Cash-strapped Cyprus Airways is contemplating either the gradual closure or sale of Hellas Jet, its subsidiary in Greece, the government said on Monday.

Two foreign suitors, from the Netherlands and Britain, have expressed an interest in acquiring Hellas Jet but have yet to come up with a financial downpayment for the sale, transport minister Haris Thrassou said.

"Whether they are serious or not will be seen if either company comes up with a deposit," Thrassou told the Cyprus Broadcasting Corporation.

Asked if closure was likely if a deal fell through, he said: "If there is no response from the two interested parties."

He did not name the companies or specify the initial payment sought by Cyprus Airways, which is majority owned by the state.

Cyprus Airways is facing mounting financial problems as European Union-led free market rules opened up previously closed routes to competition.

The carrier posted record pre-tax losses of CYP36.9 million Cyprus pounds (USD$68.7 million) last year. It is now waiting for European Union approval for an urgently needed loan guaranteed by the government and redundancies are planned.

Cyprus Airways declined to comment, saying its options on the future of Hellas Jet were open.