Cyprus appointed a senior government official on Thursday to salvage flag carrier Cyprus Airways after a spate of high-level defections and record financial losses.

Eschewing a private sector appointment, the cabinet named Lazaros Savvides, interior ministry director-general, as chairman to replace banker Constantinos Loizides.

A bureaucrat in a government economic think-tank was also included in the line-up to direct a turnaround at the loss-making airline.

Cyprus Airways recorded losses of CYP36.9 million pounds (USD$84 million) in 2004, with margins under pressure from competition in a newly deregulated market and an upgraded fleet.

Loizides, who led a drive to cut down on costs and said redundancies were inevitable at the state-controlled airline, resigned on Wednesday.

Some media speculated on Thursday that he jumped before he was pushed. He was widely blamed for a crippling strike which grounded Cyprus Airways for 24 hours in early March, triggered by his decision to fire 22 senior flight officers.

Faced with the prospect of the fleet grounded indefinitely, the airline backed down and rescinded the dismissals.

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

The state owns more than 60 percent of Cyprus Airways. The airline has a staff of about 2,000 people. One outgoing board member distanced himself from the crisis on Thursday, and warned Cyprus Airways was heading towards a rough landing.

"Several board members have repeatedly expressed their concern about the catastrophic course the company has taken," said Achilleas Kyprianou, who resigned as vice-chairman.