NEW YORK, April 2 (Reuters) - Alcoa Inc (AA.N: Quote, Profile, Research) said this week it would curtail about 120,000 annual tonnes of aluminum smelter output at its Massena, New York operations in May, raising total cuts to the aluminum giant's primary output to over 850,000 tonnes, or 20 percent, of annualized output.

Alcoa operates two smelters in Massena, the East and West smelters, with combined output of 255,000 tonnes per year.

New York-headquartered Alcoa also said it would work with the New York Power Authority to reach an agreement that will allow the West Plant to continue operating at its current employment level and to retain more than 250 of the 420 East Plant employees during the plant's temporary curtailment.

Due to a 60 percent decline in aluminum prices since last summer, Alcoa said it had considered curtailing operations at both the Massena East and West smelters, which would have eliminated about 1,100 jobs.

"We both wanted to find a solution to keep jobs, address the current business situation, and enable the next phase of work on our modernization project to continue," said John Thuestad, President of Alcoa U.S. Primary Products.

On Feb. 23, aluminum MAL3 on the London Metal Exchange fell to a low at $1,275 per tonne, which dates back to November 2001, after setting a $3,375 record last July.

Since then, the price has regained some ground, closing Thursday at $1,430 a tonne, but global demand remains weak.

Alcoa has said its earnings were hurt by a sharp drop in demand, particularly from the automotive, commercial transportation and building and construction sectors.

In January, Alcoa said it finalized a 30-year hydropower contract with the New York Power Authority to supply the company's two aluminum smelters at Massena.