What happens to air at 1000 degrees Celsius
At $\pu{1000^oC}$, oxygen and nitrogen will not react substantially or probably even noticeably if at all. Besides that, whatever organic material you are using for a hot air balloon will most definitely ignite immediately. The average temperature that most organic materials char and eventually ignite is $\pu{270^oC}$. At almost double the kinetic energy at $\pu{1000^oC}$, most things will almost instantaneously ignite. Note that in air, temperature diffuses rather quickly so even if the fire or whatever you are using to get to $\pu{1000^oC}$ will probably be significantly colder when it reaches anything flammable. In fact, most fuel used in normal hot air balloons burn at over $\pu{1000^oC}$, but it diffuses very quickly that the average temperature of the air in the balloon is around $\pu{110^oC}$