Mediation between KiwiRail's Interislander ferry business and two unions will resume on Monday, as the company tries to avoid strike action at the beginning of next month.
The Aviation and Marine Engineers Association (AMEA) and Merchant Services Guild (MSG) have issued a strike notice for the first week of December after members voted to reject KiwiRail's offer following months of contract negotiations.
KiwiRail responded with a lock-out notice, saying if the services did not sail, union staff would not be paid.
Chief executive Jim Quinn, in a staff newsletter, said the timing was "about as unfortunate as it gets" in the lead-up to Christmas.
Mr Quinn said Interislander deck and engineering officers were paid between 27 and 69 percent more than their competitors at Strait Shipping and some union members had received pay rises of up to 51 percent in the past eight years.
The company was facing disproportional cost increases - its labour bill rising by 33 percent in those eight years, he said.
It could not pass on the increased costs to customers and stay competitive.
But AMEA national industrial organiser Stan Renwick says his members were facing a 29 percent pay cut because of proposed changes to conditions and service pay.
AMEA represents 70 engineering officers and MSG represents 54 deck officers.
If the strike proceeds it will affect about 14,000 passengers, 4000 cars and 1200 rail wagons.
Last time there was a full strike on the Interislander was in 1994. A partial strike in 2008 saw night-time road and rail ferry sailings stopped.