An Alitalia "survival plan" involving job cuts, cash infusions, selling off aircraft and the axeing of unprofitable routes was given a mixed reaction as shares in the troubled Italian national carrier fell and analysts warned of further labour unrest.

Alitalia said that its 2008-2010 plan, which also involves reducing reliance on the Malpensa hub near Milan, was "transitional" and designed to keep the loss-making airline afloat while it continues to search for a buyer for the government's 49.9 per cent stake.

An auction for the sale of Alitalia was suspended in July after potential bidders walked out, complaining that the government had imposed excessively restrictive conditions and that Alitalia's accounts lacked "transparency". Citigroup is advising Alitalia on relaunching the aborted auction process.

Under the earlier scheme, buyers were required to give undertakings that Alitalia would remain majority Italian-owned, that its brand and logos would be untouched and that existing routes and employment levels would be maintained. Buyers also had to be prepared to buy the whole company and not just the 49.9 per cent stake.

As Alitalia management discussed the latest plan with trade union leaders, the company said that it might have to sell a "significant" amount of stock to raise capital, thought to be in the region of €1.5 billion (£1 billion). It currently loses a million euros a day.

La Repubblica said that a thousand redundancies would be offered, and 20 to 25 aircraft would be sold. Some 400 ground personnel would go, plus 450 stewards and stewardesses and 150 pilots. It suggested that the "survival" plan was "tailor made" for potential buyers such as Air France-KLM, which already has a small stake and is thought to be a leading contender in "round two" of the auction process.

Some reports suggest that Air France-KLM would increase its stake in Alitalia to 29 per cent or even 39 per cent, with a private equity partner such as TPG Group or Apax.

Alitalia did not say which "unprofitable" routes would be axed. But Italian media reports said that they included flights from Malpensa to Mumbai and Delhi in India and Shanghai in China, with flights to North and South America and Japan transferred from Malpensa to Rome. Malpensa said that it would compensate by attracting more cargo and low cost flights.

Trades union leaders said that they were reserving judgment on the Alitalia plan. But Fabio Berti, the head of the pilots union Anpac, said that his members were already threatening to strike. Roberto Formigoni, the governor of Lombardy, said that the decision to reduce flights from Malpensa was a blow to Northern Italy, which was the powerhouse of the Italian economy.

He said that the plan was "the fifteenth in seven years", and showed that Alitalia was "comatose". "All previous plans have failed, and I doubt if this one has any better chance of success," he said. Letizia Moratti, the mayor of Milan, said that reducing traffic at Malpensa was "against all market logic".

Alitalia currently operates 180 aircraft to 100 destinations and has a workforce of 20,000. Last year it posted a loss of €626 million compared to €168 million in 2005.

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