A price war has broken out between low-fare airlines Go and Ryanair to win passengers on the Dublin-Edinburgh route.

The battle for business between the two airlines intensified yesterday as the British airline cut its one-way fare to £10 (#12.70) only to be undercut by Ryanair which offered similar seats for £5.

Competition between the two hotted up after Go announced last week that it was entering the Irish market, offering cheap flights to Edinburgh and Glasgow from September 19th onwards. The airline quoted return flights from £50 to Edinburgh and £45 to Glasgow airport.

Ryanair responded this week with plans to introduce a daily service from Dublin to Edinburgh ahead of Go. It already operates flights to Glasgow Prestwick. The airline said it would operate four return flights daily to the Scottish capital and guaranteed that all seats for the first 29 days would be sold at £29.99 return.

Go bounced back, promising it would sell every seat for £10 each way, inclusive of tax and charges, for the first 30 days. The airline said seats must be booked by October 1st for travel before October 18th. A £5 supplement applies each way to all telephone bookings, taking the cost of a return flight to £30 or £20 for Internet bookings.

But Ryanair, determined to defend its own turf, further slashed fares to £5 each way for all seats on the route from August 30th to October 25th. This price includes all taxes and charges which account for £9.26 of a £10 return fare, according to the airline.

"Ryanair's fare is half the price of Go's lowest fare and is available for twice as long," the company trumpeted yesterday.

Go countered by saying Ryanair was looking over its shoulder at them. "Our advice to them is to watch this space," a Go spokesman said.

Analysts say Ryanair has significant advantages in the battle between the two low-frills airlines and is likely to come out on top in any price war. In addition to having a lower load factor - the number of seats it must fill to break even - it owns its own aircraft rather than having to lease them.

However, its share price fell by 1.7 per cent yesterday as the market reacted negatively to news of the price war.