Aer Rianta is to spend £500 million (€635 million) in the next five years developing its airports at Dublin, Cork and Shannon and will sell off its Great Southern Hotel chain as soon as practical.
The group, which yesterday published a major report on its strategic future, will also float part of the company to raise equity. It is currently awaiting a consultants' report on the charges levied by it, including those for landing and parking, which is likely to recommend an increase in both charges.
Aer Rianta chairman, Mr Noel Hanlon said passenger numbers were currently growing by about two million a year in Dublin. Current passenger volume was running at around 14 million per annum at the three airports, with the average growth rate at 20 per cent per year. Extra facilities, including car-parking and shopping, were needed to cater for passenger growth, he added.
Aer Rianta is to spend £360 million improving Dublin Airport, £60 million upgrading Cork and £80 million on Shannon Airport. Mr Hanlon said this was the equivalent of about £4 per passenger per annum over the next five years.
The company's chief executive, Mr John Burke, said yesterday's report on the State's airport operator was the most important in its history. He added that the company would like to see the establishment as soon as possible of a regulatory regime which would set and adjudicate on landing charges.
He said it was accepted that duty free would be abolished - it was now a question of when. Duty free contributes around £30 million per annum to post-tax profits which are currently running in excess of £42 million.
The consultants' report, prepared by Investment Bank of Ireland (IBI), Lehman Brothers and Arthur Andersen for Aer Rianta following a request by the Public Enterprise Minister, Ms O'Rourke, also recommends the sale of the Great Southern Hotel chain which it acknowledges needs investment. Aer Rianta said it could not afford to invest in the chain. "It [the hotel chain] is a very successful business, but it is not our core business," said Mr Burke. "A sale is in the best interest of both companies, but it will be done on a consultative basis."
The eight hotels in the chain employ around 600 permanent staff. It is expected the sale could raise £80 million-£100 million. Mr Hanlon said the hotels would be sold as a group if possible, even though Aer Rianta may not get maximum value by selling them this way.
Aer Rianta ruled out taking on a strategic partner as a way of raising finance. Mr Hanlon said Aer Rianta "is the strategic partner".
Although the timing of a flotation and how much should be floated is up to Government, Mr Burke said the ideal "preparation time" would be about 18 months. The report suggests it should take place within three years.
Mr Hanlon said the board's preference would be for up to 49 per cent of the company to be floated initially. Various estimates have valued it at £500-£850 million.
It was very unlikely, Mr O'Hanlon added, that a deal would be done whereby employees would get up to 14.9 per cent of the company prior to the flotation, as is happening with Telecom Eireann's workforce. He said Telecom was a different case. The normal percentage for an employees' shareholding in a State company would be about 5 per cent, he said.
Aer Rianta will also seek opportunities abroad, both in airports and in duty-free sales in non-EU areas. It is a stakeholder in Birmingham and Dusseldorf airports. "Airport retailing and airport management is what we do best," said Mr Burke. "We have a growth strategy and a successful track record. We believe we will have no problem raising funds."
Ms O'Rourke welcomed the report yesterday, praising Aer Rianta for the work it put in. She said a decision on its recommendations would be made in about two months.
She will shortly appoint her own consultants to carry out a report on a flotation.
