The Government has told Aer Lingus unions it will not move beyond the 14.9 per cent shareholding in the company already on offer in return for over 2,000 redundancies and sweeping changes in work practices.

However, the unions have been offered a 10 per cent profit sharing scheme that could be capitalised in the event of privatisation and a £5 million (€6.35 million) loan to give the employee share option scheme an initial boost.

The secretary-general to the Government, Mr Dermot McCarthy, is expected to write to the unions this morning outlining the parameters of the offer. If it is along the lines indicated at a meeting of union leaders with the Minister for Finance, Mr McCreevy, and the Minister for Public Enterprise, Ms O'Rourke, in Government Buildings yesterday, the unions are expected to begin balloting members on the overall Aer Lingus package next week.

According to informed sources, the unions were told the Government could not meet their demand for a shareholding larger than 14.9 per cent because of the knock-on effect across the semi-State sector.

The unions said that, in view of huge sacrifices required from Aer Lingus workers over a very short period, extra recognition had to be shown on top of the £40 million redundancy package on offer.

In response, the Government side made a number of proposals.

One was that the union side could be lent up to £5 million to buy out the existing 4.7 per cent shareholding in Aer Lingus already held by company employees on an individual basis.

It was also proposed that, unlike Eircom workers, the Aer Lingus workforce would not have to pay for the extra 10 per cent of the company on offer. The job cuts and acceptance of changes in work practices, worth an estimated £100 million in operational savings over three years, would suffice to finance this.

Finally, a 10 per cent profit sharing scheme would be introduced with immediate effect, if workers accepted the company survival plan. A cap of £20 million is likely to be put on the amount that could be paid out under the scheme.

In the event of Aer Lingus being sold off, or partially privatised, the profit sharing scheme would have to continue or staff would have to be compensated. In today's letter Mr McCarthy is expected to propose that capitalisation could take the form of compensation or shares.

While the proposals are vague they do offer the prospect of a larger shareholding for staff down the road, plus strong incentives to return the airline to profitability.