Loss-making Malaysia Airlines is forging ahead with a plan to reduce staff numbers despite a lukewarm response to a voluntary severance scheme, said Transport Minister Chan Kong Choy.

He said 4,500 employees from the airline signed up for the scheme by the June 7 deadline, falling short of the desired target of 6,500.

"Though the scheme failed to attract the targeted number of employees, the mutual separation scheme will be continued," he added.

He said that 1,171 workers from the airline would retire this year and that 2,761 employees would be terminated when their contracts expire in the next three to five years.

Return to profit

When the plan was announced in March, the airline said it expected to lay off 3,000 to 5,000 employees at a cost of up to RM850 million.

The retrenchment offer to the airline's 23,000 workforce is part of a three-year business plan to return to profit after posting annual losses of RM1.3 billion.

MAS will also surrender all but 19 major domestic routes to budget carrier AirAsia and sell assets to raise cash.

The airline has blamed its losses on crippling fuel prices and lower load factors but hopes to be back in the black by 2007 and to achieve record profitability the year after.