Cyprus Airways won European Commission approval on Tuesday for a government-backed loan guarantee after the Brussels-based executive said the aid did not break European Union rules.

The Commission said it allowed Cyprus to support the flag carrier through a loan guarantee of CYP30 million Cyprus pounds (USD$66.2 million) for the next six months "so as to allow the authorities to organize the restructuring of the airline".

It said the amount of aid was limited to what was needed to manage the carrier's short term cash flow deficit and that Cyprus authorities had committed to providing the Commission with a restructuring plan for the airline within six months.

"The possibility of the aid having any adverse spill-over effects on other member states is limited by its size, its short duration and the relatively small size of the recipient," the Commission said in a statement.

"The aid is also warranted on the grounds of serious social difficulties," it said, adding 2,400 people worked for companies within the Cyprus Airways group.

The majority state-controlled airline said in February it made a pretax loss of CYP36.9 million (USD$81.4 million) in 2004, hit by tougher competition, and said it required government guarantees to finance its operational needs both in the short and long term.