Aer Rianta think-tank argued for State ownership, says report
Members of an Aer Rianta strategy group favoured continued State ownership of the company last year but believed the Government was ideologically opposed to funding the airport management company, according to an internal document seen by The Irish Times.
The Cabinet is due to consider the future of Aer Rianta, which manages Dublin, Cork and Shannon airports.
Most political representatives in the mid-west oppose privatisation as an option, believing private investors would sideline Shannon Airport.
The document states that some members of the group "argued a very strong case for investment by the existing shareholder". State ownership has a "clear logic" and the Government's "apparent ideological opposition" should not prevent the case being put forward.
The document was published last March, one month before Aer Rianta submitted a report to Government arguing for a part-privatisation of the State company. That report, "Future Strategic Direction", made no mention of a State investment option. The funding options, examined by IBI Corporate Finance and Lehman Brothers, were an initial public offering, additional debt financing, or the sale of non-core assets. Other options considered were a trade sale, finding a strategic partner or finding a financial partner.
The discussion document states that EU competition law would not prevent the Government from continued investment in airports provided such investment met the criteria of economic viability.
But it notes the Government's record as a State company shareholder "was not good in terms of providing capital investment . . . Generally, the Government has only invested in State companies when they are in serious financial difficulty".
It says Aer Rianta has a proven track record and "it would make excellent business sense for its shareholder to invest in it", citing the "excellent track record of the company" and the returns of more than 20 per cent on capital employed over the past five years. "Return on average investment has been constantly 14.5 per cent or more; profits had doubled from £23 million (£29.2 million) in 1993 to £46 million in 1997 and dividends of almost £100 million had been paid to the Exchequer in just five years."
It adds that those of the group in favour of further State investment believed a stock market listing would be a second choice provided the State retained a majority share.
The document is based on the proceedings of six meetings of the 26-member "Corporate Strategy - Significant Issues" group, between June 1998 and January 1999. The group was made up of management - including the chief executive, Mr John Burke - union representatives and business strategy experts drawn from the Irish Management Institute, Bank of Ireland, the Michael Smurfit School of Business and the University of Westminster.
The stance on the company's future favoured by Aer Rianta management is that investment needs would be met through a 49 per cent flotation.