Up to 1,300 jobs may go in Aer Lingus in a new business plan for the State airline, whose top managers have asked the Government for permission to develop a bid to privatise the company.
The Government and Aer Lingus will move separately to take legal advice today on the proposal from the airline's chief executive, Mr Willie Walsh, and two colleagues to pursue a management buy-out of the company.
The Aer Lingus board is likely to appoint a subcommittee to take overall responsibility for the day-to-day control of the airline while the Government decides its response to Mr Walsh.
It is understood that Mr Walsh and his colleagues have indicated a willingness to co-operate with whatever structure is put in place as the process develops.
Informed company sources said that a new business plan being prepared for the airline's board was likely to call for up to 1,300 redundancies as the company attempts to reduce the cost of its European service. The plan is likely to be finalised by the end of the summer and a dialogue with the airline's unions has already begun.
The company sources said some 600 cuts were likely in the airline's catering division and about 120 would be sought from its ground-handling division at Shannon airport.
The bulk of the remaining cuts were likely in the airline's freight division, they said.
While the Minister for Transport, Mr Brennan, is expected to bring an aide mémoire on the management buy-out proposal to tomorrow's Cabinet meeting, there will be no immediate decision on the substance of Mr Walsh's move to lead a bid for the company.
The Department of Transport has told Mr Walsh to do nothing further in relation to the approach until the Government decides its stance.
The department also told Mr Walsh that he could not assume that Mr Brennan would support the proposal.
While Aer Lingus says it needs private investment because State investment is ruled out under EU rules, there was a recognition in Government circles that the approach from Mr Walsh is highly sensitive politically.
With informed sources emphasising that the Government would have to maximise transparency, it was speculated that the Government might yet opt for a stock market flotation if it decided on privatisation.
This may be favoured over a management buy-out in order to rule out any suggestion that the management team would be a major beneficiary of the process.
Mr Brennan moved on Saturday to appoint a British-based Aer Lingus director, Mr John Sharman, as interim chairman of the airline as he continues the process of selecting a permanent chairman to replace Mr Tom Mulcahy, the former AIB chief executive who resigned in May.
Mr Sharman will meet today with the company secretary in Aer Lingus, Mr Greg O'Sullivan.
Informed sources said the legal advice to the Government and Aer Lingus will centre initially on the corporate governance issues raised by the approach from Mr Walsh, along with the airline's chief financial officer, Mr Brian Dunne and its chief operations officer, Mr Séamus Kearney.
Sources said the Government would have to publicly ensure that its interest, as the major shareholder in the airline, is protected if the company is being run by managers who want to take it private.
A meeting of the Aer Lingus directors, who received a brief synopsis of the proposal on Friday, has not yet been called. It is likely, however, that Mr Sharman will call a meeting this week. Mr Walsh and Mr Dunne, who are board members, are likely to be excluded from such a meeting because of their declared interest in the process.
With unions saying they will oppose the surprise proposal, opposition to the plan has already surfaced within Fianna Fáil.
"I have serious doubts personally over the privatisation of the State airline and would need to be persuaded," said one north Dublin TD.
