IT was just after 9am yesterday when the full extent of P&Os dramatic announcement began to hit home.

The shipping giant signalled a sea change in its ferry operation by axing four routes and about 1,200 jobs.

Facing strong competition from the low-cost airlines, P&O said it was scrapping three of its four Portsmouth crossings as well as one of its Irish Sea routes.

Unions reacted angrily to the changes, which will see the company's number of ships reduced from 31 to 23, and which are expected to save £55m a year.

The restructuring, which the company hopes to be largely in place by the middle of next year, will mean the axing of the Portsmouth-Cherbourg, Portsmouth-Caen and Portsmouth-Le Havre routes as well as Rosslare-Cherbourg.

At Portsmouth, the number of ships operated will be reduced from six to one.

"I only found out in the morning," said shocked Portsmouth port manager Martin Putman.

"There had been speculation but this was at the extreme end of the scale."

Like tens of thousands of others, Mr Putman was staggered by the scale of yesterday morning's P&O cutback.

"It took us by surprise and the shock-waves of the decision are going to be felt across Hampshire," agreed Stewart Dunn, the president of the Southampton and Fareham Chamber of Commerce.

Rumours had been circulating for weeks that P&O's loss-making ferry arm was in for a rough crossing during a review of the service. Wrestling with the Channel Tunnel, the rapid rise of the budget airline, the loss of duty free, fall-out from the Iraq War and a fierce price war, P&O's ferry arm was dragging down company figures.

It was losing £25m in the first six months of the year.

But no one expected the company to axe all Portsmouth to France routes as part of a major shake-up. Only Portsmouth to Bilbao in Spain remains.

Industry insiders forecast it could mean as many as 400 job losses for Portsmouth as well as a reduction in the numbers of destinations available to travellers and the 320,000 freight vehicles which used the port as a gateway to Europe last year.

"Obviously it was pretty devastating for the port and for the people who will be made redundant.

"It is bad news for us and for the shipping industry as a whole," said Mr Putman.

However, by early afternoon it was clear the storm clouds were easing a little as P&O rival Brittany ferries sailed to the rescue.

Encouraged by the fact that 3.2m passengers and 932,000 vehicles passed through the port last year, Brittany Ferries revealed that it is in the process of agreeing to take on two of P&O's services.

In a welcome statement, the company said it had "signed a memorandum of understanding" with P&O to take on two ferries and offer an alternative service to Le Havre.

While still subject to the "negotiation of definitive agreements and regulatory approval", the deal will have provoked sighs of relief across the county.

The announcement has saved scores of jobs in the historic port city and saved hauliers from redirecting their loads to rival ferry ports.

David Longden, the managing director of Brittany Ferries said: "These are challenging times for the ferry industry with the Channel Tunnel, new seasonal services, increasing competition from low-cost airlines, and continuous price pressure, led in particular by the Dover-Calais route, resulting in downward pressure on rates.

"The developments will enable us to provide our customers, both passenger and freight, with the reassurance of route choice and the highest level of service."

Mr Longden continued: "This initiative by Brittany Ferries will also help to secure continuity and a significant number of jobs, both on-shore in Portsmouth and Le Havre, as well as on board the two ships involved." Mr Putman added that the port was confident that other rivals to P&O, not burdened by the same high costs, would be tempted to fill its shoes.

"There are people who have approached us in the past looking to put ships on routes out of Portsmouth but who haven't been able to do it," he said.

"I feel confident we are geographically well placed and that we have the infrastructure and that there is a lot of potential here."

Mr Putman added:"We are going to spend a few days assessing what has happened.

"We will have to see what space we might have and then we might go knocking on doors - we have a few companies in mind.

"There are a few who might be interested in operating a service in the western channel, companies that currently only operate in the Eastern channel."

Associated British Ports, owners of Southampton docks, refused to comment on the situation at its south coast rival.

But other business leaders described the news as a blow. David Cumming, the managing director of Southampton Airport, said: "This news is very disappointing for local people and for the tourism industry as a whole.

"Transport hubs are vitally important to the ongoing prosperity of the travel industry on the south coast and for generating inbound tourism."

Stewart Dunn added: "It is not just the ferry, it is the services that go with the ferry - the travel business, the tourism and haulage.

"Now it is about how the region responds.

"However, it is pleasing to see that Brittany Ferries is stepping in.

"Obviously it is early days but hopefully this news will take some of the sting out of it and we can quickly get our European connections back.

"It would be nice to see ferries back in Southampton and a return of services to Europe."