Spanish airline Iberia and its workers moved closer to agreement on mass job cuts today after owner IAG accepted a compromise proposal put forward by a government-appointed mediator.

IAG also owns British Airways.

Unions also said they were largely in favour of the proposal, which would save the jobs of 666 workers and increase redundancy payouts for others.

But they said they still needed to make a formal decision.

"The company and a large majority in the unions were in favour of the proposal but we have to pass it to our decision-making committee," a spokesman for labour union UGT said today after a meeting with mediator Gregorio Tudela, a professor at Madrid's Autonomous University.

Tudela has proposed reducing job losses to 3,141 and paying redundancy compensation equating to 35 days pay for every year worked instead of 20.

Worker representatives will meet with the mediator again on Wednesday, when they must decide whether to back the proposal.

The loss-making carrier has had to cancel hundreds of daily flights in recent weeks due to worker strikes over the original plans to scrap 3,807 jobs, a move which management says is essential if the airline is to survive.

But owner International Consolidated Airlines Group (IAG) said yesterday it has now agreed to the mediator's compromise proposals to stop further strike action, which has already cost the firm millions of euros.

Iberia had already softened its original plan for job cuts but worker representatives had rejected the overture and gone ahead with strike action.

Pilots, flight stewards and ground crew went on two five-day strikes, between February 18 and 22 and March 4 and 8, and are planning a third between March 18 and 22. They have also threatened to strike again during Easter week.

The company loses €3m every day Iberia workers strike, chief executive Willie Walsh has said.