The Irish government agreed on Tuesday to sell its 25 per cent stake in Aer Lingus to IAG, paving the way for the owner of British Airways and Iberia to make a formal bid for the Irish carrier.

International Consolidated Airlines Group's (IAG) proposed 1.36 billion euro ($1.48 billion) offer for Aer Lingus was recommended by the Irish airline's board in January but is still conditional on receiving the support of its other main shareholder, Ryanair Holdings Plc.

"There's a number of extremely important changes that have led to this decision by government today," Paschal Donohoe told a news conference after a cabinet meeting.

In February the government presented IAG with a list of new demands it said had to be met before it would consider the sale, in areas including possible job cuts, transatlantic services and a longer guarantee on maintaining connections between Irish airports and London's Heathrow airport, BA's hub where Aer Lingus holds valuable runway slots.

Formally presenting its 2.55 euros per share offer, IAG committed to Aer Lingus operating routes from Heathrow to Irish airports for at least seven years.

"Acquiring Aer Lingus would add a fourth competitive, cost-effective airline to IAG, enabling us to develop our network using Dublin," IAG Chief Executive Willie Walsh said in a statement.

Donohoe said Aer Lingus did not foresee any compulsory redundancies despite the potential loss of 50 jobs next year and said the airline could add up to 635 new jobs by 2020. The government will spend the 335 million euros it receives on infrastructure projects, he added.

Ryanair still has to declare its hand. It declined to comment again on Tuesday on whether it would accept an offer by IAG for its 30 per cent stake.

Aer Lingus, whose shares closed 1 per cent higher at 2.39 euros on Tuesday, welcomed the decision, reiterating that it was a compelling transaction for the former flag carrier.

The government, which has been urged by opposition parties and trade unions to reject the IAG offer and also faced objections to it from some government MPs, had said that Ryanair's attitude was key to its decision.

Aer Lingus' main trade union, IMPACT, repeated after the announcement that the deal was bad for workers. A second major union, SIPTU, said it wanted commitments on compulsory redundancies and outsourcing.

Ireland's ruling coalition will put the decision to a vote in parliament as early as Wednesday. While it has a large majority capable of easily approving the deal, it risks some unhappy backbench MPs voting against the government.

In a joint statement, MPs from the Labour Party previously opposed to the sale - known as the "Gang of 8" as they represent almost a quarter of the junior government party's lower house of representatives - said the deal was a positive outcome.

Two MPs from Donohoe's Fine Gael Party, who had previously expressed reservations about the deal, told Reuters they would likely vote through the sale. – Reuters