British transport group National Express may enter the Dublin market by linking with the bus firm Aircoach, it emerged yesterday.

It is thought the groups may have tendered to operate the Luas light rail services from Tallaght to Connolly Station and from Sandyford to St Stephen's Green.

National Express's spokeswoman said it had entered talks with Aircoach but would not reveal what arrangement was being sought. The Luas project is seen as attractive and a number of British operators are believed to have expressed interest in it.

Aircoach declined to comment. The company operates bus services to Dublin Airport from the city and manages services from car parks at the airport to its terminal.

"We are interested in the Irish market and the best way is with a local partner," said the National Express spokeswoman. "We are aware of Aircoach and have held discussions with them. We have a lot of respect for what they do."

Such discussions were continuing, she added. National Express's strategy was to enter new markets with "quality partners" locally.

While declining to state whether National Express was interested in operating Luas, she said such projects were "fairly typical" for it as a group. It operated a light rail service in the British midlands, a metro service in Birmingham and a tram service in Melbourne, Australia.

The first phase of the competition to operate Luas is under way. Applications were submitted last month to Babtie, a consulting group appointed by the Minister for Public Enterprise, Ms O'Rourke. She has said the licence will be awarded next autumn and service introduced in 2003.

It is thought CIE's other subsidiaries, Iarnrod Eireann and Dublin Bus, applied for the operation licence. However, transport insiders believe their partnership is unlikely to succeed because the Government has been keen to encourage private sector interest in public transport.