The Government is to consider options for the future of Aer Rianta ranging from privatisation, flotation, a strategic partnership or the continuation of the status quo early next year. This will take place after the Aer Rianta board reports the results of a fundamental review of future development options ordered yesterday by the Minister for Public Enterprise, Ms O'Rourke. Privatisation and flotation are among the options that will be assessed by the board of Aer Rianta over coming months. Aer Rianta chairman Mr Noel Hanlon has been instructed by the Minister to carry out the review.
The board has been told "to adopt an open and pragmatic approach" to find the most appropriate strategic direction for Aer Rianta and to report to Ms O'Rourke within six months. After a board meeting yesterday Mr Hanlon described the review as "timely". It will start immediately and Aer Rianta will appoint consultants "where appropriate" to assist the group. Mr Hanlon said the review will take place against a background of considerable change in the semi-State sector.
"Aer Rianta has many challenges and opportunities facing it, including major capital investment programmes at Dublin, Shannon and Cork airports, and there are significant opportunities at home and overseas," he said. Employees and trade unions will be fully involved in the process, he added.
Ms O'Rourke stressed that she had no ideological position either for or against privatisation. "It is entirely in the lap of the board. All options are open or none. This company has been very successful but the whole aviation regime is speeding up and it is important to examine opportunities for development," she said.
Noting "the strain on the company's resources arising from the substantial capital programme currently underway at the three State airports", she said other challenges facing the group included the risk that intra-EU duty sales could be abolished in July 1999. But she added that the Government "will continue to fight" this move. Asked whether Aer Rianta would be floated on the stock market like Telecom Eireann, Ms O'Rourke said that "what is good for one State body is not necessarily good for another". She added that she would be "ideologically keen" that the unions and employees are involved in the process "in a spirit of partnership".
Aer Rianta could make an attractive flotation prospect. Profits are rising in a buoyant economy where business and leisure airport traffic is increasing steadily. Brokers suggest that a full flotation could raise between £700 million and £800 million for the Government.
But the uncertainty about the impact on profits of the abolition of intra-EU duty free sales which account for about half of group profits would be a significant negative factor in market sentiment towards the group.
A strategic partnership may be a less attractive option because Aer Rianta does not have the same need for onward or international links that arise for Aer Lingus and Telecom. The group has already successfully expanded overseas.
Another option would involve breaking up the group. The chain of eight hotels could be sold off, raising up to about £50 million, while the remainder of the group could then be floated on the market. The option to remain as it is would be the most unlikely choice given Aer Rianta's capital expenditure plans which would have to be funded largely through increasing borrowings.
