Ryanair has returned to make a surprise bid for Aer Lingus, valuing its rival at almost €700 million.

Europe’s largest budget carrier, which already has a 29.82% stake in Aer Lingus, said a combined operation was needed to create a strong Irish airline group in the face of increased consolidation among airlines across Europe.

Ryanair previously failed in an attempt to buy Aer Lingus in 2006 but claimed that circumstances in the sector had changed since then and the new deal should be approved by EU competition authorities.

It is thought the move by Ryanair means UAE carrier Etihad Airways, which took a 2.99% shareholding in Aer Lingus in May, would be encouraged to bid for the Irish government’s quarter share in the Dublin-based airline.

Ryanair chief executive Michael O’Leary said: “This offer represents a significant opportunity to combine Aer Lingus with Ryanair, to form one strong Irish airline group capable of competing with Europe’s other major airline groups led by Air France, British Airways and Lufthansa.

“Since the European Commission recently approved BA’s takeover of British Midland (being the latest in a series of EU airline consolidations), and Etihad recently invested in Aer Lingus and there are reports that it has a “strong interest” to acquire the government’s stake, and since the Irish government has decided to sell this stake, we believe now is the time to focus on the right long-term strategic partner for Aer Lingus.”

He said the Ryanair bid was “the best way for Aer Lingus to continue to be owned, controlled and managed from Ireland for the benefit of Irish citizens and visitors”.

O’Leary added: “With Ryanair’s help, we believe that Aer Lingus can grow its traffic from a current figure of 9.5 million passengers (8.4% fewer than its 2009 figure of 10.4 million) to over 14 million passengers over a five year period post completion, by growing Aer Lingus’ short-haul fleet to offer more competition at some of Europe’s major airports where currently Aer Lingus operates and Ryanair has no desire to fly.”

Aer Lingus’ transatlantic operations would also benefit from investment to “grow materially” over the same period, according to O’Leary.

The offer “enables Aer Lingus to secure a financially strong, Irish based, airline partner committed to keeping Aer Lingus as a separate airline while developing the Aer Lingus brand and business,” he said.

“Ryanair believes this offer will ensure that Ireland will have two separate airlines in one strong airline group, with combined traffic of almost 90 million passengers per annum, capable of growing Aer Lingus’ traffic and creating new jobs for pilots, cabin crew and engineers within a dynamic and expanding airline.”