Take a look at this article from the FT for more detail.
FT.com / Companies / Airlines - Aer Lingus job loss plan sparks union fury
Aer Lingus is the benchmark basket case airline right now. It's based in the worst performing European economy, a small market at the best of times, with a mighty competitor in Ryanair.
Any merger activity is badly compromised by the 30% Ryanair and 25% Irish government shareholdings. At a time when airlines are looking to preserve cash, any purchase of Aer Lingus would have to provide for taking out both these shareholders in cash, ie there could be no all-share offer.
Aer Lingus is, I think, still haemorraging cash, and will run out of the stuff sometime in 2010 without a major turnaround in fortunes. Their long haul business is a disaster. They're using the A330s bought to grow their US routes to take people on holiday to Spain instead (seriously).
So, the cuts are necessary. Personally, I don't see them as being enough. The Irish economy isn't going to recover until 2011, unemployment will continue rising (it's at about 15% at present), net emigration will leave the available passenger base lower anyway. They're trying to grow in the UK, but Easy and Ryanair have already got the best deals at all the London hubs ex-Heathrow, so that is unlikely to be a great source of profits (or positive cash flow) any time soon.
There are political reasons why Aer Lingus won't be allowed to fail totally, and every effort will be made to prevent Ryanair taking control (though don't be surprised to see Ryanair take the long haul bit of Aer Lingus in return for reducing their stake in the airline). I'm not sure just how a takeover/rescue can be put together, because it's not obvious why anyone would want Aer Lingus. It has no strategic value to anyone other than Ryanair.