Kevin Thompstone, the chief executive of Shannon Development, is engaged in the biggest fight of his working life, writes Jamie Smyth

At stake is control of the State's only dedicated regional development company, with a brief to generate industry, tourism and development in an area spanning Clare, north Tipperary, Limerick, north Kerry and south Offaly.

Shannon Development, which was set up in 1959 to promote Shannon Airport and up until now has enjoyed a relatively low profile, has suddenly attracted the unwelcome attention of the Government.

In the space of just a few months, the 400-strong organisation has been told it faces losing control of a substantial portion of its property assets. A potential merger with Enterprise Ireland, following the latter's proposed decentralisation to Shannon by 2008, has also been suggested.

The Government proposals pit Shannon Development's board against the Tánaiste, Ms Harney, who is proposing to reshape the Republic's enterprise strategy for the next decade.

This week Shannon Development's chairman, Mr Liam McElligott, described the Tánaiste's plan as a "disaster" and "flawed". But this type of "grand-standing" is clearly not Mr Thompstone's style and the soft-spoken University of Limerick graduate is clearly keen to find a resolution to the current dispute that will suit everyone involved.

"We are confident that, with the right spirit shown around the table, we will be able to find a better solution than the one that is currently on the table from the Government."

The Tánaiste's proposal is for the transfer of Shannon Development's extensive property portfolio in the Shannon Free Zone to a new Shannon airport authority, which would take up the reins following the break-up of Aer Rianta. Consultants have predicted that the proposed new airport authority would face substantial financial pressures.

The Shannon Free Zone portfolio, which forms part of the firm's total land bank valued at more than €200 million, generates gross income worth €10 million per year, enabling Shannon Development to fund a range of development activities in its region of influence and pay part of its €25 million operating costs.

The implications of the proposal for Shannon Development would be a shift towards a reliance on Exchequer funds.

This would mean that Shannon Development would be unable to fund innovative activities such as technology parks in Tralee or new "etowns" in regional areas, according to Mr Thompstone, who will have to overcome a growing media perception that Shannon Development is now the "dead man walking" among State enterprise agencies.

The 2003 financial results for Shannon Development, published this week, bear testament to the financial pressures that the body would face if it lost a large portion of its land bank.

The organisation reported a deficit on its activities before tax of €4.52 million. It spent more than €15 million on staff costs, €20.3 million on property and €4 million promoting tourism, according to its annual report.

The results also show a pension deficit worth €26.9 million at the end of December 2003, a factor that has raised concern among the pension fund trustees, who recently began legal action to make it pay in extra funds to cover incremental pension increases that will occur in the future due to recent pay rises.

Ironically, for the past several years, Shannon Development has been the loudest advocate of breaking Aer Rianta's hold over Shannon airport to allow it greater independence and flexibility to promote the Shannon region.

This view has not changed as a result of the Tánaiste's proposal, says Mr Thompstone.

"In a group structure, there was naturally a greater focus on Dublin's problems, such as its proposed second terminal. So Shannon and Cork were only getting limited attention."

Instead of opposing the plan, Shannon Development, at its results announcement this week, signalled its intention to refocus its own attention on the airport.

"In the context of regional development, one factor looms large and that is Shannon Airport, which faces significant challenges ahead, not just from the proposed new model but also from US and EU talks on creating an open aviation area."

A future open-skies deal between the EU and US would remove the Shannon stopover requirement, posing significant challenges to any new airport authority.

Mr Thompstone also acknowledges that Aer Lingus's ongoing restructuring, which has led to the cancelling of early morning and evening fights from Shannon to Dublin and potentially the end of air cargo services, is affecting the operation of the airport.

The entry of new airline operator EU Jet at Shannon and the presence of several express freight services has limited the impact somewhat, he says.

To overcome its own funding issue, Shannon Development has proposed several alternatives to the Government in an attempt to prevent its land bank being transferred to a new airports authority. These range from merging Shannon Development with the new authority to setting up an investment fund to provide initial seed capital for the authority, according to Mr Thompstone.

"My philosophy is, if there is a problem then take responsibility with it and run with it yourself," he says, citing the organisation's initiative to roll out broadband in the region and establishing the State's first national technology park as examples of this.

He says there are advantages and disadvantages to both of these new proposals but both are better than the current one on the table.

A decision on the transfer of property is expected before the end of the year by the Government, although Mr Thompstone acknowledges the plan to break-up Aer Rianta will become a political football that could be delayed further.

However, fresh from facing down one political battle, Shannon Development also faces a tough battle to convince policy makers that it has a valid role in the enterprise arena following the planned decentralisation of Enterprise Ireland staff to Shannon by 2008.

The Government's blueprint for industrial development for the next decade, the Enterprise Strategy Report, highlighted that a merger of the agencies would be preferable.

"We welcome the overall thrust of the report," says Mr Thompstone.

"But we believe that reference took an overly narrow view of the role of Shannon Development, seeing it only as an enterprise development agency."

He says it would be a mistake to believe that if the organisation moves to Shannon it would remove the role of Shannon Development, which is engaged in a range of different activities spanning tourism to rolling out broadband.

However, Mr Thompstone does concede that, if the agency moves to the region, it could result in the merger of its own enterprise division.

"Whether that is 20, 30,40 or 50 people really depends on how you define enterprise activity," he says.

Earlier this week, Shannon Development handed over the management of Shannon Town to Clare County Council after 40 years of developing it into a town of 9,000 people.

In what was billed as a unique event in Irish local government history, Mr Thompstone says that the move made sense that Shannon should be treated the same as every other town in the Republic.

He now has to hope that he can successfully persuade the Government that Shannon Development has a continued role in regional development.

Clearly, the stakes are high for the organisation, which faces perhaps the most critical period in its 45-year history.