The Government may need to introduce public service obligation (PSO) levies for certain routes between Shannon and the United States if Shannon Airport is to survive an open skies regime, a new report has stated.

The report by former minister for transport, Mr Alan Dukes, and Mr Frederik Sorensen, a former senior EU official, says the rate of Irish economic growth could rise by 10 per cent following the introduction of an open skies agreement, but it warns that Shannon "could run into difficulties".

However, the report says open skies would be particularly beneficial for Aer Lingus.

The report was commissioned by the Chambers of Commerce of Ireland.

The authors quote figures from Aer Rianta which suggest that transatlantic passenger traffic at Shannon could drop by between 40 and 50 per cent if the Shannon stopover comes to an end. However, the authors suggest the blow to Shannon might be cushioned by transitional arrangements such as subsidised flights.

"It should be considered whether a PSO could be introduced on routes between Shannon and/or Cork and certain US destinations. Such a PSO could be perhaps be part of a transitional arrangement."

The report says Shannon will be able to sustain links to the US, but it will become more dependent on US carriers if Aer Lingus concentrates its services at Dublin. It also draws attention to Shannon's shortcomings in relation to European services.

"Shannon has a weakness in that its links to continental Europe do not mesh well with transatlantic links. This situation could be remedied if operational interlining could be established," it states. Interlining refers to using the one ticket to travel with several airlines.

The report overall is modestly upbeat about Shannon's prospects, but Mr Dukes said carriers would only fly into the airport if it had something attractive to offer. He acknowledged the recent deal done with Ryanair.

The report adds that there may be scope for "limited transatlantic services from Cork", particularly when the new terminal there is operational.

Meanwhile, speaking before the Joint Oireachtas Committee on Transport yesterday, Mr Sorensen said Shannon was unlikely to face a catastrophic scenario following the introduction of an open skies agreement. He said there was a substantial market between the Co Clare airport and the United States.

He said that there were currently around 600,000 people travelling between the western part of the Republic and the US.

Mr Sorensen said that, after the introduction of open skies, some of this traffic might go to Dublin and some might even go to Cork. However, he said that he did not think that the figure for Shannon would fall below 400,000.

This level of traffic would be sufficient to allow for two, three or even four destinations in the US to be served from Shannon.

He believed that some US airlines such as Continental would remain in Shannon even if others moved their services to Dublin.