At least 800 pilot jobs could go

Ontario Superior Court Justice James Farley said the court would meet Sunday morning to consider options, if the two sides did not strike an agreement.

This is likely to take the form either of an enforced labour deal, or a filing for bankruptcy - something that would ground the airline.

Air Canada is currently not technically bankrupt, but enjoys the sort of protection from creditors that is known as Chapter 11 in the US.

Time running out

"Air Canada is at this time in a perilous and ultra-precarious position," Justice Farley said.

"There is no time to reach a leisurely resolution of this... this matter must be stabilised now."

The union, the Air Canada Pilots Association, has said it is willing to restart talks as ordered by the court, and expressed its wish to avoid the grounding of the airline.

Air Canada wants pilots to agree to cut its annual labour costs, currently 3bn Canadian dollars (�1.3bn; $2.2bn), by C$770m - a concession that is likely to cost 800 pilot jobs.

A deal is seen as crucial, if Air Canada is to restructure its C$13bn of debt.

Overall, Air Canada is cutting one-quarter of its 40,000-strong workforce, and is shaking up its fare structure to compete better with low-fare operators.