A decision on whether to dispose of some or all of the state shareholding in Aer Lingus could be made by September, it emerged following the first meeting of a cabinet sub-committee to discuss the issue this week.
Ministers discussed the issue and have called on civil servants to work on a number of the key issues. No statement was issued about the meeting's outcome, but a number of sources indicate that ministers want to reach a decision in principle on what route to take by early autumn.
The discussions on the airline's future were triggered by a proposal from three of its senior managers to undertake a management buy-out. Earlier this month the Government asked the three executives - Mr Willie Walsh, the chief executive, Mr Brian Dunne, the chief financial officer and Mr Séamus Kearney, the chief operations officer - not to advance their MBO proposal pending a Government decision on the ownership issue.
A Cabinet sub-committee was set up to examine the issue and met for the first time last Wednesday. Its members were the Taoiseach, Mr Ahern, the Tánaiste, Ms Harney, the Minister for Finance, Mr McCreevy, the Minister for Transport, Mr Brennan and the Minister for Arts, Sports and Tourism, Mr O'Donoghue.
There was no official comment following the meeting. Sources believe that a number of Ministers - including the Tánaiste and Mr McCreevy - favour in principle the sale of the state's shareholding. However the attitude of the Taoiseach, Mr Ahern, remains unclear. There have been tensions between the Government and the trade unions in recent months over the future of Aer Rianta and Dublin Bus and this may influence the Aer Lingus discussions.
However with a staff share ownership scheme - intended to give employees a 14.9 per cent stake in the company subject to delivery of changes in work practices - being finalised, the prospect of a financial gain may also affect the union stance. The need for €1 billion in investment in the company's fleet will also be a key consideration.
There is no question of the Government giving the go ahead for the MBO plan without setting in place a process which allows a wider assessment of the interest form investors. The Minister for Transport has already indicated that if a sale went ahead , the management "would have to get in the queue and make their bids like anyone else".
The Government has three basic options: to leave the ownership structure unchanged; to sell part of its stake; or to sell all of its stake. If it decides to sell all or part of its stake, it would most likely appoint an investment bank to gauge investor interest and then sell to the highest bidder or bidders.
Typically this process would be followed by a stock market flotation in future years. An immediate stock market float would also be an option.
A key question in a sale to investors would be the Aer Lingus management role. Management could align themselves with one bidding group. However the Government could also decide to ask them to stand aside while the initial assessment of investor interest is underway, with a view to becoming involved with whatever consortium was successful.
This would keep in place the team that has turned the airline around, and would put them in line to achieve a sizeable equity stake under any new structure.
