The Irish Aviation Authority will bid with eight airlines next week to operate Britain's air traffic control system.

The consortium is one of three shortlisted by the Department of Environment, Transport and the Regions, which is selling 46 per cent of the national air traffic services body, NATS.

Other candidates are US aerospace group Lockheed Martin, backed by venture capital firm Apax Partners, and a British facilities management group, Serco, which is backed by venture capital group PPM.

Owned by the State, the Irish Aviation Authority will not take an equity stake in the Airline Group, whose eight members include British Airways, British Midland, Virgin Atlantic and EasyJet.

Each airline holds an equal stake in the consortium.

The Irish authority will manage all civilian air movements in Britain if its bid is successful. Telecoms group BT will provide technology services. Because a general election in Britain is imminent, ministers are said to be keen to conclude the part-privatisation by the end of March. The British state will retain a controlling 49 per cent share in NATS after the sale; its workers will acquire 5 per cent.

Britain's civil aviation authority will continue to regulate safety after the change in ownership.

Observers believe the 46 per cent stake could be worth £1 billion sterling (€16 billion) although NATS has £330 million in debt. It requires a £1 billion investment to upgrade services in the next 10 years. The Airline Group has said it will operate NATS on a "not-for-profit" basis if successful.

The part-privatisation was strongly opposed by unions representing NATS staff and by elements within the Labour Party.

Opponents claimed privatisation could compromise air safety, drawing comparisons with the rail system has been plagued by accidents and tragedies since the former British Rail was privatised.

But the Blair government hopes NATS will lead any shake-out of the business in Europe.

Europe's skies are crowded and, while 49 groups control the airspace, one analysis suggests this could be reduced to four or five major operations.

Involvement by the Irish Aviation Authority in the bid is seen as a strong signal that it intends to remain active in any restructuring of the EU's air traffic control business. It is thought the group could be vulnerable to takeover when change comes if it does not move now to consolidate its business.

Media reports have valued Serco's offer at £800 million, but the British government expressed competition concerns about the bid. The trade minister, Mr Stephen Byers, said 10 days ago the group would have a monopoly on the training of air traffic controllers if its acquisition went ahead. Serco said it would work with the government to resolve the issue.