Soon, possibly before the end of this month, the board of Aer Lingus will be asked by its chairman, Mr Bernie Cahill, to ratify the appointment of a new chief executive.

It is not known who will be chosen to succeed Mr Garry Cullen at the State-owned airline, but there is no doubt about the task that person will face. Aer Lingus is preparing for a flotation and the new head will be expected to guide the airline safely into public ownership.

Mr Cullen's reluctance to undertake this complex job prompted his resignation last February. The appointment of his successor is likely to be one of the final decisions of the airline's board as many members are expected to stand down before the flotation to make way for people with greater private sector experience.

Yet, while the airline's management, a raft of financial and legal advisers and specialist teams within the Departments of Public Enterprise and Finance have been working full-time preparing for the initial public offering since then, it is still unclear when this will proceed.

The Minister for Public Enterprise, Ms O'Rourke, has said the flotation is expected "at the back end" of the year, although people familiar with her thinking insist that this means late this year or early in 2001.

For his part, the airline's acting chief executive, Mr Larry Stanley, has said the company would be in the "best possible condition" to float this year.

Revelations this week that British Airways and the Dutch carrier KLM were engaged in talks on a "possible combination" of their businesses will have added impetus to the process.

With the US carrier United Airlines poised to purchase US Airways, and American Airlines said to be pressing for a merger with another US company, Northwest, major consolidation in the global airline industry appears to be under way.

If this happens and if Aer Lingus is floated successfully, there is a distinct possibility that it will ultimately be taken over by a larger carrier. Aer Lingus is a small peripheral player in global terms, although its business could prove attractive to a North American airline keen to use it as a hub into Europe.

"All airlines are in play at the moment and the vast majority of them are hitting the public markets," said Mr Chris Partridge, an analyst with Deutsche Morgan Grenfell in London. "The rationale for there being 14 separate airline identities in Europe is nonsensical. Some of the peripheral players like Aer Lingus will no longer exist, though there will be a local slant on their service."

Yet many in the industry concede that consolidation will only proceed if bilateral agreements between governments, which underline the industry's worldwide structure, are unwound.

Mr Ian Wild, an analyst with Societe Generale Securities, also in London, warned that there appeared to be little appetite for this. "Consolidation will have to happen at some point. If that's in the next 12 months or the next five years or 10 years, I don't know. It's an irresistible commercial force meeting an unmoveable object."

Bilateral agreements are perceived to be outmoded and unwieldy, but previous attempts to change the industry's structure have failed. Renewed talks earlier this year between US and British officials aimed at a modest opening of the transatlantic market ran into well-publicised difficulties.

And the regulations are no less important in the case of Aer Lingus. For example, a longstanding bilateral between the Republic and the US dictates that more than half the airline must be held by Irish investors.

While deregulation in other industries - notably telecoms - suggests that global change is inevitable, its timing will probably depend on political will.

Meanwhile, the short-term priority for all at Aer Lingus is to ensure that its proposed flotation is a success.

The rationale for the proposal is clear. At a presentation last month to members of the Oireachtas Joint Committee on Public Enterprise and Transport, Mr Stanley said the airline's retained profits would generate £800 million (€1.015 billion) of the £1 billion required to fund its capital investment programme. The additional £200 million would be secured by the issue of new shares in the flotation.

"We have been told firmly by the Government that it will not put another penny into Aer Lingus," Mr Stanley said.

Perhaps significantly for Aer Lingus, the Spanish airline Iberia said last week that it was planning to float a 54 per cent stake still held by its government this October. This is the same timeframe identified by the Irish airline and its advisers as best suited to its flotation, planned for the Dublin and London exchanges.

Many aviation industry observers say a global recovery is imminent and in this analysis, shared by many close to Aer Lingus and, apparently, Iberia, the correct time in the cycle to float would be this autumn.

For all that, the director general of the International Air Transport Association, Mr Pierre Jeannoit, warned this week that world airline profits were likely to sink further this year, after falls in 1999.

Aer Lingus is perceived to have performed well since turning around its finances following the crisis in the early 1990s and has bucked a largely poor international trend. Next month, it is expected to report steady profit growth for 1999. Before tax, it reported a 14 per cent rise in profits to £52.4 million for 1998 on the back of a 12 per cent rise in sales. Broadly similar growth is expected for 1999, reflecting the buoyant economic climate in the Republic and the US.

But uncertainties remain. Mr Cahill and his counterpart at Aer Rianta, Mr Noel Hanlon, this week received an independent task force report on the funding of a joint pension scheme for general workers at both companies. This report addresses concerns by certain pensioners that the scheme is underfunded. Crucially, the group of trade unions at Aer Lingus has said this issue should be resolved before agreement on a proposed employee share option plan (ESOP) can be reached.

Preliminary discussions between the Government's advisers and the airline's unions on the ESOP have taken place, although sources said this week that the hard bargaining had yet to begin.

When it does, the crux may be that the influential pilot's union, IMPACT, has said it wants an additional 14.9 per cent stake granted to workers. Because staff already own 5 per cent, granted under Mr Cahill's recovery plan of the early 1990s, Ms O'Rourke and Mr Stanley have said that an additional 10 per cent only will be available.

One suggestion is that there will be pressure to conclude an ESOP deal this month because the arrangements must be included in legislation underwriting the flotation, although another person close to the process was confident a deal could be done.

While Ms O'Rourke is expected to publish draft legislation next week, a Government source said that passage through the Oireachtas before the summer recess at the end of the month was not certain.

Assuming, however, that preparations for the flotation go to plan, the next issue will be ensuring sufficient investor demand for the stock. The Government has committed to offer shares to retail investors, although Ministers and people managing the flotation process will be keenly aware of the slump in Eircom's share, priced this week at 20 per cent below its flotation level.

Whether or not thousands of domestic investors will invest in the airline is unknown, but people close to the thinking of the company and the Government maintain there is a compelling case to float the airline.

It has yet to be decided how the offer will break down between domestic and institutional investors, though those managing the process are aware that a majority stake must be held by Irish investors.

Pricing will be crucial - particularly in the light of recent assertions by Eircom's chief executive, Mr Alfie Kane, that its stock was overvalued when floated - although this will not be decided until nearer the flotation date. Deciding this and whether all or part of the company will be floated, will be a matter for the Cabinet, although it will have no shortage of advice.

Many observers believe that the entire airline will be floated because it is a relatively small company. Claims that Aer Lingus may be worth between £400 million and £600 million have not been denied by its management. Indeed the flotation value could be as high as £800 million it believes, including the £200 million of new stock to be issued to fund capital requirements.

Some suggest the shares will be priced competitively rather than aggressively because the Government, which is not short of money, will be keen to ensure the success of the flotation. Others argue that Aer Lingus should be priced on merit, reflecting its "fair value".

Another argument is that Aer Lingus may be competing to attract investors in London who may opt to invest in Iberia.

According to Mr Keith MacMullan, managing director of London consulting firm Aviation Economics, Aer Lingus should not delay its flotation. "It's profitable, but not hugely profitable. There's a limitation to how much money you can make because its a relatively small airline . . . But it's doing better than the likes of Air Portugal and Olympic in Greece."

Mr Wild of Societe Generale warned that Aer Lingus had "quite a heavy cost burden" and faced greater competition from "low cost" operators than many comparable carriers.

People close to the company countered this, saying its business was fundamentally different to carriers such as EasyJet and Ryanair. On heavy staffing levels at Aer Lingus, they argued that this was no different to comparable airlines which had been floated previously.

Mr Wild added: "An airline isn't the easiest thing to flog off even at the best of times because the industry has such a poor record."

Mr Partridge of Deutsche Morgan Grenfell warned that further uncertainty surrounded the price of aviation fuel which has risen to $30 (€31.3) per barrel from $10 in the past 18 months. A crucial element of Aer Lingus's future strategy would be its potential to link with a larger and stronger carrier, he said.

Alliance agreements such as Aer Lingus's membership, with British Airways and American Airlines, in the OneWorld group, were "transitory by nature". "From an aviation perspective, one has to look at the fact that Aer Lingus is a peripheral player. It's going to have to hedge itself with another airline."

Whether or not the flotation goes ahead this autumn, it promises to be an interesting and busy summer for all at the airline, and, in particular, its new boss.