The Government won't budge on its refusal to sell its stake in Aer Lingus to Ryanair after detailed plans were revealed yesterday regarding a proposed deal spearheaded by Michael O'Leary with UK airline Flybe, it is understood.
Ryanair has sweetened the pot by offering Flybe €100m in cash and an additional €50m in forward ticket sale receipts as part of a transaction designed to ease competition fears.
Flybe chief executive and chairman Jim French said that Flybe sees the potential deal as a "long-term business opportunity".
Under the transaction, Ryanair would transfer the cash and routes to a new company called Flybe Ireland. Flybe Ireland would then lease between nine and 12 aircraft currently in the Aer Lingus fleet to run the services. About 600 Aer Lingus staff would transfer to the new company.
Flybe would acquire Flybe Ireland for just €1m. It would then operate the routes under the Aer Lingus brand for three years before rebranding.
Mr French said Flybe has already had a number of meetings to persuade the European Commission that it has the ability to operate the routes on a long-term basis.
But he conceded that while Flybe would pay a penalty if it exited any route within the first three years, it would be free to axe routes once the three-year period passed.
But the Government said before Christmas that it wouldn't be selling its 25.1pc stake to Ryanair. It's thought that the Government position hasn't altered even in light of the Flybe proposals.
"The European Commission is market testing the recent proposals by Ryanair and has asked the Department to respond to those proposals as part of the formal process," he added.
That response will be submitted within the next couple of days. The Commission has said it will deliver its verdict on the planned takeover by March 6.
Aer Lingus chief executive Christoph Mueller lashed out at the Flybe-Ryanair proposals yesterday.
"We have always opposed this Ryanair bid because it's so bad for the Irish consumer," he said. "The combined entity would represent 85pc of the total market. We have always subscribed to the fact that weak airlines should disappear from the market place. I'm a strong Darwinist in that respect. But this proposition turns the whole thing upside down."
Mr French said Mr Mueller was probably being a "bit cruel" in suggesting Flybe might fail.