The board of Italy's grounded low-cost carrier Volare, which suspended flights and ticket sales this weekend, declared insolvency overnight.
The decision will enable Volare to benefit from a law adopted in December 2003 by the Italian government to save the failed food group Parmalat from bankruptcy.
Ryanair says it will announce plans for expansion in Italy on Wednesday in the wake of the Volare crisis.
Volare ran up an estimated €300m debt, and is now hot favourite to become the first major victim of what Ryanair boss Michael O'Leary predicted earlier this year would be a 'bloodbath' among low-cost airlines.
But the company, with 1,400 employees, is likely to be protected from its creditors while a government-appointed administration team tries to turn it around under a similar procedure used to halt the decline of food giant Parmalat last year.
A government decree paving the way for administration is likely to be signed at the next cabinet meeting later this week.
Reports said Volare - which flies domestic routes as well as to Paris, Madrid and Prague - would ask shareholders for a €60m capital injection.
Meanwhile, former managing director Andrea Molinari launched a bitter attack on the running of the airline which he led for a three-month period before he resigned last month with Volare's debts at the time reportedly soaring to €250m.
'A few days after I began, I noticed there was no system of management controls,' Molinari alleged in an interview with Corriere della Sera. 'There were conflicts of interest you wouldn't believe, and irregularities galore,' he added.
