The Government may underwrite a £125 million (€159 million) loan to Aer Lingus to fund a redundancy package for 2,500 workers. The Minister for Public Enterprise, Ms O'Rourke, briefed her Cabinet colleagues on Aer Lingus yesterday and outlined a number of ways in which the Government could help the national carrier.

A guaranteed loan is seen as the option least likely to upset Brussels which is opposed to state-aid to airlines and has already challenged a similar €125 million bridging loan to Sabena from the Belgian government. "It is less in your face that just giving them cash," said a Department of Public Enterprise source last night.

The Aer Lingus board met yesterday to review a restructuring package being formulated by management. The airline wants to shed 2,500 of its 6,300 permanent staff, but claims it does not have the cash to fund a redundancy programme. Departing staff could expect to receive up to £100,000 each on the basis of the £60,000 per person paid in the last round of redundancies in the early 1990s when 1,300 staff left.

The airline is expected to argue that it cannot afford to be as generous this time and will offer around £50,000, putting the full cost of the redundancies at £125 million.

Last night, Aer Lingus said the plan was at an advanced stage and "is expected to be finalised within the next week when it will be presented to Government". The Minister wants Aer Lingus to have its plan finalised before she travels to Luxembourg next Tuesday for a meeting of transport ministers. The Commission is expected to make its position clear on limited state aid today.

The Central Representative Council of Aer Lingus, on which all the company's unions are represented, meets this afternoon to consider its options. Earlier the company will brief all employees on progress to date in identifying the areas where it is hoping to cut up to 2,500 jobs on top of 700 temporary staff currently being shed.

The company stressed last night that the final survival plan would not be completed until the end of the week, but it is thought likely mass redundancies could be sought before the end of next month. The crisis was of "unparalleled urgency" according to one management source. The Irish Congress of Trade Unions has warned the Government that any attempt by Aer Lingus management to "unilaterally impose a solution on the workforce will not be tolerated either by Congress or its affiliated unions". It says the problem can only be solved by negotiation and agreement.

ICTU general secretary Mr Dave Begg is expected to contact the Secretary General to the Government, Mr Dermot McCarthy, this week and press for full consultation with the social partners on strategy at EU level to save the national airline.

All the Aer Lingus unions made it clear after yesterday's board meeting that they expected State aid would not be limited to funding security costs and compensation for losses in the immediate aftermath of the US attacks of September 11th.

Even talk of Government loans or guarantees to fund a redundancy package will hardly satisfy the unions, whose priority will be to minimise job cuts and maximise the future job security of those left. These aims could prove difficult to reconcile.

Under the Cahill Plan staff received packages worth an average of £55,000 to £60,000. It would cost £90,000 to match that figure today, or £250 million worth of Government supports.

IMPACT's assistant general secretary Mr Michael Landers, who represents pilots, middle management and most of the company's cabin crew, said: "The Government should support Aer Lingus in the interests of the wider economy. Significant reductions in the company's transatlantic routes would have far-reaching economic effects way beyond the aviation sector."

He pointed out that only three airlines operated direct routes from Ireland to the USA before September 11th and, of these, Delta had already withdrawn from transatlantic routes and Continental was considering its position.

SIPTU, the largest Aer Lingus union, accused the Government of inaction. National industrial secretary Mr Noel Dowling said: "It's amazing how on some issues the Government says it can't act because of EU policy, while on other fronts the Government champions national independence against Brussels' interference."