Air France and KLM were merged in May

On Thursday, the government agreed to sell 17.7% of its stake in the carrier, raising 700m euros ($931m; �486m).

That, already flagged, move will see its holding reduced to 25% from 44%.

But Reuters reported 13.2 million more state-held shares may go to Air France staff agreeing to cut their pay and 8.4 million shares will be sold to staff.

'Cutting debt'

After the merger of Air France and KLM in May the French government stated its intention to sell down its stake.

Proceeds from the sale will be used to cut debt and not for new spending, Finance Minister Herve Gaymard said on Thursday.

"The market conditions being right, we are putting on the market a percentage of the capital of Air France which should bring us revenues of around 700 million euros," Mr Gaymard told a joint news conference with Prime Minister Jean-Pierre Raffarin.

"These 700 million euros, I can tell you today, will be used towards reducing the state's debt and not towards financing new spending," Gaymard added.

Full-year growth

Last week the merged airline group, which continues to fly under separate brand names, reported upbeat results.

Profits for the three months to 30 September were 201m euros, compared with year-ago like-for-like profits of 143m euros.

The company said the merger had lifted revenues faster than expected. They were 5.13bn euros for the quarter, up from 4.82bn euros a year ago.

It predicted full-year growth in spite of the current high oil prices.