EU state aid ruling threatens Cyprus Airways

(BRUSSELS) - EU regulators ordered Cyprus on Friday to recover about 65 million euros in illegal state aid from Cyprus Airways, a decision likely to force the struggling airline to close.

Cypriot Communications Minister Marios Demetriades had warned the airline could not survive if the EU decided Cyprus broke the rules by giving it a 31-million-euro ($37 million) capital increase and a 34-million-euro rescue loan.

"Following an in-depth investigation, the European Commission has concluded that a restructuring aid package ... for Cyprus' ailing flag carrier Cyprus Airways gave the company an undue advantage over its competitors in breach of EU state aid rules," EU Competition Commissioner Margrethe Vestager said in a statement.

"Cyprus Airways has received large quantities of public money since 2007 but was unable to restructure and become viable without continued state support," Vestager said.

Demetriades had warned Thursday that such an EU state aid decision would mean there would be "no other choice but to suspend operations."

The minister did not say how soon a suspension of operations could come but said contingency plans had been drawn up.

"There will be no gap in the country's connections," Demetriades said, with Ireland's Ryanair and Greece's Aegean Airlines able to fill the gap.

The government, which owns 93 percent of Cyprus Airways, had searched for investors but interest from Ryanair and Greece's Aegean Airlines was dismissed as "not serious".

The carrier has struggled to survive against intense competition on its most popular routes to Greece and London, and several cost-cutting plans have failed to stem losses.

It posted a net loss of 55.8 million euros in 2012, more than double the 23.88 million euros of the previous year.

The Cyprus Stock Exchange announced it will delist the airline's shares from January 13 for failing to submit financial statements for two years.