State advised to keep duty-free firm

CONSULTING FIRM Booz has recommended to the Government that duty-free operator Aer Rianta International (ARI) should remain in public ownership.

It is currently owned and controlled by the Dublin Airport Authority.

The Irish Timeshas also learned that Booz recommended that the DAA be given a similar corporate structure to State-owned rail and bus operator CIÉ.

This would involve the DAA acting as a holding company with the operating entities comprising Dublin and Cork airports, and ARI, which generates all its revenues from duty-free concessions in overseas airports.

Separately, Booz has also recommended that Shannon Airport could be separated from the DAA and possibly merged with other public bodies in the midwest region to form a new entity to manage the loss-making Co Clare facility.

It is understood that Minister for Transport Leo Varadkar is in favour of retaining ARI in public ownership.

The duty-free business is profitable.

Booz is believed to have concluded that this would not be the best time to affect a sale of the duty-free division given the depressed financial markets and a lack of funding globally.

However, it is not clear if the Minister will proceed with the recommendation to adopt a similar corporate structure to CIÉ, whose operating divisions are Iarnród Éireann, Bus Éireann and Dublin Bus.

Such a structure would involve four separate boards, something that is likely to involve greater costs for the company.

On the plus side, it would allow greater autonomy for the operating entities to conduct their businesses.

This would be particularly significant for Cork Airport, which currently only has limited autonomy from the DAA.

Booz ruled out Cork being completely separated from Dublin on the basis that it would not be able to service the €200 million borrowings associated with the building of a new terminal facility in recent years.

Mr Varadkar is expected to present his recommendations on separation and the future structure of the DAA to Cabinet early in the new year.

In framing his view on the future ownership and structure of the DAA, the Minister will have to be mindful of the fact that the company has debts of about €1 billion.

This largely relates to the development of Terminal 2 at Dublin airport and other associated developments there.

The Minister will not want to implement any changes that might impair the DAA’s ability to service its debt, which it currently does without any recourse to the exchequer.

Earlier this week, Mr Varadkar appointed corporate lawyer Pádraig Ó Ríordáin of Arthur Cox as chairman of the DAA.

The post had been vacant since May, when David Dilger resigned.

The airport authority is also seeking to appoint a new chief executive after Declan Collier recently announced his intention to leave the position to take up a similar role in London City Airport.