THE GOVERNMENT HAS handed out new contracts to indigenous airline Aer Arann and Scottish firm Loganair to operate two domestic routes in Ireland.

The Kerry/Dublin service will be run by Aer Arann and regional Scottish carrier Loganair will be the new operators of the Donegal/Dublin air service.

The decisions were announced today by Minister for Transport Leo Varadkar following a European Union public tendering process.

Both routes are funded under Public Service Obligations (PSO) and will receive about €7.6m in support each year.

Services are expected to start in November. The airlines will offer two return flights every day on both routes for the next three years.

Varadkar said that the Government continues to provide funding to the Kerry and Donegal routes because they are the most remote airports in Ireland.

However, he warned that funding is not secured beyond 2014 and could be pulled, depending on the use of the services and public finances.

The Minister revealed that there was a “good level” of interest in the tender process with two airlines missing out.

Yesterday, Ryanair announced it was pulling its Kerry to Dublin route because of the new PSO arrangements being put in place from 3 November.

A spokesman for the budget airline said, “Since this Government clearly prefers to subsidise high fares with the awarding of yet another pointless PSO on the Dublin– Kerry route, Ryanair has been forced to close our unsubsidised low fare flights on this route.”

Read: Ryanair scraps all flights between Dublin, Cork and Kerry >