Air fares could rise by at least £10 per return journey and 700 jobs could be lost in ferry companies, a study into the abolition of duty-free has found.

However, the study, which was commissioned by Minister for Finance, Mr McCreevy, also found that the Exchequer could gain around £45 million through the abolition. The study predicted far less severe consequences than were previously feared. Earlier this week, the country's biggest union, SIPTU, warned that the ending of duty-free in June 1999 would lead to 9,000 job losses in Ireland.

However, the study carried out by consultants KPMG for the Department of Finance - and approved by Government yesterday - says that just over 1,100 jobs directly involved in duty-free sales would be at risk.

Mr McCreevy said last night that he would be using the study's findings to press the case for retaining duty-free and tax-free sales to EU travellers post-1999 at a future meeting of EU finance ministers. He said, to date, no comprehensive impact study had been done, so Ireland had commissioned its own. The major findings of the report, which were published yesterday, say airport charges will have to increase to replace some of the lost contribution from duty-free sales, but the level of increase would be a matter for Government.

It points out that not all duty-free sales will be lost as some passengers will continue to buy it, and it will continue for non-EU destinations. It also says there will be opportunities to increase sales on certain tax-paid goods such as perfumes and cosmetics by absorbing the VAT.

Taking everything into account, it says the affect of abolition amounts to an average increase in air fares of up to £10 per passengers on return journeys within the EU.

The study was carried out by KPMG in association with Fitzpatrick Associates and MDS Transmodal Shipping Consultants. It says the total number of full-time jobs in the aviation duty-free sector is 466, but not all of these jobs are at risk. Those most at risk are part-time, contractual and seasonal posts.

It says that, on ferry routes, the average spend on duty-free goods is £13. It says the central corridor routes will remain profitable, if duty-free is abolished, but all southern routes will go into loss. These routes include Cork-Swansea, Cork-Roscoff and the Rosslare-Cherbourg route.

The study says the total number of jobs at risk is around 700 "made up of Irish, British and Greek nationals".