Ryanair is believed to have spent €37.6 million yesterday increasing its stake in Aer Lingus to 28 per cent.

It is understood that the budget airline, led by Michael O'Leary, bought 16 million shares at €2.35 each from an unnamed seller.

This makes Ryanair the biggest shareholder in Aer Lingus, ahead of the Government, which has a 25 per cent stake and the employee share ownership trust (Esot), which owns 12.6 per cent.

Ryanair is expected to notify the stock market today that it has increased its shareholding in Aer Lingus, from its previous level of 25.2 per cent.

Shares in Aer Lingus closed two cent or just under 1 per cent down in Dublin yesterday at €2.40. Ryanair spent €345 million building its 25.2 per cent in Aer Lingus.

Its €1.48 billion bid for Aer Lingus was blocked earlier this summer by the European Commission, but Brussels stopped short of forcing Ryanair to offload its shareholding.

No comment was available from Ryanair last night. Sources close to Aer Lingus, however, conceded that the airline's main rival has increased its shareholding in the former State-owned company. The move intensifies the pressure on Aer Lingus chief executive Dermot Mannion.

Mr Mannion is under fire over his decision to cut the Shannon to Heathrow route and transfer the slots to Belfast.

He also faces a damaging two-day strike from the airline's pilots in a dispute over pay rates being offered for its new base in Belfast.

Market sources suggested that yesterday's share purchase by Mr O'Leary was a move designed to smooth out the average price Ryanair has paid for its Aer Lingus shares.

In November, Ryanair paid €2.72 a share to acquire 31 million units of Aer Lingus stock. Ryanair's failed bid valued Aer Lingus at €2.80 a share.

Earlier this week, Mr O'Leary wrote to Aer Lingus, requesting that an extraordinary general meeting (egm) be held to vote on the decision to move the Heathrow slots from Shannon.

Acquiring the extra shares does not significantly alter Ryanair's ability to influence major decisions at Aer Lingus. The company only needed a 25 per cent shareholding to block special resolutions by the company.

In July, Ryanair defeated a resolution at Aer Lingus's first annual general meeting that could have had the effect of diluting its shareholding.

The resolution would have given Aer Lingus the power to raise money by issuing new shares without having to offer them to existing investors in the airline.