Minister for Transport Shane Ross has warned that Bus Éireann is facing insolvency within two years unless difficult decisions are made.

Mr Ross told his Cabinet colleagues between six and eight of the least profitable routes may have to be axed to bridge the funding gap at the company.

The Minister said the firm has reached a critical state in its financial situation and a number of unpopular decisions may have to be made.

Bus Éireann reported losses of up to €5.6 million last year and has projected a €6 million loss this year.

The semi-state company faults the Expressway services for the significant losses and is seeking to separate it from the rest of the firm.

It is also proposing a reduction in staff and the introduction of pay cuts for remaining employees.

Mr Ross told his Cabinet colleagues the losses were unsustainable and the semi-state company was now in crisis.

The bleak financial picture was outlined to the Minister recently when he met the chief executive of Bus Éireann, Martin Nolan. He also met the chair of the company, Aidan Murphy, on Monday.

Mr Ross said: “What they are looking at now is to find a solution to a critical situation in their finances.”

The announcement was made as management and unions met at the Labour Court to discuss union requests for pay increases of up to 21 per cent for drivers.

Management did not engage on pay insisting they could not assess the claims outside of examining the other cost-cutting measures.

In a statement the company said: “Bus Éireann incurred a €5.6 million loss in 2015 and is forecasting a similar deficit for 2016, mainly due to losses on our commercial Expressway services.

“The company must advance our cost reduction plan.

"The company attended the Labour Court with employee unions today December 6th, to address a pay claim.

“Bus Éireann has previously stated that we cannot afford a pay increase, given the immediate cost savings required to address ongoing losses.”

Mr Ross has backed the company and insisted it cannot afford the increases being sought by drivers.

The Minister and Bus Éireann will face stiff opposition to any proposals to cut staff or the company’s operations.

The Programme for Government commits to a full review of public transport policy and to investing in services including an updated bus fleet.

Fianna Fáil spokesman on transport Robert Troy said his party were totally opposed to any reduction in bus services or compulsory job losses. He said Bus Éireann is losing business to the private sector and the company is not responding adequately enough.

“It is unbelievable that despite this being highlighted by Bus Éireann for months, Minister Ross is only bringing it to Cabinet now,” he said.

“You could question whether he is taking this seriously at all. We cannot have a situation develop here where connectivity is at risk. Rural services have already been decimated. Mr Ross now needs to examine the subsidies available to the company and how they can be better used,” he added.

A recent report also warned Iarnród Éireann faces insolvency unless it gets more State money. And even with some additional Government funding, the routes from Limerick to Ballybrophy and Limerick Junction to Waterford could close. The National Transport Authority and Iarnród Éireann's review also said part of the Limerick-Galway route from Ennis to Athenry, which only came back into service in 2010 at a cost of €100 million, and the Wexford line south of Gorey could be shut, leaving Wexford town and Rosslare without a rail service.

The report found the semi-State needs an extra €103 million a year over the next five years to ensure its survival.

The chief executive of Bus Éireann, meanwhile, has made a number of appointments to its management team to assist with their financial difficulties. Mr Nolan confirmed Ray Hernon would be appointed as the new chief financial officer. Joe Kenny, who operated as the chief Human Resources Officer, left the company after over 30 years of service with the CIÉ group.