FIRM of consultants is to examine Aer Rianta's international operations to see whether it should find a strategic partner or be floated to generate investment for expanding the company's interests overseas.The contract tender will he advertised within the next two weeks.

Aer Rianta's chief executive Mr Derek Keogh said the consultants will look at Aer Rianta International (ARI), a subsidiary of Aer Rianta to find the best way forward in terms of securing finance". He said this could mean "finding an international partner to attracting pension funds, to floating the company

The process is expected to be completed by the end of the year. The company manages overseas contracts including duty free, airport management and consultancy with an annual turnover of Pounds 250 million.

ARI operates Aer Rianta's overseas business, while the main company runs the State airports Dublin, Cork and Shannon. ARI would still be an important contributor to the main company's finances, said Mr Keogh, who is to retire at the end of the year.

Aer Rianta is currently part of a consortium negotiating to buy a 50 per cent stake in Dusseldorf Airport, one of Europe's busiest airports and is on a short-list of two. The company is in partnership with Hochtief, a German construction company and if it is successful, the bid will represent the largest overseas investment to date for the state body.

Mr Keogh said if the bid is successful, it will be a "very rewarding investment," and would enhance the company's position as "a serious player in the ownership of world airports."

He said Aer Rianta would run the airport very much along the lines of Birmingham International Airport, where it joined with NatWest Ventures to buy a 40 per cent stake for Pounds 42 million. The bulk of the funding came from Nat West and Aer Rianta contributed the airport management expertise.

Mr Keogh said a number of European airports are being privatised or will be privatised in the future. These include airports in Italy (Naples and Rome), Germany (Stuttgart and Hamburg) and Portugal.

In many cases, the governments stipulate that a local operator be involved in the process. Aer Rianta may team up with different operators in different countries.

The company will bid for stakes in European airports which come on the market as well as targeting Asia and the Pacific Rim. Recently the company got a contract to manage the duty free and liquor shops at Hong Kong's new airport. It will operate 12 duty free stores under the concession.

Mr Keogh says this gives them an important entree to China.

Aer Rianta has not been so lucky in Thailand where it recently lost the contract to manage Bangkok's prestigious downtown duty free store at the World Trade Centre. The contract was abruptly terminated by the Thai government.

Mr Keogh said Aer Rianta was disappointed to lose the contract, but had not lost any money on the venture. In fact, he said, Aer Rianta had made a profit in Thailand, as it was a management contract.

Although management contracts are worth money, ownership of an airport is more lucrative. Mr Keogh said airports represent a good investment. "Airports are a long-term business, but a good solid business which give a strong return on investment."

He believes that in future there will be moves to regulate existing airports, possibly at EU level, partly because they enjoy a near monopoly.

"Airport ownership is much less risky than duty free," he said.

Mr Keogh admitted that the threatened abolition of duty free presents potentially serious difficulties to Aer Rianta's operations. Ten years ago, he said, the company decided to diversify its operations overseas, to help counter the threat.

However, he admits to being optimistic that duty free will not be abolished as planned on July 1st 1999 a mere two years away. He believes there is a general movement towards maintaining it and Aer Rianta, like many others, is actively campaigning for its retention.

Mr Keogh dismisses arguments by organisations such as the Dublin City Centre Business Association that duty free is affecting other retailers and should be abolished.

"Research has shown that duty free represents an extra purchase that would not otherwise have been made," he says.

He argues that if it disappears, airport owners and operators will try to make up the margins elsewhere. Landing charges and consequently air ticket prices will rise.

Mr Keogh pledged that Aer Rianta would not increase landing charges if duty free disappears. Despite criticism by Ryanair that its landing charges were too high, he says time and again independent studies including one by the University of Westminster have found that Aer Rianta's charges are among the most competitive.

However, he contends that in many cases duty free is not the giant money spinner people believe. Some airport owners stipulate that the franchisee who runs the duty free must pay a percentage of the duty free sales plus a rent. Others specify how much the duty free must be sold at. "Margins can be very tight sometimes only a couple of per cent," he says.

This is one reason why Aer Rianta is moving into the ownership end of the airports business. In Birmingham, for example, Aer Rianta does not run the duty free shops.

In Dublin, Cork, and Shannon, Aer Rianta is the operator and franchisee of the shops so it is on a winner. Last year, Shannon's general manager told staff that it was not acceptable that Cork airport can service over one million passengers with 120 staff while Shannon is servicing 1.6 million passengers with about 650 staff.

Keogh says both airports are profitable and it is not fair to compare Shannon and Cork. Shannon has other businesses, such as an oil business and a mail order business, which Cork does not.

He says changes, including possible staff reductions are being managed on a joint basis.

Cork and Shannon are both making "acceptable profits," he says, but readily admits that the loss of duty free would be a huge problem for these airports.

Aer Rianta is also at an advanced stage of negotiations with private developers regarding developing business parks around the periphery of the airports.

Aer Rianta is also carrying out a substantial investment programme which will eventually see Pounds 250 million spent upgrading the three airports.

The company also owns the Great Southern Hotels chain which last year contributed Pounds 2.7 million to profits.

It is planning to build a hotel in Cork and is currently completing an Pounds 8 million 147-bedroom hotel development at Dublin airport, which will give Great Southern its first hotel in Dublin.

Aer Rianta also runs the Shannon College of Catering another non-core business. Mr Keogh says the company does this to give something back to the tourism industry.

There have been calls to privatise Aer Rianta itself. Mr Keogh, who has been chief executive for 10 years, says he has no view on the matter.

"I've always believed that ownership is irrelevant provided you behave as an owner, he said.

He says one of the difficulties over the years has been confusion, over the company's role as either owner or regulator, of various governments. However, he says, recent governments are beginning to become aware of this.

As for the future, Mr Keogh says as airports become more congested they will look at the periphery locations. Although in the main, Dublin is unlikely ever to become a hub for European airlines, it could become one for airlines operating from the far East.