NOT CONTENT with being the State's biggest car-park operator and running one of its largest shopping malls, the Dublin Airport Authority (DAA) now wants to add another string to its bow: speculative property development on a massive scale.
When you boil it down to its constituent parts, the €4 billion Dublin Airport City announced on Friday is just another office, retail and hotel development in a city that is coming down with such projects. What it has going for it, however, is that it is right beside the airport and will have dedicated shuttles to and from the terminal.
The idea is that Asian multinationals considering the Republic as a European base - primarily for tax reasons - will plump for the airport city as their executives will be able to come and go with the minimum of fuss.
The DAA believes that, in a sort of win-win scenario, the €600 million it expects to receive each year from the airport city development will help to keep airport charges down. This will in turn encourage more airlines to fly here and thus boost the attractiveness of the airport city as a location for headquarters operations.
It is an intriguing idea and it might well work, but it is hugely speculative and begs the question as to whether it is really the sort of activity that a State company should get into, particularly in the current climate. Property speculation is after all a private-sector activity par excellence , given its combination of high risk and big rewards.
What makes the move even more questionable is that the DAA is simultaneously slimming down its exposure to what might be considered its core activity: operating airport infrastructure.
Terms have been agreed for the separation of Cork and Shannon airports, and the DAA has also sold its stakes in Birmingham and Hamburg airports.
The airport city project is without a doubt an ambitious move. And it would be unfair to suggest that the DAA has not thought it through.
The essence of the DAA's case for developing its Dublin landbank is that it break its dependence on airport charges and the current dysfunctional cycle in which the charges are set by the regulator, appealed by the airlines and then, by the time they come into force, need to be reset.
The DAA claims that the tight regulatory regime that applies to its largest income stream is strangling the business. But on the other hand, being able to introduce higher charges whenever it wants is no solution, as that will drive airlines away to lower-cost airports.
The DAA believes the €600 million target for annual revenues from the airport city will cut this Gordian knot.
While there is a logic to this, the DAA still has some questions to answer. Why not just sell the land and let private-sector developers take on the risk? Why go for such a grandiose speculative scheme? And why not just develop the land piecemeal over the next 10 years, using the revenues to offset costs at the airport?
The DAA would argue that, if it really wants to target multinationals in India and China as tenants, then it has to create a certain buzz around the project and deliver on the promise. Doing this requires an overall plan and a master developer to implement it.
The DAA also believes it will get a better return by being the developer. And indeed it will, but it will also have to assume a proportional amount of the risks involved.
Obviously the DAA will look at various ways of limiting its exposure but, fundamentally, the higher the return you want, the higher the risk you must take on.
And this project is particularly risky; in the way that the collapse of the dotcom boom undermined equally grandiose plans for a digital hub to revitalise Dublin's Liberties, oil prices could seriously undermine the Dublin Airport City project.
The kernel of the project is that it is self-perpetuating; the more tenants there are in the airport city, the more money for the DAA; this in turn means lower airport charges, which means that more airlines will fly to Dublin. And the greater the connectivity at Dublin airport, the more people will want to be tenants in Dublin Airport City.
With oil peaking at $119 a barrel last week, you could take the view - as does the DAA - that airlines will focus more on costs and airports with low charges will be the winners in the fight for connectivity.
However, some analysts are forecasting oil rising to $200 a barrel by the time Dublin Airport City is up and running in 2012. At those prices all bets are off. According to research by Davy stockbrokers, Ryanair would only break even if oil hits $132 a barrel, while Aer Lingus would run into trouble at $125 a barrel.
It is hard to think of a speculative property project more directly based on oil prices outside of the oil industry itself. And the State got out of that game a few years ago with the sale of the Irish National Petroleum Corporation.