Subsidies for air and ferry services to the Aran Islands could be cut, the Minister for Community, Rural and Gaeltacht Affairs, Mr Ó Cuiv, was told by consultants who investigated the use of €2.13 million State aid.
The Inis Mór ferry needed "minimal subsidy", while the subsidy for Aer Arann's Aran service could also be cut, said Malachy Walsh and Partners.
The tender for the passenger services to the Aran Islands should be split into two, a tender for Inis Mór and a tender for Inis Meáin and Inis Oírr, to avoid the danger of cross-subsidisation and to improve competitiveness, the consultants said.
Emphasising that he would not cut services, Mr Ó Cuív has now given islanders a month to comment on the consultants' findings before the Department carries out "a comprehensive analysis in the near future on the various recommendations".
The study was carried out in co-operation with Posford Haskoning, Raymond Burke Consulting, McCaig Watson and Mr Seosamh Mac Donnacha.
"The maintenance of the total subsidy amount at present levels cannot be sustained as ferry costs increase with inflation and there is no change in fares.
"Therefore, if the total current subsidy amount is not to be exceeded in the future, then some services must face a real reduction, if not a withdrawal, in subsidy. This could result in a reduction in the frequency and scale of certain services provided."
However, it said ferry services to all of the islands were vital. The services generate €12 million worth of tourism spending, €6 million in tax and excise receipts and supports 275 jobs.
"Competition, where it exists, has improved the quality of the passenger services. However, it is equally obvious that competition, if not properly managed, could lead to monopolies and ultimately to a reduction in the quality of the service. This comment particularly applies to the Aran Islands and to the Mayo Islands," the consultants found.
The Aran Islands' cargo service was criticised by users, who believe that it should be based out of Rossaveal, though the operators, O'Brien Shipping, insist the service is "reliable, efficient and economical".
The four airstrips serving the Aran Islands should be upgraded, at a cost of €1.3 million, while a fortnightly winter helicopter service could be provided for the Mayo islands of Clare and Inishturk "in the interests of equity".