Struggling Cyprus Airways in Talks with MEA

Near-bankrupt national carrier Cyprus Airways said on Tuesday it was in preliminary talks with suitor Middle East Airlines as it undergoes drastic restructuring to stay afloat.

"Middle East Airlines and its representatives had preliminary contacts with company management and the ministry of finance," the carrier said in a statement to the stock exchange.

"Consultations are at an early stage and so far there is no specific agreement to announce."

"As previously announced, consultations were held with other companies that had shown an interest in buying Cyprus Airways. However, these consultations are also at a preliminary stage."

Earlier this month the state-owned carrier announced that there were "encouraging" signs that China's Beijing Yi Xiang Da Investment could buy it.

The government, which is hoping to keep the carrier operation through the key summer months, has made it clear that the cash-strapped airline must undergo a drastic transformation or it be shut down.

The government has described the airline's current plight as "very difficult and fragile," and the carrier said authorities had adopted its restructuring plan for the 11 Airbus fleet to be reduced to six with one in reserve.

Trade union estimates said the company has pre-sold 400,000 seats for the summer, and unions say an agreement has been reached to reduce the 1,030-strong workforce by 490.

The company posted a net loss of 55.8 million euros for 2012, more than double the net loss of 23.88 million a year earlier.

Operating losses almost doubled to 49.7 million euros from 25.5 million.

The airline has also struggled to compete with no-frills competition on popular routes to Greece and Britain.

Last month, it said its future depended on it receiving rescue aid through a 31 million euro government share capital injection which would be subject to European Union approval.

But the European Commission has launched an investigation into whether the money that the state has pumped into Cyprus Airways breached competition law.