The Government has to balance a number of considerations, as it considers the future of Aer Rianta. A review of the options from consultants Warburg Dillon Read, AIB Capital Markets and SH&E, published yesterday, concludes that the financial outlook for the company is "severely strained." If it is to invest in developing the State's airports, then fresh funding must be found. Wider issues of public policy must also be considered. The Government must aim to keep airport charges as low as possible, in order to maximise the amount of air traffic. This is vital for the tourist industry and for business in general. Interestingly, the consultants conclude that, contrary to claims from Ryanair, Aer Rianta's existing airport charges are at the lower end of the EU average. The aim must be to keep them there.
The report recommends the sale of the Great Southern Hotel Group, a proposal already supported by the Aer Rianta board but seemingly causing some angst around the Cabinet table. This issue should not be side-lined again; the sale of the hotels should be given the go-ahead without delay. However the proceeds from the sale of the hotel group and the ongoing earnings of Aer Rianta's international arm would not together be enough to fund the expected capital investment. Aer Rianta says it needs to invest £520 million in the period up to 2003, though the consultants suggest that this may be a bit too much and that some projects could be conducive to outside financing. The consultants conclude that an initial public offering (IPO) of the company's shares would be the best way to raise finance. The company has recommended that up to 49 per cent be sold, although the consultants do not plump for a particular figure. The Minister is believed to favour disposing of a stake of around 30 per cent.
On the analysis presented, the IPO option does seem to present the best way forward. Further consideration needs to be given to how much of the company's shares will be sold. As the consultants point out, it is vital that in tandem with a change in the share structure, a detailed regulatory regime is put in place to monitor airport charges, using a transparent formula which recognises the wider public policy needs. A regulator, Mr Bill Prasifka, formerly of the Competition Authority, has been appointed by the Government, but the way he will operate has yet to be decided.
What about competition? The report raises serious questions about the viability of developing Casement aerodrome at Baldonnel as a full-scale civilian airport. It also comes out against the proposal to develop a second competing terminal at Dublin airport, although it does not reach a firm conclusion on Ryanair's proposals to fund an extension to Dublin airport, which merits further examination. If, as the consultants conclude, Dublin city is not big enough for two airports, then a proper regulatory structure is the best way to try to impose the kind of necessary disciplines on the airport operator.