Flying by the seat of his pants

He goes for high-risk investments others would run from. He likes a challenge - he must do to take on London's struggling City Airport, writes Patrick Tooher. Profile; Dermot Desmond

WHEN the late Monsignor James Horan, a local parish priest in Knock, Co Mayo, floated the idea of building an international airport on a remote, boggy plateau in the far west of Ireland, commentators said his mad-cap scheme would never get off the ground.

But Monsignor Horan confounded the doubting economists and sceptical civil servants and, almost 10 years on, the pounds 12m airport has proved a tremendous success.

Now an equally flamboyant Irishman is taking over another small airport which has also been written off by its critics.

Last week, Dermot Desmond became the new owner of London City Airport in a deal worth pounds 23.5m. He is paying pounds 14.5m to John Mowlem, the struggling construction group which built the airport and has lost more than pounds 70m on the project since it opened in 1987. The rest of the money is going to the Port of London Authority for the surrounding Docklands site and freehold.

Passenger volumes have improved since transport to the nearby City of London was improved with the opening of the Limehouse Link road in 1993, but the airport has never made a penny in its eight-year existence; some say it never will at the pre-tax level, although it expected to make a profit at the operating level by the end of next year.

It remains unclear what Mr Desmond, a former non-executive chairman of Aer Rianta, the state-owned Irish airports authority, plans to do with his purchase. His spokeswoman in Dublin insists he does not speak to the media and she refused to provide any biographical details of Mr Desmond.

Reports in the Irish press suggest, however, that Desmond sees the problems of access to and from Heathrow airport escalating. He may also build a hotel next to the City airport. He does not appear concerned that the airport has a finite capacity because of restraints on building new runways or extending the existing one.

Whatever the reasons behind it, this is a typical Desmond deal. It is the latest in a series of high-risk investments others would run an Irish country mile from.

Earlier this year, he shelled out pounds 2m for a 10 per cent stake in Glasgow Celtic football club, and underwrote a massively oversubscribed share issue. The club has won only one major Scottish trophy in the last six years, and was ignominiously drummed out of the European Cup-Winners Cup on Thursday by Paris St Germain.

The Celtic and City airport deals, coupled with extensive dabbling this year in property and financial services, mark the latest phase in a short, but colourful business career.

Now in his mid-forties, Dermot Desmond was brought up in Dublin's northside - the tougher, more streetwise side of the river - the son of a local customs officer. The young Desmond had an undistinguished secondary school education as a boarder at the Augustinian Good Counsel College in New Ross, a small town on the road between Wexford and Waterford.

He left school in the late Sixties and after a stint in Cork working on credit analysis and syndicated loans, he joined the Investment Bank of Ireland before moving to a World Bank project in Kabul in the late Seventies.

Following the Soviet Union's invasion of Afghanistan in 1980, Desmond returned home to set up National and City Brokers (NCB), a small moneybroking business. By 1984, he had bought his way into Dillon & Waldron, an old- established Dublin stockbroker.

The new kid on the block soon made his mark in the staid world of Dublin stockbroking. "He was a breath of fresh air," says a source, who knows him well.

NCB - metamorphosing into a merchant bank - soon grabbed a large slice of the Irish gilts market and expanded successfully into equities dealing.

Desmond put his finger into many financial pies. He started IFOX, the Irish futures exchange, and is also credited with masterminding the successful defence of Irish Distillers against a hostile bid from Grand Metropolitan in Ireland's biggest ever corporate takeover battle in 1987.

Critics say his assiduous cultivation of Irish government and business contacts helped bring lucrative privatisation work NCB's way. His supporters argue that the importance of Mr Desmond's friendship with the then Taoiseach, Charles Haughey, is overstated.

But they do not dispute Mr Desmond's role in convincing Mr Haughey's Fianna Fail government to start work on an International Financial Services Centre (IFSC) on a deserted docks site near Dublin's Connolly Station. The scheme proved a huge success. This year the IFSC is expected to generate a chunky pounds 400m in revenue for the Irish Exchequer and pounds 1bn within three years. Mr Desmond has also gained, having put his money where his mouth is by purchasing a block for about pounds 30m in the middle of the IFSC.

Other projects have been less rewarding. In 1989, he ploughed pounds 1.4m into an NCB-sponsored boat to compete in the Whitbread Round the World Yacht race, but the yacht's poor performance proved a costly disappointment.

Desmond was also a director of Classic Thoroughbreds, an ill-fated stock market venture into horse racing.

But it was the Telecom Eireann affair that almost scuppered the financier. A report by John Glackin, a government-appointed inspector, concluded that Desmond was the prime mover and beneficiary behind a complex set of transactions that took place between the sale of a bakery in Ballsbridge, a plush Dublin suburb, for pounds 4m in 1989 and the subsequent purchase of the same site by state-owned Telecom Eireann 13 months later for pounds 9.4m.

Desmond has always denied any wrong-doing, but the affair wounded him. He resigned as non-executive chairman of Aer Rianta, and temporarily stepped aside as chairman of NCB and IFOX until the investigation was concluded two years ago.

He also lowered his public profile, selling NCB to Ulster Bank last year in a deal said to have netted him over pounds 10m. Sources say he personally handed out four-figure cheques to secretaries and other non-shareholding NCB employees when the deal was completed.

No expense was spared, either, when he refurbished his new home in Ailesbury Road, Dublin. Desmond, a keen golfer, installed a putting green - reputedly heated - in the back garden.

Such flamboyant gestures, and this year's spate of wheeler-dealing, hardly suggest Mr Desmond has become the reclusive tax exile painted by his many detractors. On the contrary, he is displaying the consummate risk-taker's ability to recover from almost terminal setbacks.

Only time will tell if his gamble on London City airport takes off, like Knock did, or proves a deal too far.