AER ARANN has been awarded the contract to operate scheduled flights on the Knock-Dublin public service obligation (PSO) route by Minister for Transport Noel Dempsey.
The contract was originally awarded in May to Dublin-based Aer France subsidiary CityJet.
However, the airline withdrew two months later, saying it did not have the aircraft to operate the route.
CityJet was awarded a subsidy of €4.9 million for the three-year contract.
Aer Arann's once-daily service will begin on October 1st, and run until July 21st, 2011.
The Irish airline had the contract until July of this year, and was the underbidder to CityJet in the recent tender process.
The Department of Transport said the Knock contract has been coupled with Aer Arann's licence to operate a PSO service to Derry at a cost of €13 million over the three-year period.
CityJet had proposed that Scottish company Highland Airways take over the Knock PSO contract.
It is understood that this was rejected by the Department of Transport.
This was done on the basis that it did not fulfil PSO regulations.
Aer Arann managing director Garry Cullen welcomed the contract win.
"We're very happy to have been awarded this route and to return to Knock."
Ryanair criticised the Minister's decision to award the contract to Aer Arann.
"While Ryanair did not make an offer under the PSO subsidy scheme in relation to the Knock service, we did offer to operate this route when CityJet's operations failed to materialise," Ryanair said.
"We offered to operate a twice-daily return service, which was turned down with the result that no airline operated the service," said the company.
"We are confident that the offer Ryanair presented to the Minister provided a better service than the one now agreed, and at a cost which we are sure is substantially less than the Minister awarded to Aer Arann."
It added: "We will be contacting the Minister to request that he clarifies the level of the award made."
Ryanair's criticisms were rejected by the Department of Transport.
It said the airline's offer to operate the Knock route was more expensive that the one agreed with Aer Arann.
