The board of Aer Rianta, the State airports' operator, is to consider a report next week which will point towards the flotation of a substantial part of the company's equity on the stock market. The report will also stress it is crucial for Aer Rianta to find new income streams to combat the pending abolition of duty free.

The report, details of which will published mid-week, is a response to a request from the Minister for Public Enterprise, Ms O'Rourke, last August. She urged the board to carry out a fundamental review of the future development options. The report, carried out by Investment Bank of Ireland, will recommend an initial partial flotation, of under 50 per cent as the most viable option to raise funds for the group's expansion. The monies raised would help to fund Aer Rianta's expansion plans.

The company is currently undertaking a major expansion programme at Dublin Airport. It expects to spend in excess of £200 million (€254 million) improving its three main airports - Dublin, Cork and Shannon - over the next four years. The consultants have examined the company's core and non-core assets, including its Great Southern Hotel chain, and will make recommendations on what disposals should be carried out. It is understood that there is concern among the hotel staff on this issue. Aer Rianta has previously defended its interests in the hotel business, saying these are not mutually exclusive as it caters for visitors through its airport operations and these visitors need somewhere to stay. The matter will then be considered by the Cabinet following a recommendation by Ms O'Rourke. It is understood Ms O'Rourke has no fundamental objections to a flotation. A joint consultation group set up by the company, involving management, trade unions and outside representations, has already concluded that a flotation of the company's shares would be a viable option. The group is believed to have concluded that an injection of State funds would be a preferable way to raise finance. But given that this is seen as most unlikely, a flotation is seen as a way to raise cash to fund expansion.

Aer Rianta is a large group and is profitable, returning pre-tax profits of £42 million in 1997. It paid £15 million of these profits to the Government that year.

If floated it could be worth £700ú800 million , according to analysts.