The Minister for Public Enterprise, Ms O'Rourke, has warned that Aer Lingus is in such a poor financial state that government intervention cannot save 700 jobs the airline plans to cut.

Up to 700 temporary staff are being let go by the airline following its decision to cut its schedule by a quarter. A further 1,200 permanent jobs are also at risk as the Aer Lingus board prepares to ratify a new rescue plan at a meeting later this month.

Speaking in Brussels yesterday following a meeting with her Belgian counterpart, Ms Isabelle Durant, the Minister said that the Government would only consider State aid for Aer Lingus on the basis of a tough restructuring plan.

"If a situation comes about where the EU would relax the rules it could only do so on the basis of an airline that was shaped up and trimmed up," she said.

Ms O'Rourke requested yesterday's meeting to discuss the impact on airlines of higher insurance premiums, increased security costs and lower passenger numbers in the wake of last month's attacks in New York and Washington.

The European Commission is considering a relaxation of strict rules governing state aid to allow governments to ensure the survival of national airlines.

Sabena, Belgium's national airline, is in an even more parlous financial state than Aer Lingus.

Ms O'Rourke said that the two ministers did not discuss the issue of state aid but she made clear that the US government's decision to give US airlines $15 billion (€16.38 billion) in emergency help raised important issues for Ireland. Half of Aer Lingus's business is on transatlantic flights, making it highly vulnerable to any market distortion caused by the US move.

Ms O'Rourke insisted that the Government had yet to decide whether to seek EU permission to help Aer Lingus but she indicated clearly that her thinking tended in that direction. "My mind is fixed on doing my job and it is to ensure that Aer Lingus remains strong, remains viable," she said.

The Transport Commissioner, Ms Loyola de Palacio, has suggested that last month's attacks amounted to "exceptional circumstances" under which EU rules on state aid could be relaxed.

The issue will be considered at a meeting of transport ministers in Brussels in two weeks. The Competition Commissioner, Mr Mario Monti, indicated that he had no objection in principle to relaxing the rules.