Nigerian Airways is understood to have settled a $16 million (€17.62 million) debt with Aer Lingus for less than $8 million.

The debt, incurred in respect of maintenance work carried out by the former TEAM Aer Lingus in the early 1990s, was written off by the State-owned airline in 1994.

A payment is understood to have been made in the past month to the Irish carrier, which is facing significant losses this year.

Airline sources said there was no suggestion that the settlement was linked to a deal this summer between the Minister for Justice, Mr O'Donoghue, and the Nigerian government to repatriate failed asylum-seekers from the State.

That agreement linked cooperation on immigration matters with the continuation and development of Irish aid to Nigeria.

It is understood that Aer Lingus dealt directly with Nigerian Airways in the past year when recovering the debt.

In previous attempts it dealt with the Nigerian government, and admitted on one occasion to using a debt recovery company.

Contact was established with Nigerian Airways when it emerged that it was seeking to re-enter the International Air Transport Association.

A condition of entry is that prospective association members must not have outstanding issues such as debt to clear with other members. It is understood Aer Lingus will return a quantity of aircraft parts to the Nigerian company as part of the deal.

A Boeing 737 held at Dublin Airport since the early 1990s will be destroyed.

After record profits in 1999, Aer Lingus is expected to lose about £20 million this year following strikes, a downturn in US sales and foot-and-mouth.

Its board is expected to vote on a recovery plan at a meeting on September 27th which will be the first chaired by Mr Tom Mulcahy, the former chief executive of AIB Group. He was appointed last week after the sudden death on August 17th of Mr Bernie Cahill.

The company is not expected to abandon any transatlantic routes as part of that process, but it may stop a small number of European services.

Where fewer staff are required, it is thought the company will use less temporary workers.

One of the first tasks facing Mr Mulcahy is the appointment of a successor to Mr Michael Foley, the chief executive sacked in June after a board subcommittee upheld two complaints against him of sexual harassment. Mr Foley denied the allegations.

It is thought that an appointment will be made within the month, as the process was said to be well advanced when Mr Cahill died. There was a shortlist of two, but the decision will rest with Mr Mulcahy.