The airline was founded by Aristotle Onassis

Already, the airline has cut some 600 jobs and curtailed loss making routes.

Olympic currently employs about 9,000 people. Reports suggest 2,500 jobs could go.

Other reports said the government was considering splitting the airline into smaller units.

The European Union is unlikely to allow the government to pour more money into the airline.

Chris Elafros, the head of economic research at EFG Eurobank Securities, doubts the government will allow the carrier to collapse.

"I don't think they can bear the political risk at this point of letting it collapse. I think what they will try to do is to buy more time," he told the BBC's World Business Report.

Favourite bidder

Greece's Axon Airlines had been considered the favourite to buy Olympic Airways.

It dropped out after it suspended its own operations, following the drop in airline travel after the 11 September attacks in the US.

Mr Elafros added: "I don't think anyone was expecting that this bidder would actually make it."

The crisis in the global aviation industry has meant there has been little interest from foreign investors in the sale.

Professor Rigas Doganis - a former chief executive of the airline - believes Olympic need not follow Sabena and Swissair into bankruptcy.

The government needs "to grasp the nettle", he told the BBC's World Business Report.

"There will be a political cost in downsizing Olympic, but the alternative is to allow the airline to collapse and the political cost of that would be much greater," Professor Doganis said.

"What they need are small local airlines that are very strong in their own market," he added. "If Olympic can be restructured to do that primarily, then it may survive."