Reports of a row between management and unions over new employees' pension entitlements, coupled with the Taoiseach's strong attack in the Dail last week on former Aer Lingus boss Willie Walsh, raised fresh fears in some quarters that the government may be getting cold feet about the privatisation.

However, Mannion said that the privatisation process is "going on as we speak".

The company is working away in the background with the unions to address outstanding issues, such as pensions, he said. "I'm confident they will be resolved".

This view was backed up by well-placed political sources, who are emphatic that the flotation will go ahead as expected in September. "People got over-excited about what happened this week, " one source said. "This is now out of the political process and into the commercial process . . . The Taoiseach was very supportive in the house [about the flotation]."

The source dismissed comparisons raised by Labour leader Pat Rabbitte with the recent flotation of Air Berlin, which, according to Rabbitte, "went to the stock market last week but found it had to halve the expected share price with the subsequent reduction in income".

The only similarity between Air Berlin and Aer Lingus is that they are airlines, the source suggested.

"You are talking apples and oranges. Air Berlin is a lossmaking airline, a low-cost operator, while Aer Lingus is very profitable and one of Europe's national flag carriers."

One senior Fianna Fail source stressed that the "Rubicon has already been crossed" with the cabinet decision to proceed. "A principled decision has been taken. It's just down to the detail now. The government will take the advice of its consultants [on the timing and price] and those consultants won't be taking political considerations into account."

The same source conceded, however, that there is still a fair amount of "haggling" to be done over pensions and how best to finance the employee share ownership plan to ensure that staff maintain the Esop's 14.9% stake in the company after Aer Lingus shares are listed on the stock market.

Other close observers are doubtful as to whether the Taoiseach is fully convinced about floating Aer Lingus with a general election coming next year.

They do not believe that a September privatisation is a done deal, feel the government might still be happy to look for an excuse to stop the flotation and believe that the current uncertainty in the global equity markets may offer a potential way out.

"There are two ways of looking at Bertie's outburst in the Dail, " said one. "Either he is really buttering up the unions by having a go at their bete noir before he shafts them, or he has no appetite whatsoever for the flotation.

This flotation has all the hallmarks of something that won't happen."

The source was also sceptical about the line of argument that the government has already made the decision to float and that a point of no return has been passed.

"It was way further down the line the last time, " he said.

"In 2000, they were within weeks of setting a price when the stock market flotation of the airline was postponed due to a combination of a downturn in the financial markets and industrial unrest. This has been going on for seven or eight years, and it seems very unlikely now to happen before an election. All the signals point in one direction."