The Government has announced it will not to accept the Ryanair offer of €1.40 per share for its shareholding in Aer Lingus.
It said the decision was taken because the cash offer 'greatly undervalues Aer Lingus' and that a merger would have negatively affected competition in the market.
Minister for Transport Noel Dempsey said: 'The Government took the view that the Ryanair offer greatly undervalues Aer Lingus.
'There were a number of other issues considered by Government in coming to this decision. Competition was a major consideration.
'Because we live on an island, Irish consumers depend very heavily on air transport. A monopoly in this area would not be in the best interests of Irish consumers.'
Ryanair Chief Executive Michael O'Leary said: 'We will respect and abide by the Government’s decision. We don't think it is in the best interests of Aer Lingus, which will be isolated as a small, peripheral, loss making airline.
'We would like to thank the Government and other Aer Lingus shareholders for the time and consideration they have given to our offer over the past seven weeks.'
Elsewhere, Aer Lingus announced it was extending its relationship with United Airlines on some long-haul services between Europe and the US.
It also said it is holding out the prospect of forming a new joint venture company with the US airline
The two airlines will launch a daily service between Washington and Madrid from March 2010.
Additional routes may be made available from next year for services to begin in Summer 2011.
Aer Lingus said that further expansion and development of the partnership's activities will be jointly assessed and agreed by the partners and may develop into a 'broader and deeper' joint venture, in which Aer Lingus would have a controlling interest.
The High Court has begun hearing proceedings taken by Ryanair over what it says is an alleged 'gagging' order on a TV debate about the budget airline's takeover proposals for Aer Lingus.
It followed agreement over how sensitive commercial information would be dealt with during the proceedings.
Ryanair had challenged a direction from the Irish Takeover Panel (ITP), the State body responsible for monitoring and supervising takeovers, that it could not take part in a Prime Time debate about its hostile takeover bid of Aer Lingus.
