However, as last week's appointment of a new junior minister demonstrated, the taoiseach's signals can sometimes be misinterpreted.

Obtaining the political mandate to push ahead with the privatisation is a sine qua non for the process, but it is not the only hurdle to be overcome if a successful sale is to be completed. "Even if they push the button and go for it, I would't assume this is a slam dunk, " said one market source.

If the sell-off is to get underway within the expected timeframe, a decision to start the clock has to be taken by the cabinet within three weeks.

The final report from the government's financial advisors UBS and AIB will go to transport minister Martin Cullen by the end of next week and a decision to move to phase two of the privatisation process has to be taken within two weeks for an initial public offering to take place by June or July, which is the preferred option of Aer Lingus management.

One source close to the process admitted that this represents a tight timeframe but argues that this may be no bad thing. "As Shakespeare said: 'If it's to be done, then let it be done quickly'."

The UBS/AIB report is thought to recommend an initial public offering that will sell up to 60% of the equity in Aer Lingus in a deal that could value the airline at 800m- 900m. Aer Lingus chief executive Dermot Mannion wants to spent 2bn to effectively double the size of the Aer Lingus fleet by buying seven new long haul planes and 17 new short haul aircraft. To do so, Aer Lingus will have to stump up about 500m in cash - from a combination of its own resources and the proceeds from the flotation - and borrow the remaining 1.5bn.

Given that about 200m of the IPO proceeds will be paid into the Aer Lingus pension fund, this could see a scenario under which the state take from the privatisation is very small. With exchequer coffers bulging with record tax revenues such an outcome may not be the end of the world for the public finances - and if it got the IPO away successfully the government could argue that it owns a 25% stake in a newly energised and privatised airline. But the election campaign has already started and the opposition will try and make capital from a sale process under which the owner gets very little.

If the button is pressed to begin the second phase, a key task will be selling the Aer Lingus story to investors, and some in the financial markets remain to be convinced.

"This will be hedge fund driven and it [the IPO] will have to be priced to go, " said one source. The airline has to show that it has a clear strategy for the medium term and explain its plans for both the long haul and short haul markets. In long haul, the two new Airbus A330s that were ordered two weeks ago will come into service in 2007, by which time there should be a new EU-US agreement on open skies.

This will allow Aer Lingus to add new routes to the US, but there is growing competition on transatlantic and any change in the current rules will bring additional capacity, some analysts believe.

American Airlines will introduce lie-flat seats in its Irish services from next year, Continental is thought likely to increase its services to Ireland in the near future, and United Airlines is also said to be mulling an Irish service under open skies.

Aer Lingus economy fares are highly competitive on transatlantic routes, but its offer in first class - where most of the money is made - is somewhat tired. The current fleet is more than 15 years old and needs revamping, but it is understood that major changes are planned for Aer Lingus' premium class offer to address this issue. By the summer of 2007, the existing fleet will have new seats and a much more modern in-flight entertainment system.

These changes, which are likely to cost between 3m and 5m, will be made to coincide with the arrival of the new A330s but will not include lie-flat beds as this would mean fewer seats in economy and the company does not want to go down that road.

Mannion also wants to expand long-haul services to the Middle East and other locations, but some observers remain sceptical of such a notion. "Manchester Airport is struggling with long-haul and they have a population of 25 million within four hours . . .

Dublin Airport only has four million people within four hours, so how can they justify a raft of new services, " said one aviation source.

Then there is the potentially thorny short-haul issue.

Aer Lingus built its European short-haul business while Ryanair was effectively boycotting the then Aer Rianta.

But Michael O'Leary completed a vast U-turn just before Christmas, which saw his airline launch 18 new routes from Dublin and declare peace - at least temporarily with the new Dublin Airport Authority. A number of the new Ryanair routes compete directly with Aer Lingus services and more Ryanair services are expected in 2007 and 2008.

"They [Aer Lingus] are too weighted towards short haul, " according to one market commentator. "Yields are likely to suffer in Europe as Ryanair expands. Ryanair will have 15 planes based at Dublin from later this year, but within 12 months that could grow to 25 aircraft with the resultant explosion in routes and frequency.

Many of the Aer Lingus routes offer limited frequency, and could be vulnerable to a Ryanair assault. "They [Ryanair] own Shannon and they could soon own Dublin on short haul, " one Ryanair analyst said last week. But sources within Aer Lingus remain upbeat about the airline's chances of maintaining a European short-haul business even in the face of more competition from Ryanair .

Aer Lingus' European bookings for April of this year are understood to be better than last year, despite the new Ryanair services, according to an airline source. But the average ticket price for those seats has fallen, he admitted.

Aer Lingus results for last year, which are expected to show operating profits of about 65m, are due by midMarch. But the focus has already moved on and the key issue is what happens on the privatisation.

Government sources are rejecting the suggestion that any further debate has to take place, arguing that the discussion is merely around the technicalities of the process rather than whether or not to proceed.

But many other observers, including some close to government remain to be convinced that the Cabinet will opt for privatisation. It's going to be a fascinating few weeks.

AER LINGUS SHORT A CHIEF FINANCIAL OFFICER

ONE situation that has perplexed some observers ahead of a possible Aer Lingus privatisation is the absence of a chief financial officer at the airline.

The former chief financial officer Brian Dunne, who left at the same time as Willie Walsh and Seamus Kearney, has not been replaced. New chief executive Dermot Mannion has previously indicated that he is happy with the current system, under which group financial controller Greg O'Sullivan handles that side of the business.

Some market observers argue that, in that case, O'Sullivan should have been promoted to become chief "nancial officer, since investors see that position as crucial in an IPO process.

"I am intrigued and perplexed by the lack of a CFO, " said one financial source. "There were three vacancies when the previous management team left, and only one was filled."

But Mannion has said that he is very happy with his senior team at Aer Lingus:

"We have a very good management team here.

There is no skills deficiency."

Some other sources argue that a CFO should be in place, even if for the sake of appearances. "Investors take their lead from a CFO . . . it's his job to sell the story."