The Cypriot government said it has yet to receive any serious interest in Cyprus Airways, four months after launching a search for investors in the struggling airline.
Communications Minister Marios Demetriades appeared to dismiss interest from Ireland's Ryanair and Greece's Aegean Airlines, which have been holding talks with his government.
"It was an open and transparent process in which, unfortunately, showed that there is no significant interest," Demetriades told reporters.
"We have stated that we are ready to listen in the event that there is a serious investor for Cyprus Airways," he added.
Ryanair and Aegean were whittled down from an initial 14 suitors when the process was launched in July.
The interested parties are reportedly concerned about a European Commission investigation to determine if the Cypriot government breached EU state aid rules through its support for the airline.
Demetriades said there was a "danger" the airline could be forced to close if the EC decides Cyprus broke the rules by giving it with a €31m capital increase and €73m rescue loan.
The Cyprus Airways board was working on a back-up plan which reportedly would see the carrier reduced to three aircraft and its staff cut to 230 from the current 560.
"The position of the government is that a strategic investor is needed but the results of the company at this time are not satisfactory and it cannot be characterised as viable. So we need a strategic investor," said Demetriades.
The Cypriot government owns 93% of Cyprus Airways and wants to offload the airline.
The east Mediterranean island's national carrier has been selling off assets, including three time slots at London's Heathrow airport, so it can keep flying.
With a reduced fleet of six aircraft, the airline is struggling to survive against intense competition on its most popular routes to Greece and London.
Cyprus Airways has also axed staff and scrapped routes, but this has failed to stem losses.
The airline posted a net loss of €55.8m for 2012, more than double the net loss of €23.88m a year earlier.