Qatar Airways has taken a 9.99pc stake in International Airlines Group, the Aer Lingus bidder and owner of British Airways and Iberia in the oneworld alliance.
The airline was once tipped as a bidder for Aer Lingus which is now the subject of a €1.4bn bid from IAG.
However, the prospect of the State selling its critical shareholding in Aer Lingus to IAG is now in serious jeopardy, as the deal has been met with an "extraordinary level" of opposition from Government TDs.
The wave of opposition towards the deal exploded this week, as Labour Party TDs indicated that holding onto the Government's stake is a "red line issue" for the party.
Shares in Aer Lingus slumped again today amid the growing wave of political and business opposition to a €1.4bn takeover of the airline by BA parent group IAG.
Shares in the airline fell 3.7pc to €2.15. The dropped 6pc yesterday and its market capitalisation now stands at €1.15bn the €1.36bn IAG offer.
Senior Government figures last night conceded that plans to sell the 25pc stake will be kicked into touch unless "concrete assurances" are provided on the areas of jobs and the Heathrow slots.
Qatar's national airline said it would look to strengthen commercial ties with IAG, and may consider increasing its stake over time, although it was not currently intending to exceed 9.99pc.
"IAG represents an excellent opportunity to further develop our Westwards strategy," said Qatar Airways Chief Executive Akbar Al Baker.
IAG Chief Executive Willie Walsh, the former Aer Lingus boss who is heading up the takeover talks with Aer Lingus, welcomed the move.
"We will talk to them about what opportunities exist to work more closely together and further IAG's ambitions," he said in a statement.
Non-European shareholders of IAG including Qatar Airways are subject to an overall cap on ownership, as a result of the requirement for EU airlines to be majority owned by EU shareholders.
Qatar Airways, fully owned by the country's sovereign wealth fund, has competed with regional rivals Emirates and Etihad Airways to become major global carriers.
It joined oneworld in 2013, becoming the first Gulf airline in enter into a global alliance, which allows airlines to team up via code-sharing agreements to boost the number of flights they offer.
Etihad Airways has a 4.9pc holding in Air Lingus.
(Additional reporting Reuters)