Cyprus Airways ceased operations on Friday after the European Commission ordered the carrier to repay more than €100 million in state aid received in 2012-13.
An administrator will be appointed and Cyprus Airways’ operating licence be revoked as the carrier does not have the money.
Cyprus Airways has a fleet of six aircraft and employs 560 staff.
The carrier’s unions accused the government of failing to explain why it gave state aid.
Pilots’ union leader Petros Souppouris said: “Staff believe the government should do its utmost to keep the company operational or launch a fresh start with an investor.”
Ryanair was among a number of airlines to launch bids to take over Cyprus Airways last year.
The Irish carrier immediately offered one-way “rescue fares” from €49.99 to stranded passengers.
Earlier, EU competition commissioner Margrethe Vestager said Cyprus Airways had no possibility of becoming viable without further state subsidies.
In a statement she said: “Cyprus Airways has received large quantities of public money since 2007 but was unable to restructure and become viable without continued state support.
The commissioner added: “Injecting additional public money would only have prolonged the struggle without achieving a turnaround.”
The EC ruled that a restructuring package of €102 million the carrier received from the Cyprus government breached EU competition rules, arguing: “Cyprus Airways needs to pay back all incompatible air received. This is necessary to ensure a level playing field in the internal [European] market.”
Cyprus has four months to appeal against the decision and the airline has 10 years to make a repayment.