Bahrain's state-owned carrier Gulf Air has cut over 500 staff positions in the past six months, its chief executive said, after the airline announced it was setting up a voluntary redundancy program.

The positions were cut through a combination of letting temporary contracts expire, an extensive recruitment freeze and natural attrition, Samer Majali said in an e-mailed statement to Reuters on Monday.

'We have cut down our overall costs by 3 per cent in the first quarter. We have also reduced our overall staff strength by over 500 in the last six months ...', Majali said.

Gulf Air said over the weekend it had introduced a voluntary redundancy and retirement scheme.

Bahraini employees and nationals of former owner states who sign up for the scheme will receive three months' salary, plus one month's pay for every year with the company and such benefits as medical insurance coverage into 2011.

Mustafa al-Tooq, head of the Gulf Air trade unions, told Reuters the union was satisfied with the agreement.

'We're happy with it...this has completely changed the situation,' he said.

Loss-making Gulf Air was established as a regional airline but has struggled to find its niche after previous shareholders Oman, Abu Dhabi and Qatar gave up their stakes, partly to establish their own national carriers.

Under CEO Majali, who took the job in August last year, the carrier has closed loss-making routes and is shifting its fleet to narrow-body planes and regional jets to focus on shorter routes. – Reuters