Cyprus Airways (CY, Larnaca (LCA)) and its trade unions, PEO and SEK, have reached a compromise which will see half the loss-making carrier's workforce laid off in order to save the airline from closing outright. As part of the government-backed cost cutting drive, 490 staff are to be made redundant, wage cuts will be enforced, and the airline's fleet will be reduced to six aircraft. The deal was struck following reports that negotiations with Lebanon's MEA - Middle East Airlines (ME, Beirut Rafic Hariri International (BEY)) had collapsed under unclear circumstances. According to Lebanon's Daily Star, part of the blame for the deal's fall-through was attributed to Lebanese Central Bank Governor Riad Salameh, who refused to commit Central Bank funding to MEA's proposed total buyout of Cyprus Airways, claiming it would have "presented too many risks to the country's already fragile monetary and economic climate."

MEA - Middle East Airlines (ME, Beirut Rafic Hariri International (BEY)) has thrown its hat into the proverbial ring with Lebanese reports now claiming the carrier is in talks to acquire ailing Cyprus Airways (CY, Larnaca (LCA)). According to a report in the Lebanese paper, The Daily Star, highly confidential talks are ongoing though no mention is made as to whether the Beirut-based airline "would seek to buy part or all of the Cypriot national carrier". The report goes on to speculate that MEA "could benefit from Cyprus Airways’ low cost of operation and expand the network of its flights abroad”. Negotiations are set to reach a decision "by the end of May."

Cyprus Airways (CY, Larnaca (LCA)) faces imminent collapse without immediate government assistance a report in Cypriot newspaper "Fileleftheros" has suggested. The paper quotes Cypriot Minister of Transport, Labour and Trade as having presented three possible scenario's concerning the Cypriot national carrier's future: The first pertained to the immediate closure of the loss-making airline, the second involved "dealing with its problems after the Summer season" and lastly, a government cash injection to help keep the airline afloat indefinitely, but which would prove burdensome to the Cypriot state given its already precarious financial situation. The latter would consist of laying off 560 employees as well as salary cuts in return for an EUR 83.2million bail out spread over 3 years, needed to offset the airline's already uncompetitive route network, which has to circumnavigate Turkish airspace as a result of their ongoing dispute. However, the latest reports claim a potential reprieve could come about if ongoing negotiations between Nicosia and Chinese investor, Beijing Yi Xiang Da Investment Co. Ltd., prove fruitful.

Cyprus Airways (CY, Larnaca (LCA)) has become the latest partially state owned carrier to face an investigation by the European Commission into potential illegal state aid. According to statements by the European Commission, the commission has doubts that support measures by the Cypriot government were in line with European Union state aid rules. Cyprus has increased its stake in Cyprus Airways from 69% to almost 94% in early February during a capital increase contributing 31.3 million EUR in new capital. in addition, the government had also provided Cyprus Airways with a 73 million EUR emergency loan back in December. Cyprus Airways has reported a net loss of 55.8 million for 2012 and has specifically mentioned a positive outcome of the European Commission investigation and its restructuring plan as key drivers to ensure the carrier will be able to survive the next financial year.

Cyprus Airways (CY, Larnaca (LCA)) has retired its two A321-200s 5B-DCO (c/n 2730) and 5B-DCP (c/n 2793) from its fleet by the end of last month with both aircraft due to join Monarch Airlines (ZB, London Luton (LTN)) later this spring. The loss making Cypriot national carrier had just added the two aircraft to its fleet in mid-2012 replacing larger A330-200s. It continues to operate two A319-100s and seven A320-200s. Its A319-100s and four A320-200s are based in Larnaca while three A320-200s are used for domestic flights in Greece and currently based at Heraklion Nikos Kazantzakis (HER), Rhodes Diagoras/Maritsa (RHO) and Thessaloniki Makedonia (SKG).