Air Malta is locked in talks with four trade unions representing its workforce as it seeks to restructure itself and resolve serious financial problems.
Discussions that began last week between the carrier and unions representing pilots, cabin crew, engineers and head office plus ancillary staff are likely to continue throughout this week, said an Air Malta spokesman.
There was no deadline to conclude the discussions, which included the possibility of setting up an early retirement scheme.
Such a scheme would help the airline meet its target of shedding around 500 staff from its current total of 1,250. Earlier threats of redundancies among pilots led to their union, Airline Pilots Association - Malta, to threaten industrial action earlier this month. The proposed strike was called off shortly before it was due to start.
Air Malta has not made a profit since 2007, with latest unaudited accounts for the year ending 31 March 2011 showing a loss of €36 million ($52 million). Its financial difficulties led to the European Commission approving a temporary €52 million rescue package in November 2010 while a restructuring plan was worked out.
As well as reductions in its workforce, Air Malta is targeting cost reductions of €30 million and increases in revenues of the same size.
It hopes to cut its costs partly by renegotiating contracts. Malta International Airport had already offered to cut its charges for all airlines using the facility, the spokesman said.
Contrary to some press reports, there are no plans for Air Malta to transform itself into a low-cost carrier, he added.
Air Malta is a major contributor to the island's vital tourism trade, but its position has been undermined in recent years by the growth of low-cost carriers.