Aer Rianta is on a collision course with the Government over demands by a policy group that it develop "low-cost" services at Dublin airport to boost tourist numbers.

Just two months after the aviation regulator, Mr Bill Prasifka, cut £726 million (€922 million) from its capital expansion programme, the State company is set for another conflict tomorrow over its plans for the airports at Dublin and Shannon. The adversary this time is its owner, the Government.

The irony is that Mr Prasifka was appointed to bring political wrangling over landing fees, linked to capital expenditure, to an end. Yet while Aer Rianta is challenging the regulator's determination on fees in the High Court, the politicking over the State's airports has not abated.

If anything, it has worsened. According to some informed observers, however, the company may find it easier to face down the Government than the regulator.

For political reasons, they say, the optics of a deal for "low-cost" carriers at Dublin airport may prove difficult to stomach in an environment where Aer Lingus, the State's own airline, wants to let go more than 2,000 staff.

The desire is to boost tourist visits to help the entire economy. Yet some informed sources believe the most visible beneficiary would be Ryanair, the carrier which appears to be thriving while others such as Aer Lingus shed thousands of staff to avoid bankruptcy and closure. They add that Ryanair trades to deliver stock price growth to shareholders, not to enhance Bord Fβilte's tourism statistics.

At the core of the troubles lie attempts by the Government to address a serious slump in visits next year by US tourists following the airborne attacks on New York, Pennsylvania and Washington on September 11th. Worried, the Government set up an inter-departmental group on "visitor issues". It said last week in an interim report that Aer Rianta should build a new pier at Dublin airport as a "low-cost facility targeting low- cost carriers".

Ryanair dismissed the report. But in part at least, it dovetails with a proposal often made by its chief executive, Mr Michael O'Leary, to construct a "low-cost" terminal at Dublin and hand it back to Aer Rianta in return for a promise to limit landing fees to £1 per passenger. The average landing fee is about £7 and Mr O'Leary has argued that a reduction to £1 would stimulate enough demand to deliver one million additional tourists to the State every year.

Given that Mr O'Leary wanted to exploit State property for the benefit of a his publicly-quoted company, the Department of Public Enterprise said that any such plan should be subject to tender. As might be expected, Aer Rianta rejected the plan. And despite Mr O'Leary's repeated protestations - sometimes privately to politicians - the issue appeared to go away. Then the US was attacked.

No less than Bord Fβilte, the Government understood well that a downward spike in tourist numbers spelt trouble throughout the State, in hotels, pubs, restaurants, shops and other outlets. In that context, the beauty of the Ryanair proposal was that it held out the prospect of flooding the State with additional tourists. How the delivery of additional tourists would be measured and what would happen if the increase did not materialise remains unclear.

Chaired by Mr Noel Hanlon, Aer Rianta's board meets for the second time in a week tomorrow morning to consider the interim report. After that meeting, it is understood the company will tell the advisory group that the plan is unworkable.

In addition, it will say attempts to boost visits to the State should focus on Shannon airport. It will argue that the western region will suffer most. Because the company already offers airlines zero charges to open new routes from the airport in Co Clare, carriers may be paid a premium to deliver additional passengers on existing routes.

Aer Rianta will also say a new six-bay extension at Dublin - dubbed "terminal B" - means that pier D is unnecessary. What is more, the company will say that any attempt to provide "low-cost" facilities for the exclusive use of "low-cost" carriers could breach competition legislation.

A further uncertainty surrounds the definition of "low-cost" carrier. Is such an airline one which offers flights, without complementary meals or drinks, for £9.99 on a small number of unsold seats while many other seats cost £80? Or does it offer £100 flights, with the frills?

How the advisory group responds to Mr Hanlon remains to be seen. A Government spokesman would say only that it anticipated Aer Rianta's response.

No decision will be taken by the Government without consideration of the general election next year.

Quite what trade unions in Aer Lingus would made of concessions or apparent concessions granted to "low-cost" carriers while their workers walked the plank was another matter. As Ryanair is fond of saying, it dominates the field.