It would be more economical for the Government to simply borrow €500 million and invest it directly in Aer Lingus rather than selling shares to private investors, according to the Irish Congress of Trade Unions' (Ictu) economic adviser, Paul Sweeney.

Mr Sweeney said yesterday that the Government could borrow the money at cheap rates, possibly 3.9 per cent, and that this arrangement was superior to any sale of shares in the airline to institutional investors.

The Minister for Transport, Martin Cullen, is expected to seek Cabinet approval next month for the sale of a stake in Aer Lingus to raise funds for a new long-haul fleet. Over 50 per cent of the airline may have to be sold to raise sufficient funds.

Mr Sweeney said it was not clear what kind of stake the Government wanted to retain in Aer Lingus. He said that, based on a valuation of €600 million, the Government's current 85.1 per cent stake was worth almost €511 million. The other 14.9 per cent is owned by staff.

Mr Sweeney said to interest private investors in Aer Lingus, the Government would have to sell shares at a significant discount to the market price.

"A company the size of Aer Lingus would be relatively small by international standards, so an incentive would have to be provided to interest certain buyers," claimed Mr Sweeney.

He said the discount would also be needed in a situation where the Government sought to retain a "blocking" shareholding.

If there was a rights issue after the initial sale to raise further funds, the Government would be diluting its stake even further and unnecessarily losing value because of a discount needed to satisfy the markets.

"The loss to the taxpayer in an initial public offering (IPO) greatly exceeds the cost of borrowing money and investing the funds directly in the airline," he said yesterday.

Mr Sweeneysaid there was nothing to stop the Government investing directly in the airline. He rejected claims that any investment would be regarded as illegal State aid by the EU.

"They can invest in the airline. In the morning, they could write a cheque," he claimed.

He also said the Government was investing in non-unionised companies like Ryanair and Wal-Mart via the National Pension Reserve Fund.

Mr Sweeney said his research indicated that between 1.5 and 2 per cent of the value of companies that had floated was eaten up by costs associated with getting a public listing. He said considerable management time was lost during the IPO process.

However, he conceded that a trade sale was not an expensive process.