Aer Lingus warned yesterday that more than 1,000 workers could be made redundant over the coming months after the airline failed to reach agreement with unions on a plan to cut €97 million from costs by 2011.

Chief executive Christoph Mueller said failure to agree a deal meant the airline would ground aircraft in the new year and close loss-making routes. This strategy was decided by the board of Aer Lingus at a 90-minute “extraordinary” meeting at its headquarters yesterday evening.

The board will meet again on Friday to decide the scale of the cuts, Mr Mueller said. Aer Lingus’s hardline approach has raised the prospect of industrial action, possibly before Christmas.

Aer Lingus had originally sought 676 job cuts but Mr Mueller said this would now be “north of 1,000”.

Talks with unions broke down at about 8am yesterday morning following seven weeks of negotiations. Mr Mueller said the two sides were “so close to an agreement this morning [Monday] that it was almost ready for a signature”.

“The board has decided today to move,” he said. “It is regrettable.”

It is understood that agreement was close to being reached with craft workers, ground operations, and head office and support staff. But there was still some distance to be bridged in talks with pilots and cabin crew.

“We haven’t reached an agreement with the pilot association and to a lesser extent with the cabin [crew],” Mr Mueller said.

He said proposals from the pilots, which included an extra 4 per cent stake in the airline, were “not sustainable” and the price was “too high”. It is understood that the pilots offered cost savings of €30 million a year. This included pay cuts of 10 per cent, extra productivity and other concessions.

The pilots are also thought to have proposed that the company establish a tax-efficient share-saving scheme that would have given them access to an extra 4 per cent stake in the airline. These shares are currently worth about €12 million. The pilots already own about 4.5 per cent of Aer Lingus.

No comment was available from the pilots’ representative body Ialpa last night. Impact, which represents cabin crew, said it was disappointed with Aer Lingus’s decision. The union said it had submitted cost-saving proposals that have been “checked and verified” by accountants Grant Thornton.

“The union remains available to discuss alternatives with the company,” a spokesman said.

It remains to be seen if the National Implementation Body, the State’s main troubleshooting mechanism under social partnership, will once again seek to get involved in the dispute.

Siptu divisional organiser Gerry McCormack said the union “would welcome an intervention to get this resolved”.