The Cabinet has cleared the way for the sale of the State's entire 95 per cent shareholding in Aer Lingus, a move which could raise up to £600 million (€760 million) for the Exchequer.
The Government is also prepared to cede 9.9 per cent of the company to employees, who currently hold 5 per cent. This would bring their stake to nearly 15 per cent, worth almost £90 million.
This amounts to an average of around £13,000 for each employee, which is likely to be paid for in part through reforms in working practices. Staff are also likely to have to pay cash for a portion of the shareholding.
The Minister for Public Enterprise, Ms O'Rourke, said last night she personally favoured the sale of the State's 95 per cent stake, but stressed that a final decision on this was a matter for the Government.
Yesterday's Cabinet meeting gave initial approval for floating shares in Aer Lingus. The next step is to appoint advisers to give guidance on the flotation process.
It is likely that the share offering will take place in autumn or winter next year. It is expected that there will be a combined offering, raising monies for both the Exchequer and the airline (the airline needs £150 million - £200 million for expansion within the next 12-18 months).
However, analysts said last night that the public's experience with Eircom may temper their appetite for Aer Lingus shares.
Fine Gael's spokesman on public enterprise, Mr Ivan Yates, said his party favoured cementing the potential of the Oneworld alliance through a strong equity participation by Oneworld partners, which include British Airways and American Airlines. He said this should take place before a share offering, which should be done on a phased basis.
Ms O'Rourke said the flotation would follow the Eircom model, whereby shares were sold to the public as well as institutions. She declined to put a value on the company and said that flotation would depend on market conditions. "If conditions are good we'll float, if not, we won't."
Last night the Central Representative Council, which represents the nine unions at Aer Lingus, said it would be consulting the workforce on the best course of action over the flotation. SIPTU said it would know the reaction of employees by the middle of January.
However Impact, which represents the airline pilots association, said it would be pressing to bring the employees' shareholding up to 20 per cent. Impact's assistant general secretary, Mr Matt Staunton, said this was in line with industry norms in Europe and North America.
Aer Lingus welcomed the Government announcement, saying it was a positive development in the company's move to full commercialisation.