UPDATE 1-Ireland in talks with Aer Lingus on further financial support

(Adds additional quotes)

DUBLIN, Feb 18 (Reuters) - Ireland and IAG’s Irish airline Aer Lingus are engaged in discussions about the government providing further financial support for the former flag carrier, Deputy Prime Minister Leo Varadkar said on Thursday.

Ireland’s sovereign wealth fund said earlier this month that it had provided a 150 million euro ($181.2 million) three-year loan to the airline that is also a recipient of the state’s wage subsidy scheme for firms hit by the COVID-19 pandemic.

“To say very clearly, Aer Lingus will not be allowed to fail. It is already receiving substantial financial support from government. Discussions are underway on further support for the company so it is there when we need it again,” Varadkar told parliament.

He later added that when the government said it would not allow Aer Lingus to fail, he did not want to create the impression that such a development was likely.

“What I am saying is that we will provide more (financial support) to enable us to retain essential connectivity, like for example (London) Heathrow, the United States and those key hubs in Europe,” he said.

“The sad truth is that the way things are going now, it could be a very long time before we see aviation recover... Saving all jobs and saving all routes may not be possible.”

Non-essential travel oversees is a breach of current COVID-19 regulations in Ireland, and the government is set to increase fines for residents who break those rules to 2,000 euros per journey.

$1 = 0.8279 euros Reporting by Padraic Halpin; Editing by Jan Harvey