Cypriot flag carrier Cyprus Airways has sold charter subsidiary Eurocypria to the government for CYP13.45 million pounds (USD$29.3 million) as part of a restructuring.

The government, which owns close to 70 percent of Cyprus Airways, has said the acquisition and spinning off of Eurocypria from the main airline unit was designed to create a second, debt-free scheduled carrier.

Cyprus Airways, burdened by fleet renewal costs and cheaper competition, posted a pretax loss of CYP25.03 million (USD$54.6 million) in 2005 and required an EU approved and government-backed financial bailout last year.

The restructuring, which includes outsourcing, the Eurocypria spinoff and shedding about one fifth of its work force, is designed to generate savings of CYP21.8 million (USD$47.5 million) annually.

The European Commission approved a EUR51 million (USD$111 million) government-backed loan as rescue aid for the carrier in May 2005, on condition that the government come up with a credible overhaul plan.