The European Commission has advised cash-strapped Cyprus Airways to reduce its workforce if a business survival plan is to work, the chairman of the troubled national carrier said on Friday.

The state-controlled airline is mired in financial difficulties from cheaper competitors and fleet renewal costs. Financial woes have forced it to shut its Greek subsidiary, Hellas Jet, from May 10.

Cyprus Airways is now pinning hopes for its survival on a government-guaranteed cash injection in May, but requires European Union approval first.

"The European Commission conveyed the message that there should be a drastic reduction of staff... from what we understand, to below 1,000," chairman Lazaros Savvides told Cyprus radio.

The airline has "1,500 plus" staff at the moment, he said.

The company should hear by May 3 whether the EU has approved its petition for EUR50 million (USD$65.3 million) in rescue aid, and an additional EUR50 million for restructuring. The second part of the package will require the EU to approve a business survival plan.

"As part of this survival plan we may have to take very painful decisions on the airline, and which would mean a reduction of staff," Savvides said.

But he said any action would be taken in full consultation with unions.

Cyprus Airways is 65 percent owned by the government. The administration, predisposed against privatizations, is expected to pull out all the stops to bail the carrier out.

The carrier posted steep pretax losses of CYP36.9 million (USD$82.9 million) in 2004.