The European Commission has approved a Belgian government bridging loan of €125 million to troubled Sabena airlines.
The Commission has said, however, that Aer Lingus will not be granted a similar loan.
Ryanair immediately said it would mount a legal challenge to the Sabena loan approval.
The Commission said the loan to help out Sabena was permissible under EU competition rules, despite protests from rival carriers.
EU Transport Commissioner Ms Loyola de Palacio said the green light was given because the bridging loan was "closely in line" with strict 1999 guidelines for state aid to rescue companies on the verge of collapse.
"There's no restructuring aid here", she told a news conference.
"This is a cash flow problem. We are providing market rate funding to allow the company the necessary cash flow so that it can keep going until it decides to restructure or wind up."
However Ms de Palacio said Aer Lingus would not qualify for similar assistance from its own government since it had not been granted bankruptcy protection like the Belgian airline.
"For Aer Lingus to be seen as such a company it would have to be subject first to a suspension of payments by a judge. Aer Lingus does not fall into this category so it cannot receive any support or loans from the Irish government", she said.
Ryanair, which flies out of Charleroi in southern Belgium, immediately said it would launch legal action to block the loan.
Ms De Palacio said the loan for Sabena was for one month, but it could be extended for up to six months.
"It can be renewed ... This sort of loan is restricted to six months in any case until a decision is taken on restructuring or winding up the company", she said.
Menawhile the Minister for Public Enterprise Mrs Mary O'Rourke told the Dail this afternoon she would seek Cabinet approval next week for a loan guarantee for Aer Lingus.
The loan, if approved, will finance redundancy payments and working capital.
She declined to give details of what recommendations she would be making to the Government on the airline's funding requirements.
Earlier Mrs Rourke claimed Aer Lingus was nearing the position of "trading recklessly".
She said the situation cannot be allowed to continue and that urgent measures were required.
She told RTÉ's Morning Ireland radio programme: "It is very important that I move quickly. The position of Aer Lingus is financially most serious.
"Nobody wants to see the airline close, but it is coming to that - if we do not act quickly. It is a matter of great immediacy. It's a matter of weeks - I can't speak plainer than that."
Additional reporting by Reuters
