RYANAIR has admitted defeat over its hostile bid for Aer Lingus after the Irish Government said it would not support it.

The low-cost airline said it was disappointed it could not satisfy its 90 per cent acceptance condition, but said it would "respect and abide" by the decision.

The Government, which owns 25 per cent of Aer Lingus, said Ryanair's €1.40 a share all-cash offer "greatly undervalues Aer Lingus and a merger on the basis proposed would be likely to have significant negative impact on competition in the market."

Transport Minister, Noel Dempsey explained: "Because we live on an island Irish customers depend very heavily on air transport. A monopoly in this area would not be in the best interests of Irish consumerism."

Ryanair Chief Executive, Michael O'Leary has hit back, saying: "We don't think it is in the best interests of Aer Lingus, which will be isolated as a small, peripheral, loss making airline, reduced to announcing so called 'partnerships' with other loss makers like United Airlines.

"It is strange, when the Irish Government is looking for €2 billion in cost savings, that it would reject an offer of €188 million for its 25 per cent stake in Aer Lingus.

"It is also sad, when thousands of jobs are being lost in Ireland, the Ryanair's offer to create 1,000 new Irish jobs in Aer Lingus over the next five years has been rejected."