Olympic will fight through the courts

Under the plan, the carrier would be relaunched with a slimmed-down workforce under the name Olympic Airlines, while its outstanding debts would be paid off with the proceeds of a partial privatisation.

The overhaul strategy, which will be put to the vote in the Greek parliament next week, is intended to re-vamp the troubled carrier in time for next year's Olympic Games in Athens.

"A bold step for the new era of Olympic was taken today," said Greek transport minister Christos Verelis.

"The government is setting up a modern, efficient carrier."

Money troubles

Olympic Airways, which has built up debts of about half a billion euros, was seen as Europe's most vulnerable airline even before the slump in global passenger numbers triggered by the 11 September attacks.

Two previous attempts at privatising the carrier have fallen through in the past two years after key bidders pulled out.

The Greek government is hoping that the firm's reduced employee headcount, which will cut labour costs by about 45%, will help potential buyers keep their nerve this time.

The necessary job cuts will be achieved partly by outsourcing Olympic's baggage handling and maintenance operations, leaving the airline to focus exclusively on flying.

The government said three Greek banks had started talks with potential buyers over plans to sell off 51% of the airline.