The airline which lost its public service contract to provide flights between the Aran Islands and the mainland is to challenge the decision in the High Court.
Aer Arann Islands is to seek a judicial review of the decision to award the contract to a helicopter company for the next four years, sources familiar with the matter confirmed.
The proceedings are expected to be issued shortly.
It is understood the airline, which has operated the service for 44 years, has a number of reservations about the tender process, which was operated by the Office of Government Procurement.
The legal challenge looms amid mounting pressure from islanders for the decision to be reconsidered.
East Galway-based Executive Helicopters was named as "preferred tenderer" by Gaeltacht Affairs Minister Joe McHugh last month, but the contract has yet to be signed.
The current service operated by Aer Arann Islands flies in to Inverin in Connemara, a short distance from the Rossaveal ferry port also used by islanders.
But islanders are upset that the helicopter firm plans to use Galway Airport in Carnmore as its mainland base, some 52km from Rossaveal.
They have also questioned the ability of the helicopter company to operate from the airport, the future of which is currently unclear and is the subject of a review commissioned by Galway County Council.
Contracts with Executive Helicopters, which currently provides services for tourists, companies and semi-State bodies, had been due to be signed around September 9, with the new service coming into operation on October 1.
However, after seeking legal advice the department extended a standstill period until November 16 with a view to obtaining clarification on the availability of Galway Airport for the duration of the four-year contract.
It has asked Aer Arann Islands to extend its contract until next February so the air service can continue while the issue is ironed out.
A department spokesman said it was "awaiting a response to its request from the existing service provider".
However, the Irish Independent understands that the airline will not agree to the request.
A spokesman for Aer Arann Islands declined to comment.
Questions submitted to Galway County Council were not responded to. A spokeswoman for the Office of Government Procurement said no contract had been concluded with Executive Helicopters and that it would not be appropriate to comment until the process was concluded.
It would not say what assessment was done of the respective bids or whether the scoring system used to identify the preferred bidder would be disclosed. It also refused to clarify whether any service users from the islands had been consulted as part of the assessment process.
Geraldine Shiel, a director of Executive Helicopters, said it was not in a position to comment at present.