Portugal's TAP airline faces cuts if privatisation fails - PM

Pilots at the airline started the strike on May 1, which TAP says has reduced scheduled flights by about 30 percent.

The strike comes just before a May 15 deadline for bids to buy a majority stake in what is now a wholly state-owned company. The government has said it will go ahead with the privatisation despite the strike.

"If the privatisation does not succeed, today we know what the alternative is: a restructuring which can only be based on big lay-offs, route reductions, reduction of equipment and thereby a reduction of the operation and significance of the company," Passos Coelho told parliament.

"That is, transforming TAP into a mini TAP, which is not in the interests of workers, the economy nor the Portuguese," he said.

Because of European Union state-aid rules, the government cannot inject capital into the airline, which has debts of around 1 billion euros.

TAP has estimated that the pilots strike could cost 70 million euros.

The pilots say the government has reneged on a 1999 deal meant to give them a stake in the airline in the event of a privatisation. They also want higher pay for long-serving pilots. (Reporting By Sergio Goncalves; Writing by Axel Bugge; Editing by Tom Heneghan)