Cyprus Airways (1947) (Larnaca) majority shareholder, the Cypriot government, has begun drafting scenarios to secure overseas air links should the cash-strapped carrier collapse. In addition, an emergency EUR10million (USD12.45million) fund is in the process of being set up to cushion the airline's workforce in the event matters take a turn for the worse.

The news comes after on Tuesday, Cypriot Finance Minister Harris Georgiades said the carrier's privatization process had stalled after both Ryanair (FR, Dublin International) and Aegean Airlines' proposals were rejected. Of the nine original proposals submitted, only Aegean and Ryanair's were considered for the next round of scrutinization as they were the only two to have met all the conditions listed by consultants KPMG.

“Neither Ryanair nor Aegean company is ready to make a meaningful offer for Cyprus Airways and their terms are not in the public interest,” Georgiades told the Cyprus Mail. “We are looking for a real investor and not a charlatan. As such, we are prepared to sell the company to an investor or to the employees.”

According to the minister, both airlines are hesitant to invest in the carrier given the likelihood it may have to repay over EUR101.3million (USD128.4million) in Cypriot government aid granted to Cyprus Airways in 2012 and 2013.

Should the European Commission decide the airline had broken state aid rules, the closure would be immediate, Georgiades said. However, even if the EC's ruling is positive, the loss-making company will still have to make cost cuts with salaries and staff redundancies to be the first affected, he said.

In the past, Ryanair has stated that its only interest in the carrier is its Air Operator's Certificate.