Kevin O'Toole/LONDON

With the sale of its loss-making maintenance arm now back on course, Irish flag carrier Aer Lingus is preparing to reactivate its search for a strategic alliance partner and could be heading for a partial privatisation.

The airline's state owners asked Aer Lingus management to submit a study on options for entering a strategic alliance by the end of last year, but the report and any decision was put on hold following a change of government and the announcement of the controversial Team Aer Lingus sell-off.

Although work is understood to have continued on the alliance issue over the past few months, the priority had been on seeing through the maintenance sale. That came to a head last month when a take-over offer from FLS Aerospace was overwhelmingl turned down by Team staff, who have individual "letters of comfort" guaranteeing their right to remain employees of the Aer Lingus group and effectively a veto over any transfer of ownership.

As a result the Danish-owned maintenance company suspended its due diligence, while Aer Lingus and the Irish Government attempted to persuade the maintenance staff to change their mind. The deal on offer effectively gives each employee a tax-free lump sum averaging out at a year's pay. New terms have since been put to the workforce, including concessions on wage rises and pension rights, which led to 72% of Team's 1,500 workers signing up for new contracts by 6 July.

The offer has been left open for a week and Aer Lingus said after the initial round of acceptances that it hoped to see the majority of the remaining employees sign up. The airline warns that it has positions for only 30-40 Team workers elsewhere within the group - representing about 6% of the staff - and that others who do not transfer to FLS will face redundancy. FLS has still to reopen formal talks, but is understood still to be interested in a deal if enough workers agree.

The Team issue will clear away the last part of the Aer Lingus restructuring that was put in place four years ago and which has already seen the disposal of a series of non-core businesses, including hotels and the sale of the Airmotive business to Lufthansa. The only remaining business still on the disposal list is the SRS maintenance hangar at Shannon, but a deal is close to being tied up with UPS. Anew framework agreement has also been put in place, with the group's unions agreeing to a goal of finding IR£50 million ($70 million)in cost savings over the next five years.

Aer Lingus highlights the search for a strategic alliance partner as its next urgent goal, and the study of options is expected to go to Mary O'Rourke, Ireland's minister for public enterprises, by early September.

O'Rourke greeted the Team result with a call to accelerate the alliance process.

There are also indications that the Government will be prepared to sanction the first steps towards privatisation.

Source: Flight International