Alitalia plans to cut about 20% of its workforce

Alitalia had a net loss 167.6m euros (�114m; $199m), compared with a shortfall of 858m euros in 2004.

The company has been trimming costs, spinning off divisions and firing staff as it looks to turn itself around.

It has clashed with unions over the plans - industrial action disrupted services at the start of this year and more strikes have been threatened.

The government is due to host a meeting between Alitalia and workers representatives on Tuesday.

Alitalia said it would need more time to fully assess the impact of the strikes, which lasted for six days in January. Earlier estimates put the losses at roughly 80m euros.

Sales during 2005 rose by 12% to 4.797bn euros and the airline carried 23.9 million passengers, 8% more than in 2004.

At the same time, Alitalia said it had cut labour costs by close to a third.