Aer Lingus has announced its cutbacks in its plan to drastically reduce operating costs.

The expected changes in its American routes have not yet been declared, but the Irish airline has cut 676 jobs and slashed salaries of staff making over €35,000 ($51,000), it announced on Wednesday, boosting its shares by 7.7 percent. The layoffs will affect about 17 percent of Aer Lingus’ 4,000-strong staff.

In its aim to reduce its annual costs by €97 million ($143 million) by 2011, Aer Lingus has fended off two bids from Michael O’Leary, who runs Irish rival airline Ryanair.

In a statement, the company said: "Aer Lingus cannot survive in a situation where staff are paid significantly more and operate less efficiently than comparable positions at its peers.”

Aer Lingus explained that 489 operational and support staff will be offered voluntary redundancy, and a second stage of cuts will later result in 187 layoffs. The airline will later seek more cost reductions if savings of €74 million are not achieved by 2011.

New Aer Lingus Chief Executive Christoph Mueller said: "The outlook in each of our current core markets is poor and, in line with the macroeconomic outlook, we do not expect any near-term recovery.

"Against this backdrop, Aer Lingus cannot continue with an operating cost base which is structurally uncompetitive."

Mueller himself and other senior executives are taking a 10 percent pay cut.

The IMPACT trade union, which represents hundreds of the Irish airline’s employees, said the cutbacks are as severe as expected.