UPDATE 1-Ryanair says no substance to Aer Lingus report

* Ryanair reiterates "highly unlikely" to make fresh bid

* Aer Lingus says not considering rights issue

(Adds quotes from Ryanair, Aer Lingus)

DUBLIN, Oct 5 (Reuters) - Ryanair (RYA.I) denied a report on Monday which quoted chief executive Michael O'Leary saying he would use a future rights issue by Aer Lingus (AERL.I) to gain majority control over the rival Irish airline.

A report by dealReporter, also posted on the www.ft.com website, quoted O'Leary as saying Ryanair would be happy to invest in Aer Lingus beyond its current 29 percent stake and the most likely way to do so would be through an Aer Lingus rights issue.

A spokesman for Ryanair said the dealReporter report was based on a misunderstanding.

"There was 'no substance' to reports which appeared on FT.com claiming Ryanair could take control ... (of) Aer Lingus through a rights issue," Ryanair said in a statement.

"Our position on Aer Lingus was recently confirmed at the Ryanair AGM, which is that we are 'highly unlikely' to make a third offer," it said. [ID:nLO135319]

Aer Lingus has said it was looking for ways to reorganise its business to reverse mounting losses. A spokeswoman for the former state airline, which has fended off two bids by Ryanair, said it was not considering a rights issue. [ID:nLS668594] (Reporting by Andras Gergely; Editing by Dan Lalor)