BEIRUT: Middle East Airlines is showing keen interest in acquiring a stake in the troubled Cyprus Airways, an industry source confirmed to The Daily Star Friday.“MEA is interested in buying a stake of Cyprus Airways. Both sides have agreed that the details should be kept classified until further notice,” the source, who spoke on condition of anonymity, said.

The source declined to give any further information about the ongoing talks between MEA and Cyprus Airway.

“MEA is tight lipped about the talks. They will only disclose the details if goes through,” the source said.

This is the first time MEA has expressed any interest in acquiring a stake in any foreign airline.

The national carrier, which has a fleet of 16 modern Airbus planes, struggled hard last year to break even due to the tense situation in the region, falling number of tourists to Lebanon and endless bickering among the country’s political class.

The Central Bank owns 99 percent of the national carrier.

But observers question how MEA can raise money for this acquisition, especially since the Central Bank owns the majority of the company.

They also rule out the possibility that the Central Bank will offer any loans for MEA to buy a stake in Cyprus Airways.

MEA chairman Mohammad Hout nevertheless was credited with turning the loss-making airline into a profitable firm with net income exceeding $100 million in 2009.

Hout has managed to borrow money from Lebanese banks and other creditors to buy his small fleet without the help of the Central Bank.

MEA was supposed to list 25 percent of its shares on the Beirut Stock Exchange in 2010 and 2011, but the delicate situation in the country has delayed such a move.

Bloomberg News reported Thursday that Cyprus Airways Ltd., the east Mediterranean island’s loss-making airline, hasn’t received any concrete buyout proposals from investors.

Kathimerini newspaper reported that Russia’s OAO Aeroflot has started talks on acquiring a stake that are at an “advanced stage,” while Middle East Air Airlines has also shown interest in buying a holding in the carrier. The paper didn’t say where it got the information.

The state-run company, in which the Cypriot government has a 70 percent stake, said in an emailed statement that no investor, including Russia’s Aeroflot, Lebanon’s Middle East Airlines and “the state of Qatar,” had expressed any interest so far. In a separate statement, the airline said that it entered into a code-share agreement with the Lebanese carrier.

Cyprus’s Cabinet gave the company the green light to increase its capital Thursday and announced its intention to participate in it.

It also said that it would consider offers for the sale of an unspecified stake in the company.

Last year, the airline, which posted 29.3 million euros ($39 million) in losses in the first half of 2011, received 20 million euros in compensation from the Cypriot government for extra costs incurred as a result of Turkey’s ban on Cypriot traffic and underwent a restructuring plan in an attempt to save 40 million euros annually.

Cyprus Stock Exchange had suspended trading of the shares of the ailing carrier pending clarifications of its financial situation following press reports, according to a statement on the CSE’s website.

The company’s share rose 6.7 percent yesterday to 0.08 cents, valuing the company at 31.3 million euros.