Management plans to slash the workforce

The announcement came after a meeting with representatives of nine unions, who have yet to react officially.

The redundancies would represent close to a quarter of the state-controlled carrier's 20,700 staff.

The plan would see Alitalia split into AZ Service and AZ Fly, with the airline breaking even in 2006, and making 1.027bn euros(�0.7bn;$1.24bn) by 2008.

Alitalia Fly would manage air transport activities, with 7,800 staff, and Alitalia Service would handle the ground service business with 8,500 staff.

The redundancy plan would see the loss of 1,570 crew jobs (made up of 450 pilots, 1,050 flight attendants and 70 flight operation service staff).

Among ground staff, the company intends to cut 1,440 maintenance jobs, 900 in handling, 360 in marketing and sales, 610 corporate jobs and 120 in cargo transportation.

Trading in Alitalia shares had earlier been suspended at the close of the Milan stock market, after they had closed up 4% to reach 0.22 euros.

Alitalia needs to get unions to agree to the plan by 15 September in order to qualify for a bridging loan of 400m euros ($482m; �271m).

Alitalia previously said it would have sufficient financial resources to operate until the end of March 2005 if it obtains the bridging loan.

EU's transport commissioner Loyola de Palacio has warned that any cash injection from the state under a deal where the government remains a majority shareholder would be rejected by the Commission.

As much as 2bn euros is thought to be needed to keep the 57-year-old airline flying.

Alitalia made a net loss of 520m euros in 2003 after making a profit the year before.