Tough task ahead

Finance Secretary Ralph Recto has welcomed the Manila International Airport Authority (MIAA) board’s move to award to the San Miguel Corp-SAC and Co. consortium the contract for the rehabilitation of the Ninoy Aquino International Airport (NAIA), the largest solicited public-private partnership (PPP) project under the administration of President Marcos.

According to Recto, this is certainly a welcome development for this long overdue project, with NAIA having been operating beyond capacity for nine years, leading to poor service and passenger inconvenience.

He noted that the NAIA-PPP project has been in the works for three decades, spanning six administrations, but it has finally turned into a reality under the Marcos administration.

With an estimated project cost of P170.6 billion, the solicited proposal to rehabilitate NAIA aims to address the long-standing challenges of under capacity, congestion, and underinvestment in the country’s main gateway.

The largest major expansion of NAIA happened 10 years ago when its Terminal 3 was operationalized in 2014, leading to its current capacity of 35 million passengers per year. This capacity, the Department of Finance pointed out, was breached as early as 2015 when NAIA served 36.7 million passengers and 47.9 million during peak.

The NAIA rehabilitation project is expected to increase airport capacity from 35 million passengers annually to 62 million, expand air traffic movements per hour from 40 to 48, improve service by applying internationally benchmarked minimum performance standards and specifications, and utilize private sector expertise for modernization and expansion.

The contract was awarded to the SMC-SAC consortium which submitted the highest bid amount and is sharing 82.16 percent of future gross revenues with the government, excluding passenger service charges. The consortium includes San Miguel Holdings Corp., RMM Asian Logistics Inc., RIW Aviation Development Inc., and Incheon International Airport Corp.

The group is required to rehabilitate, operate, optimize and maintain the NAIA airport, which includes improvements to its runways, four terminals, and other facilities. According to the Department of Transportation, the concessionaire will begin operating the airport in three to six months and that the public can expect service improvements as early as the first year of operations.

This PPP deal, the DOF emphasized, is aggressively forecasted to generate around P900 billion in revenues for the national government in the course of its entire concession period, which is 15 years with a provision for extension of another 10 years, as opposed to the total dividends remitted by the Manila International Airport Authority (MIAA) to the government from 2010 to 2023 of only P22.05 billion.

According to the finance department, the total capital outlay for NAIA from the MIAA corporate operating budget was P13.56 billion from 2012 to 2022 but only P8.26 billion was disbursed during the said period.

The P900 billion forecasted national government revenues from the deal include payments from the winning bidder of P30 billion upfront, a fixed P2 billion annual payment, and 82.16 percent national government revenue share excluding passenger service charges.

In a statement, the SMC SAP and Co. Consortium said that its proposal for the rehabilitation of NAIA is designed not only to elevate it to world-class standards but also to ensure that the government benefits from the most advantageous revenue-sharing agreement. This, it stressed, aims to secure a favorable outcome for their shareholders while prioritizing fairness and long-term sustainability over immediate profits.

It added that recognizing the weight of the responsibility entrusted to it, the consortium is committed to collaborating closely with the government and its various stakeholders, harnessing every resource available to transform NAIA into a modern international gateway that Filipinos will be proud of.

Just how the consortium is going to make NAIA worldclass remains to be seen and we will probably know the details after the signing of the concession agreement on March 15.

One of the major problems of NAIA is of course runway congestion, a problem that is pinned on the MIAA.

In a column for Businessworld, economist Andrew Masigan explained that in the first place, runway management and aerospace traffic are handled by the Civil Aviation Authority of the Philippines (CAAP), and not by MIAA, whose jurisdiction is confined to land-side management which includes all operating systems within the airport terminal. This is what the SMC-SAP consortium will be taking over.

Masigan noted that runway traffic management at NAIA is governed by a system designed by private firm Airport Coordination of Australia which was engaged by CAAP to optimize the operating capacities of both runways. ACA’s system calls for 40 movements (take-offs and landings) per hour for both runway 06/24, which services larger aircraft and the perpendicular runway 13/31, which is for lighter aircraft. The ACA plan specifies the time spaces between aircraft movements, which runway and exit ways to use and which taxiways to traverse.

The same article noted that it is a well-crafted plan that serves as CAAP’s basis for its daily aircraft movement schedule and everything should work without a hitch if conditions were perfect. However, Masigan pointed out that the reality is that one untoward event can cause an escalating domino effect of delays.

And although there is never one reason for delay, some of the most common include delays in the arrival of turnaround aircraft, operational problems of airlines, lightning alerts and gusty winds.

The problem of course is that NAIA only has two runways to accommodate the entire load of aircraft movements while other airports have a third and fourth runway to serve as back up, Masigan stressed.

NAIA has two intersecting runways and it is said that it is the only international airport in Asia with no parallel runway. The CAAP has disclosed previously that airlines are losing at least P7 billion a year in fuel and in engine maintenance costs because of the air traffic congestion in NAIA.

Then there is the issue of MIAA management characterized by unprofessionalism and patronage where those who cover-up the failures and omissions of the higher ups are insulated from sanctions while those who don’t are made to bear consequences, he added.

In another article also for Businessworld, writer Marvin Tort revealed that NAIA’s problems are not surprising considering that runway 06/24 and taxiways are 69 years old, Terminal 1 is 42 years old, the control tower 60 years old, Terminal 3 which is the newest terminal already 15 years old, and Runway 13/31 even older than 06/24 having been part of Nichols Airfield since World War II. He said that the rehabilitation would do little to improve capacity unless new runways were added.

The National Competitiveness Council hit the nail on the head when it said that a country’s international airport is not only the gateway to a country, it is also the first and last impression a visitor, whether foreign or Filipino, gets of the country.

If we want a good first and last impression, the NCC emphasized that it is imperative to get the country’s airport strategy right. It would take more than giving passengers a better experience inside the terminals – shorter queues, better food outlets and restaurants, world-class shops, improved parking and waiting areas. We need a third runway and that is outside the scope of SMCSAC’s concession agreement with the government. Our airlines need to improve efficiency. CAAP and the airline companies will have to work together to address the runway congestion problem.

So many things need to be done if we want NAIA to be a better airport.