The Minister for Enterprise Trade and Employment, Ms Harney, has spoken out in favour of Ryanair's controversial proposal to build a £12 million second terminal at Dublin Airport, in return for which it has promised to deliver one million extra passengers to the capital within three years.

Speaking on RTE's Five Seven Live radio programme, Ms Harney said she was "very positive" about Ryanair's plans which also involve it operating from Shannon Airport, in Co Clare.

She said competition drove down costs and improved quality of service. "I would personally find favour with what Ryanair is suggesting for both Shannon and Dublin," she said.

Three weeks ago, Mr Michael O'Leary, Ryanair's chief executive, made a proposal to bring an additional 750,000 passengers to Shannon by opening five new routes contingent on getting Government support for a second terminal on Aer Rianta lands in Dublin.

Ms Harney said that Shannon needed more passengers, "particularly more European passengers who will also stay in the area". "I think what we need to open up the west of Ireland to in particular is a low cost carrier," she said. However, the Minister for Public Enterprise, Ms O'Rourke, has stated that any proposal for a second terminal at Dublin airport would have to be the subject of a full public tender. She is awaiting a consultant's report on the future options for Aer Rianta and the State airports, after which she will bring proposals to the Cabinet.

A Ryanair spokeswoman said last night that an ultimate decision for the airline to go ahead with the plan would transform the entire mid-west region. A decision by the Government to back a second terminal at Dublin Airport is likely to affect its imminent decision on the scale of the civil airport to be developed at the Baldonnel military airport in south-west Dublin.