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INTENSE talks aimed at resolving a major deficit in the Aer Lingus and Dublin Airport Authority (DAA) pension funds have collapsed without agreement.

The gap is as large as €640m -- and means the Government cannot sell its 25pc stake in the airline until agreement is reached. However, those familiar with the negotiations say that the major deficit is too large for any deal to be struck.

The news will prove to be a particular headache for Transport Minister Leo Varadkar who is likely to call on both bodies to return to the negotiations table. Aer Lingus and the DAA have argued that they will not contribute extra funds to bridge the massive gap.