O'Rourke expected to seek part-flotation of Aer Rianta

The Minister for Public Enterprise, Ms O'Rourke, is expected to ask the Cabinet to float 25-30 per cent of Aer Rianta on the stock market, The Irish Times has learned.

The Government will discuss the issue before Christmas and, if agreed, the part-flotation of the State-owned airport authority would go ahead in early 2002, a year after the planned privatisation of Aer Lingus.

It is also thought likely that a plan by Dr Tony Ryan to create a £5 million executive jet terminal at the Air Corps headquarters at Baldonnel in west Dublin will be put to Cabinet.

The Minister for Defence, Mr Michael Smith, told the Dail last week that he and Ms O'Rourke expect to "report to Government with specific proposals in respect of Baldonnel". It is understood that Ms O'Rourke, who has overall responsibility for aviation, will not object to the plan, which would be subject to a public tendering process.

However, no proposals will be put to Cabinet until Ms O'Rourke receives a report on the future of Aer Rianta and on other aviation matters currently being completed by the London consultants Warburg Dillon Read.

The consultants are considering Aer Rianta's Future Strategic Direction document, in which it proposed the flotation of at least 25 per cent of the company. It said this would enable it to secure international funds for capital investment at its airports in Dublin, Shannon and Cork.

Aer Rianta's board favours a 49 per cent initial public offering on the stock exchange, with the Government retaining a controlling 51 per cent stake. The company has ruled out using additional borrowings to pay for its investment programme, arguing that this would leave it highly leveraged with increased financial risk. The current statutory limit on its debt is £250 million.

Aer Rianta wants to retain all three of its airports, and the Minister is understood to be in favour of this, at least in the medium term. Sources say Ms O'Rourke feels that Shannon and Cork Airports are still in a growth phase and she would be reluctant to sell them off at this stage.

Ms O'Rourke has stated publicly that she does not favour replacing a public monopoly with a private monopoly. However, Aer Rianta will be subject to an independent airport regulator after January 1st, who will be charged with ensuring that the airports authority does not act in an anti-competitive manner.

The Minister is also understood to favour a proposal in the Future Strategic Direction report to sell the eight hotels owned by Aer Rianta's Great Southern Hotels group and a further GSH hotel being constructed at Cork Airport.

The rationale for this is twofold. Aer Rianta has argued that the hotel group is not a core business and, as such, it could be sold off to part-fund its capital programme. Also, the company would realise a substantial profit on the sale.

It is believed the GSH hotels - at Dublin and Shannon Airports and in Cos Kerry, Galway and Wexford - will not be sold as a single entity. One suggestion is that the airport hotels would be sold together while the remainder would be sold in sub-groups or individually.

It is believed also that a proposal by the millionaire McEvaddy brothers to build an airport terminal on their lands adjacent to Dublin Airport is not likely to be put to Government.

The plan was the subject of controversy during the summer when it emerged that both the Tanaiste, Ms Harney, and the Minister for Finance, Mr McCreevy, had stayed at a holiday home owned by the brothers in southern France.

Ryanair's proposal to build a £12 million "low cost" terminal at Dublin Airport is also unlikely to be considered.

Ms O'Rourke has stated publicly that any plan by a privately-owned company to build on State lands would have to be subject to a public tender, but this is unlikely.

While Ms Harney said last week that she was "very positive" about Ryanair's proposal, it is understood that certain Government members are still unhappy about the disruption caused at Dublin Airport in March 1998 by a Ryanair baggage-handlers' dispute over union recognition.