Aer Rianta is facing a period of change irrespective of how its only shareholder, the State, decides to receive the report on the company delivered yesterday. The report, prepared for the Aer Rianta board, recommends that the company should be floated - although the board seems reluctant to float more than 49 per cent at present. This conservative approach hardly serves the wider public interest. The case for the total privatisation of Aer Rianta, said to be worth at least £600 million, seems clearcut. On the face of it, there is no inherent reason why the State should be managing international airports.
In the short term, Aer Rianta faces a period of readjustment. It is now accepted that the battle to retain duty-free sales within the European Union after June has been lost. Aer Rianta depends for about 40 per cent of its profits on commercial activities, predominantly duty-free sales. This source of income must now be replaced.
The task may sound daunting but there are solid grounds for optimism. Experience in the U.S. and elsewhere suggests that airports can profitably operate retail shops - or franchise them out - without the need of the artificial prop of duty-free subsidy. A well-run airport can also be a lucrative shopping mall catering for travellers with time on their hands and money in their pockets.
There is much work for Aer Rianta at Dublin Airport. The company is promising to invest some £360 million in improved facilities. In truth, it is badly needed: in terms of passenger comfort and car-parking facilities, Dublin Airport now compares very poorly with most major international airports in the EU.
The report recommends that Aer Rianta should sell its expertise as a duty-free operator in those parts of the world where the practice is still permitted. This is a sensible suggestion as Aer Rianta, since the introduction of duty-free in Shannon Airport in the 1940s, has built up an enviable reputation as an innovator in the field. However, the concept of duty-free sales is probably doomed in the long run as most jurisdictions turn against the fiscal distortions it entails. Aer Rianta should not rely on duty-free income as a long-term part of its future.
Aer Rianta has been urged to sell Great Southern Hotels. It should never have bought them in the first place. The purchase was put through because of a notion that if their former owners, CIE, could not afford to invest in them, they should nonetheless remain in public ownership. Again, there is no inherently sound reason why the State should own hotels. The Great Southern chain is profitable and could be easily sold. The management would not encounter difficulty in getting venture capital to buy the properties.
There is a long-standing problem at Dublin Airport between Aer Rianta and Ryanair. In essence, Ryanair says landing and other charges are too high. Aer Rianta produces figures which demonstrate, at least to its own satisfaction, that its charges are competitive. But Ryanair has been going elsewhere, inaugurating new routes from airports other than Dublin. The independent airline has a predominantly commercial mandate, but the Minister for Enterprise and Employment, Mrs O`Rourke, must consider the case it makes. Ryanair has transformed the air traffic market - and Irish tourism - and its criticism of the airports' authority should be taken seriously.