The vice-chairman of Cyprus Airways resigned on Thursday, deepening a crisis in the state carrier triggered by a debacle over staff redundancies which grounded the airline earlier in the week.

Compounding financial problems at the airline, staff staged a walkout on Tuesday after the company dismissed 22 senior cabin crew. Management rescinded its decision hours later amid scathing criticism from the government that the airline had not followed correct dismissal procedures.

Distancing himself from the airline, vice chairman Achilleas Kyprianou said he had placed his resignation at the disposal of the Communications Ministry.

In a resignation letter sent to the media, he said board members had been kept in the dark over the repercussions of the redundancies.

The letter comes amid media reports that some board members were uneasy with the tactics of chairman Constantinos Loizides, a banker who has spearheaded a plan to cut costs.

In his letter, the vice chairman said board members were "led to believe" the company would save a considerable amount from the dismissals and that the airline's unions would not react.

He said the board also acted in good faith that the redundancies had the full backing of the government, the majority shareholder.

"The events which followed showed that, once again, the board of Cyprus Airways was not properly informed," Kyprianou said.

Cyprus Airways posted a pre-tax loss of CPY36.9 million pounds (USD$84 million) in 2004, hit by fleet renewal costs and mounting competition.

It dismissed a third of its senior management last year, and said more would follow. Cost cutting would also involve spinoffs of catering and baggage handling divisions and the disposal of its Greek subsidiary, Hellas Jet.