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UPDATE 2-Grounded: Ryanair cancels flights of another 400,000 customers

* Ryanair to fly 25 fewer aircraft from Nov. and 10 from April

* Shares rise 2 pct as airline promises roster issues solved

* Forecasts for full year passenger volumes cut by two million

* Ryanair drops interest in Alitalia to focus on rostering (Adds analyst quote, detail on routes, link to graphic)

DUBLIN/BERLIN, Sept 27 (Reuters) - Ryanair canceled the flights of another 400,000 customers and scrapped a bid for Alitalia on Wednesday, in a plan to keep its pilots on side and draw a line under its rostering fiasco.

Just last week Ryanair boss Michael O'Leary had said no more flights would be canceled due to pilot rostering issues that caused the grounding of over 2,000 flights in September and October, hitting the airline's share price and reputation.

But on Wednesday the airline, Europe's largest by passenger numbers, said it would cancel flights for around 400,000 passengers in addition to 300,000 impacted by earlier travel cancellations.

In a lengthy statement addressing customers, pilots and shareholders, Ryanair said the move would minimize flight delays and would mean an earlier threat to force pilots to reschedule holidays would not be carried out.

In order to "eliminate all management distractions," Ryanair also pulled out of the bidding for struggling Italian airline Alitalia, less than two weeks after O'Leary said it was in the process of finalizing a binding offer.

"It appears they have taken stock and decided to nip this in the bud," independent aviation consultant John Strickland said.

"It's a thorough, comprehensive plan to make sure they get this battleship back on track and ensure it can continue to grow. By coming out with this detailed information, it shows Ryanair is not trying to push this under the carpet."

Shares in Ryanair jumped after it said the plan would eliminate "all risk" of further cancellations and that it would not alter its 1.4 billion to 1.45 billion euro profit forecast for the financial year ending March 31.

Shares in Ryanair, which fell by over 4 percent last week, closed 3.4 percent higher.

RARE GROWTH PLAN CUT

Ryanair blamed the original cancellations on a backlog of staff leave and outlined a carrot-and-stick approach last week, offering some pilots pay increases and cash incentives to work extra days but also saying others may have to postpone leave.

It said on Wednesday that the reduced schedule would mean it would not need pilots to give up one week of their annual leave from November and that the slower growth of the airline would create a large surplus of standby pilots.

Some Ryanair pilots have in recent weeks been encouraging each other to band together to take advantage of increased demand for experienced pilots especially among low-cost carriers - to force management to improve conditions.

The decision to fly 25 fewer aircraft from November and 10 fewer from April 2018, will "provide stability to pilot rosters," Ryanair said.

The 34 routes affected during the winter season include some UK domestic routes between London and Scotland, plus its only domestic route in Germany between Berlin and Cologne, where a gap in the market will soon be left by the insolvency of German carrier Air Berlin.

The airline cut its expected passenger volumes to 129 million from 131 million and to 138 million from 142 million in the following 12 months to March 2019.

Average fares are also expected to be slightly lower over the next two months as it promotes seat sales, it added.

O'Leary, who has taken personal responsibility for the "cock-up," apologized to those disrupted by the cancellations and said all customers have been emailed with the offer of an exchange or refund and an additional 40 euro voucher for each flight, to be used before March.

Analysts welcomed Ryanair's decision not to pursue its interest in Alitalia. Ryanair's plans could have added around 90 Alitalia planes, including long-haul.

"Ryanair's decision not to pursue the Alitalia bid is a relief, as this was always likely to be a big distraction from its core focus," said Jonathan Wober, analyst at CAPA-Centre for Aviation.

"Ryanair will recover from this," he said.

(Additional reporting by Conor Humphries in Belfast; Editing by Keith Weir and Elaine Hardcastle)