The move is in contrast to Middle East competitors such as Etihad, Qatar Airways and Dubai-based Emirates which have been expanding their networks.

"The downsizing will affect the network and affect the fleet," CEO Samer Majali said. He said staff numbers would not be affected.

The airline could tap Bahrain's sovereign wealth fund Mumtalakat, which has a stake in the carrier.

"This is currently being debated," Majali said when asked if the airline expects to get any assistance from the government or Mumtalakat.

Bahraini newspaper Gulf Daily News reported on Wednesday that the government is considering options including dissolving or shrinking the airline, or selling it and creating a new carrier at a cost of 460 million dinars.

Majali said the sale of the carrier or its dissolution was unlikely.

"The country needs an airline....they will retain the airline but at an affordable level," he said.

OPTIONS OPEN

Gulf Air said on Wednesday that all options were being considered to make the airline profitable.

"At this stage a range of strategic options are being considered," a spokeswoman for Gulf Air said in an emailed response to questions on the future of the carrier.

"Gulf Air has faced challenges in recent times, in common with other carriers around the world, and combinations of unprecedented regional and economic factors have made business increasingly difficult," the spokeswoman said.

Earlier this week, a government delegation briefed parliament and called for a restructuring of the company for "effective operational requirements", the state news agency reported.

The airline said in May it had laid off 200 employees and that bookings were down by a quarter following the Arab Spring uprisings in the region.

(Editing by Dinesh Nair and David Cowell)

• A Permanent Economic Emergency