Aer Lingus has rejected a second takeover approach from British Airways' owner IAG that valued the Irish carrier at €1.28bn.
Aer Lingus shares soared 10.1pc to €2.50 yesterday, valuing the airline at €1.33bn.
IAG issued a statement after stock markets closed yesterday evening, confirming that a new indicative offer to buy Aer Lingus for €2.40 per share was made on December 29 and was subject to certain pre-conditions.
It also said the revised proposal has been rejected by the Aer Lingus board.
Before Christmas, the Aer Lingus board headed by Colm Barrington rejected an inital approach made by IAG that tabled a €2.30 per share offer.
The board said the indicative offer had undervalued the airline and its prospects.
Aer Lingus declined to comment last night.
The latest offer values the Government's 25.1pc stake in Aer Lingus at €321m.
It values Ryanair's 29.8pc holding in Aer Lingus at €381m. That is not far off the €407m it spent accumulating its stake in its smaller rival since 2006.
There had been speculation yesterday that IAG could offer as much as €2.85 per share in a fresh bid for Aer Lingus.
The airline owns 23 valuable take-off and landing slots at heavily congested Heathrow Airport, where British Airways is the biggest operator. Buying Aer Lingus and having access to those slots would be highly advantageous to IAG.
For a bid to be successful, IAG would have to probably sell some Aer Lingus Heathrow slots to ease competition fears, while the Irish Government would also want assurances about sustained connectivity between Dublin and Heathrow.
Yesterday IAG's Willie Walsh spoke at the Pendulum Summit, a leadership conference held in Dublin.