The decision by Gaeltacht minister Joe McHugh to cancel a tender to provide an air service linking the Aran Islands to the mainland has been severely criticised.
The decision has raised the prospect of the taxpayer nursing a multi-million-euro bill in compensation and legal fees.
Mr McHugh made the decision on Friday evening, following weeks of controversy over the decision to declare a helicopter company the preferred bidder for the public service contract.
Islanders railed against the decision, which would have brought an end to Aer Arann Island's fixed-wing service, which had been in operation for 44 years.
The company had placed 40 staff on protective notice and had been due to end its service of the islands next Tuesday. Instead, it will be asked by the minister to maintain the service while a new tender process gets under way.
Staff at the company were addressed by management yesterday and sources said anger toward Mr McHugh and the department is at a high level within the company.
The decision to abandon the initial tender process will be seen as an embarrassment to Mr McHugh and the Department of Arts, Heritage and the Gaeltacht.
It had selected a bid from Executive Helicopters.
Critics argued the tender process was flawed as the future of Galway Airport is far from certain.
Yesterday, Executive Helicopters said it was "very disappointed" with the decision of the Department to cancel the PSO tender for an air service to the Aran Islands based on the uncertainty over the future use of Galway Airport.
"We will be considering all our options in relation to the announcement over the coming days," a spokesman told the Sunday Independent.
"The Aran Islands PSO stipulated that only Galway Airport or Na Mina airport could be used for the tender.
Executive Helicopters said it approached both airports (Galway and Na Mine ) for costs and received costs from both airports for landing fees and passenger fees for the PSO contract.
"Na Mina airport, owned by Aer Arann Islands quoted Executive Helicopters landing and handling fees that were in excess of €2m for the four-year contract, which was over four times the cost of using Galway Airport," the spokesman said.
"If the PSO service is re-tendered by the Department then we will be calling on them to include an alternative site to Na Mine airport in the Rossaveal area."
Aer Arann Islands said it was not in a position to comment.
That bid was based on flying out of Galway Airport in Carnmore, and would have cost the State €900,000 a year.
Tarlach de Blacam, who runs a knitwear firm on Inismeain, welcomed the cancelling of the tender. "We will be demanding a central role in the new tender process," he said.
"We will also be asking the minister to review the process in general because of the dismay and anxiety cased in the three Aran Islands by this flawed tendering process."
Last week, TV presenter Maura Derrane, who is an islander, said she was shocked at the decision to end the Aer Arann contract, which she described as "ridiculous".
"I think it would be devastating for the island," she said.
In a statement, the department said Mr McHugh intended to advise the European Commission of the cancellation of the tender as soon as possible and to commence a fresh tender process for the air service. "The minister indicated that the department will enter discussions with the existing service provider for the provision of an interim service with a view to enabling the re-tender to take place, while ensuring that there is no disruption in service," it said.