Employee reaction: Initial reactions last night to the Ryanair offer from the Aer Lingus staff shareholding group were negative.

The Employee Share Ownership Trust (Esot) said it was not correct to say the offer was worth €60,000 per employee. It said when taxation was accounted for the benefits for staff were considerably less.

While the reaction was negative, the Esot was careful to avoid rejecting the offer outright. A meeting of the group is likely to be held in the coming days to consider the matter. Trustees of the Esot were somewhat bewildered by the sudden offer yesterday. "We did not see this coming at all," commented one. Following the initial public offering (IPO), the Aer Lingus Esot holds 51 million shares.

This represents approximately 9.6 per cent of Aer Lingus's total share capital. The Esot is entitled to purchase shares representing a further 2.9 per cent under an option agreement with the Government. There are also other shares by individual staff. Together staff hold at least 14.9 per cent of the equity.

The Esot statement strongly emphasised the taxation implications of any Ryanair deal.

"In the event of a cash offer for those shares being accepted, the Esot trustees would incur a capital gains tax liability of 20 per cent of any profit made on the sale. More significantly, the Esot would then have to pass this cash to its beneficiaries. Under tax laws these payments would be subject to income tax at the marginal tax rate, as well as employer and employee PRSI. For most beneficiaries this would represent an effective rate of tax of up to 62 per cent before transaction costs," it pointed out.

The Esot trustees are being advised by the accountancy firm Farrell Grant Sparks.

The Esot contains members of Aer Lingus management, plus various union nominees. While Siptu representatives are expected to be strongly opposed to accepting any Ryanair offer, Impact members may not be as firm in their opposition.

Overall trade union reaction was very hostile to the offer. Siptu national industrial secretary Michael Halpenny called on the Government to buy back sufficient shares in Aer Lingus to prevent a "predatory takeover" by Ryanair. He said: "There is no point in the Government standing by and wringing its hands, like bystanders at a mugging. The Government is entirely responsible for this debacle and must act now, while the situation is still retrievable."

He said the Government could have legitimately invested the €400 million Aer Lingus needed to raise without privatising the company. "Instead it has created an opportunity for Ryanair to create a near monopoly in air travel between Ireland and the rest of the world."

Impact, which represents cabin crew and pilots, said it was opposed to the offer. "The union believes that an independent stand-alone Aer Lingus is in the best interests of the company, the country, passengers and staff. Ryanair has a well-known history of hostility to its staff and shabby treatment of its customers, which is unacceptable".