The Cabinet is expected to sanction the flotation of up to 49 per cent of Aer Rianta, the State airports operator, when it meets next Tuesday. The monies raised will be used for reinvestment in the airports.
It is also expected that a report on Aer Rianta's future, commissioned by the Minister for Public Enterprise, Ms O'Rourke, will reject a Ryanair proposal to build a "low-cost" £12 million (€15.2 million) terminal at Dublin Airport in return for landing fees of £1 per passenger.
Ryanair has said that, as part of the deal, it would initiate 10 new services from Dublin Airport and would allow other operators to use the terminal.
The report is understood to examine the proposal in some detail, but concludes that the State operator could not favour one airline and that such a move would seriously hamper its allure to investors. The report, written by Warburg Dillon Read, recommends retaining the regional airports, Cork and Shannon.
It also proposes selling off Aer Rianta's Great Southern Hotels chain. The part-flotation is unlikely to take place until at least the middle of next year.
The report will recommend that the shares be offered to institutions and listed on the Dublin and London market. They will also be offered to US investors, but there are no plans to list in the US.
The report is understood to support the broad thrust of a previous report which was commissioned last year on behalf of Aer Rianta. That report, by Lehman Brothers, set out a future strategic direction for the company, which included a share offer to raise cash.
The Warburg report will recommend that Dublin Airport be developed to utilise its capacity to meet projected demand but will say a second terminal is unnecessary.
However, it is understood it will support suggestions that an executive jet centre could be developed by the private sector at Casement Aerodrome at Baldonnel, west Dublin.
Like other airport operators, Aer Rianta has been badly hit by the abolition of duty free, which was expected to result in a £30 million fall in profits in a full year. The report says Aer Rianta should continue to develop its international duty free and airport operations, but not at the expense of developing the airports. Aer Rianta should concentrate on making up duty-free losses by developing retail operations at the airports, it says.
Discounts on landing fees to airlines were abolished at the end of 1999. This means Aer Rianta will get increased revenues of around £60 million a year - although this figure could be altered when the newly appointed airports regulator rules on landing charges.
Last April, Aer Rianta unveiled ambitious plans to invest £500 million to develop the three airports. It is understood the report queries the capital expenditure projections, suggesting some savings could be made.
Although the report will recommend that the State sell a minority interest of up to 49 per cent, sources say that Ms O'Rourke is in favour of selling just 30 per cent.
Aer Rianta's precise value will depend on market conditions. Analysts say the stock values of similar operators - such as the British Airports Authority - have fallen back recently. It is thought the current value of Aer Rianta is around £500-£600 million.
The eight Great Southern hotels could fetch £60-£80 million. Some are more profitable than others, which need substantial upgrading and investment. The hotels will be sold before flotation.
