Etihad will sell its 5pc stake in Aer Lingus to IAG as part of a €1.36bn takeover bid for the Irish carrier.
The chief executive of Abu Dhabi-based Etihad, James Hogan, confirmed the planned sale, which follows the Government's decision to sell its 25.1pc Aer Lingus stake. Ryanair owns almost 30pc of the carrier.
Etihad has nearly doubled the value of its original investment in Aer Lingus.
The Gulf carrier spent just over €35m between 2012 and 2014 for its 26.65m Aer Lingus shares.
Selling to IAG at €2.50 per share will see Etihad receive over €66.6m for its 4.99pc stake. However, it also received a 5 cent per share dividend from Aer Lingus last month, for a total of €1.3m. The dividend is being included by IAG in its calculations of the overall Aer Lingus purchase price.
At the International Air Transport Association's annual meeting taking place this week in Miami, Etihad boss James Hogan confirmed the planned sale.
"We're keen to maintain a relationship with (IAG). Indications are that they're interested in doing so too," Mr Hogan said.
Etihad rival Qatar Airways recently acquired nearly 10pc of IAG, which owns British Airways, Iberia and Vueling.
Etihad invested in Aer Lingus with a view to using the Irish airline to deepen its presence in Europe, where it also owns stakes in airlines such as Air Berlin and Alitalia. Under EU rules, Etihad could never own more than 49.9pc of Aer Lingus.