Alitalia is seeking a tie-up with Air France and KLM

Alitalia's board said it expects the airline's operating loss to rise to 410m euros ($480m; �281m) this year, up from 118m euros last year.

A board meeting on Thursday agreed to a restructuring plan, made up of job cuts, outsourcing and fresh investment.

Alitalia's board said it wants to spend 1.2bn euros to modernise its planes over the next three years.

Survival strategies

Airlines are still struggling to overcome the damage to their profits inflicted by the 2001 attack on the World Trade Centre, which led to a drop in business travel.

A wave of consolidations is taking place among European airlines. Dutch carrier KLM and Air France joined forces last month, and British Airways has formed an alliance with struggling Swiss.

Alitalia's board said the job cuts would not hit "front-line" staff such as flight crews.

It also said it plans to outsource a further 1,200 jobs out of a total workforce of 21,300 in order to save money.

Alitalia's board said it expects the airline to return to "full economic balance" from 2005.

Alitalia, which is 62% state-owned, is known to be interested in joining the Air France-KLM group, though analysts say there might need to be changes to its ownership structure.