A superficial glance at Aer Rianta's financial results shows a vibrant, successful company the very model of state enterprise. Revenue was buoyant at £212 million and pre tax profits surged to over £37 million. Passenger traffic at the three airports passed the 10 million customer mark for the first time in the company's history. New ground was broken with the successful bid to buy into Birmingham Airport with a private sector partner.
Aer Rianta's standing as a duty free operator it is now the fifth largest in the world was consolidated when it secured the contract to open a large shop in the centre of Bangkok. Of even more long term significance was the signing of a consultancy contract earlier this year to develop a duty free shopping centre in Beijing international airport. The Chinese market clearly has outstanding potential.
Despite these achievements, Aer Rianta is a company with serious problems ahead. One of these is caused by a questionable policy whereby the Exchequer requires Aer Rianta to surrender a large slice of its profits. Of the £37.6 million the company made last year, £11.9 million was given to the Minister for Transport, Energy and Communications. As a bookkeeping exercise, this makes sound sense for the Exchequer, but it also forces Aer Rianta to secure unnecessary commercial borrowings.
As reported today's edition the Department of Finance has indicated that it will shortly give Aer Rianta the go ahead to spend £100 million on its expansion plans for Dublin Airport. A further £50 million is to be spent at Shannon Airport over the next five years. These are very considerable amounts of money and it is, in financial terms, of the highest importance that as little of this money as possible be borrowed. Yet the policy of demanding a dividend from a company with a huge appetite for capital expenditure weakens Aer Rianta and makes it vulnerable to interest rate fluctuations. The case for allowing Aer Rianta to retain its profits is persuasive.
An even more serious problem for Aer Rianta is the proposed abolition in 1999 of duty free sales in the European Union. The company is heavily dependent on profits from this source. Aer Rianta estimates that it could lose £20 million in annual profits if duty free is abolished. The inevitable effect would be an increase in airport charges and higher air fares. This could inhibit economic growth, especially in tourism, with the obvious knock on effects for employment.
From Ireland's point of view, the case for retaining duty free is strong. It is vital for the ferry companies. And it underpins the profitability of Ryanair which now claims to be the largest single retailer of Jameson whiskey in the world. But the problem for Ireland is that duty free shops do not matter quite so much to other European airlines or airports. Aer Rianta has been in the vanguard of those lobbying to have the proposed abolition reversed. But its task is formidable since it must persuade both the European Commission and the European Parliament. This will be a difficult challenge for a single company to undertake. It deserves the vigorous support of the Government in protecting what has become a vital commercial interest for Ireland.