The Government is to sell a majority stake in Aer Lingus and will give the go ahead for the Dublin Airport Authority to build a second terminal.
A third terminal may go ahead if it is deemed necessary.
The long-awaited Aviation Strategy was unveiled by Minister for Transport, Martin Cullen.
A majority stake in Aer Lingus will be sold off but the State will retain a significant shareholding.
Mr Cullen said the Government would appoint advisors on the privatisation of the airline.
The State will retain a stake in the company to protect 'key strategic interest' in the national airline.
The new terminal in Dublin Airport will be owned by the DAA who will put its operation out to tender.
Mr Cullen stressed that the Authority itself could bid to run it, and could also bid to run a third terminal that might come on stream if passenger volumes grew sufficiently.
The building of the second terminal would be supervised by a panel of experts and the DAA would consult with the airlines on its design and construction.
The announcement was delayed because of tensions between Fianna Fáil and the PDs who wanted to ensure competition at the airport.
The decision to sell off Aer Lingus was described as shameful by Labour. Roisín Shortall said the party believed it was essential that the company remain under public control.
Fine Gael's Olivia Mitchell said Fianna Fáil expediency had won out in the debate over Dublin Airport and that it was likely the new terminal would be built on a site that was too small.
