The flotation of Aer Lingus is not expected to take place in June and a transaction is more likely to happen in September, senior sources involved in the process have said.

Management, unions and corporate advisers have been in discussions about the IPO process for several weeks, but a number of obstacles still remain.

Of the two main unions, Siptu has refused to alter its position of being opposed to any privatisation.

That makes it difficult for the the company to have all industrial relations issues resolved by the end of May, as initially planned. The company is working on a long form report and once that is done a full share prospectus can be drawn up.

The long form report is a detailed due diligence report on the company essential for any IPO to take place.

While progress on this is being made, unless the industrial relations issues can be resolved a sale will not take place until September at the earliest.

There is still no agreement on what should happen to the airline's pension fund, although the company have agreed to put €70 million from the proceeds of the IPO towards a new supplementary fund.

There is also no agreement on staffing levels for the company. Unions are also still pressing for a pay increase.

The company has turned this down, but is prepared to offer a profit-sharing scheme which will allow staff to retain their 14.9 per cent shareholding.

A senior source said yesterday: "Everyone is working hard on the various issues, but at this stage an early timetable is not going to be met".

While the company could still go to the markets in July or August, most advice is against this because key fund managers will be on vacation at various times during this period. The other problem facing the company is the last audited accounts cover the calendar year 2005. If the sale takes place any later than June a fresh set of half yearly accounts will have to be prepared.

Earlier this year the Minister for Transport Martin Cullen mandated Government advisers to "complete the sale as soon as possible, taking account of exchange regulations and market conditions".

However, sentiment towards the airline sector has moved into negative territory recently because of higher oil prices. Aer Lingus has sought to insulate itself from rising fuel bills by applying a surcharge on all its long-haul routes. But due to competition from low-cost carriers, its options are more limited on short haul.

Recent problems with the IPO of Air Berlin illustrated the poor sentiment towards airline stocks, but it is understood Aer Lingus will be marketed to the investment community as a major flag carrier with a low cost base and significant expansion plans, but not as a no frills proposition.

A delay in agreeing a new open skies deal between the EU and the US could also hamper its prospects. This deal is unlikely to happen until later this year or even as late as March 2007. Aer Lingus is hoping to see the end to the bi-lateral deal between the US and Ireland which restricts it to five US airports.