Ryanair will go "as far as it possibly can" to prevent state aid being given to state-run airlines in Europe, including Aer Lingus, Ryanair chief executive Mr Michael O'Leary said yesterday. "We'll go to the Competition Authority, the EU and we'll go to the European courts," he said.

However, the Taoiseach Mr Ahern said the Government intended to save as many jobs as possible in Aer Lingus and would examine how it could give the beleaguered airline state aid.

Mr Ahern said the task now was to save around 4,000 jobs at Aer Lingus.

"We have to make it a more efficient airline. We have to try to structure it in a way that it can deal with the economy of scale it has and can trade on into the future in a sustainable way.

"We also have to see what help we can give it by way of state aids. The transport council will discuss that on Tuesday and we'll continue to talk to our friends in Europe about how we can assist," said the Taoiseach who was speaking on RTE's This Week programme.

"It is an imperative of this country, if it is at all possible, that we can sustain Aer Lingus as a national airline with as many jobs as is possible and that looks to be in the order of 4,000," Mr Ahern added.

However, Ryanair's Mr O'Leary said: "We're not going to stand aside while somebody shovels money into Aer Lingus. Aer Lingus has more than enough cash to trade its way out of its current problems."

If the company does not have enough money to finance voluntary redundancies, it should give workers statutory redundancy, he said. But he said state aid was unlikely to be sanctioned by the EU because of pressure from the British, German and French governments.

"They see this as an opportunity to tidy up aviation," he said.

He said he also expected the EU to end the Shannon stopover in the coming year.

"The future of Shannon is working with someone like Ryanair to develop short-haul flights," he said.

Mr O'Leary rejected the suggestion that Aer Lingus should receive state aid because it is a strategic asset to the State.

"It is so strategic that six months ago the Government was going to sell it," he said.

Speaking on the subject of competition and regulation at the Dublin Economic Workshop in Kenmare, Mr O'Leary also criticised the aviation regulator's draft report on airport charges which he said failed to achieve the requirements of the Aviation Regulation Act to facilitate the development and operation of cost-effective airports to meet the requirements of users. Aer Rianta's high-cost, inefficient airport monopoly would continue, he said.

Describing the regulator's proposals as "hopelessly inadequate", he said they failed to reduce costs, increase efficiency, limit capital expenditure and promote new route and traffic growth. Regulation was no substitute for competition, he said.

"Competition works, regulation is a far inferior substitute," he said.

To ensure that regulation was proportionate and would be removed once it was no longer required, "regulatory creep" should be resisted, Mr Patrick Kenny, an economist with the Competition Authority told delegates. Failure to do so may lead to an over-cumbersome regulatory process and hinder efforts to remove regulatory burdens on sectors when effective competition emerged.

When the current regulatory system matured, the idea of subsuming all regulators into a single regulatory office should be considered, Mr Kenny said.

This would help reduce the long run costs of regulation, which were higher in smaller economies, and would allow information and knowledge synergies between regulators to be exploited, he said.