Aer Rianta's assets face a €110 million write-down if the break-up plan goes ahead, a report by two leading financial consultancies has claimed.
The report, by Farrell Grant Sparks (FGS) and Mazars, claims such write-downs raise significant issues for the Minister for Finance, Mr McCreevy. At present the Government plans to split Aer Rianta into three autonomous entities: Dublin, Cork and Shannon.
The report, commissioned by ICTU and SIPTU, estimates that the value of Shannon will be reduced by €65 million, while Cork's value will drop by €45 million following the break-up.
Last night ICTU general secretary Mr David Begg, in a letter to the Minister for Transport, Mr Brennan, and the Taoiseach, said the case for breaking-up Aer Rianta had "not been made".
The report claims the assets of Shannon and Cork will now be valued based on their "fair value", rather than their carrying value. This will lead to a reduction in Shannon's asset value of €65 million, claim the authors.
The situation with Cork is slightly different with the Government planning to lease Cork Airport from Dublin Airport and place it in the hands of local management. But based on their reading of an earlier PricewaterhouseCoopers' report, Mazars and FGS, say this will still reduce Cork's value by about €45 million.
"The position with regard to Cork will be dependent upon the value being attributed to the lease and the other assets to be transferred. For illustrative purposes the PricewaterhouseCoopers report uses a reduction in value of €45 million," says their report.
The report describes the assets as "drastically reduced" in value when they are assessed on a market value basis and as individual entities.
"In our opinion, the foregoing raises significant matters for consideration by the Minister for Finance prior to any decision to proceed. It is imperative in our opinion that full legal and accounting clearance is obtained with regard to these proposed transactions and a basis for market value is determined as they are central to the proposed restructuring," says the report.
The report also questions the view, included in other reports, that Shannon can switch to a new "low-cost model" and manage to increase passenger numbers by 50 per cent by 2008.
The report says detailed projections have not been produced to support this view.
Overall the report is bleak about the plan's potential for success and the authors say they can "provide no comfort to the employees of Aer Rianta" on the future. They say the business case for the plan has not been proven.
They say there is an inherent contradiction in the plan, because Aer Rianta directors have a fiduciary duty to protect the company's assets while they are under pressure to execute the transfer of these assets.
The report also suggests that without clarity on a second terminal for Dublin Airport, projections relating to the break-up lack relevance. The report suggests Shannon Airport should only be spun off after "robust sensitivity analysis" has been undertaken.
Overall the report is a blow to Mr Brennan who has been championing the plan, although some reports have suggested the Minister for Finance, Mr McCreevy has major reservations.
This report suggests too many questions remain unanswered. "In our view, until such time as these issues are demonstrably addressed in an objectively verifiable manner, the proposed restructuring cannot be seriously considered," it says.
