Philippine airport projects face lingering pandemic risks

MANILA, Philippines — Airport projects in the Philippines could face potential delays and even cancellations in the near-term as recovery of travel demand may take a while due to the lingering pandemic.

This could also be the case for other airport projects in Asia, which hosts over $220 billion worth of airport infrastructure projects based on data from Fitch Solutions released Tuesday. This is because many of these projects are still at pre-construction phase, Fitch Solutions explained, making them vulnerable to sudden changes that could be triggered by the pandemic.

Based on Fitch Solutions’ monitoring, the Philippines accounts for a large share of airport projects in Asia at $33.9 billion. Of those airports in the pipeline, projects valued at $18.2 billion are still at “planning stage”, representing 69% of the total line-up.

Such risks have already materialized for some projects. At the onset of the pandemic, the much-awaited rehabilitation of Ninoy Aquino International Airport (NAIA), the country’s premier gateway, was stalled after a group of tycoons that offered to take on the project backed out when the government rejected their proposed tweaks to the deal.

The so-called “NAIA Consortium”, which groups six conglomerates, said the proposed changes to their plan would make NAIA “bankable” and “viable” considering the pandemic’s impact on tourism. Listed builder Megawide and its Indian partner offered to take over the project from the NAIA consortium, but their proposal was also turned down by regulators who were unimpressed with the duo’s financial capability.

The Duterte administration had said it would no longer entertain proposals from the private sector and that the government would rehabilitate NAIA on its own.

“That said, we caution downside risks towards the potential for delays in project time frames, or even suspensions and cancellations over the near-term, due to the uncertainty amid the Covid-19 pandemic and the possibility of re-assessing business cases for some airport infrastructure developments,” Fitch Solutions said.

“Investment into airports may be shifted back or postponed as operators look to align investments with recovering passenger demand, which is likely only going to return to pre-pandemic levels post-2025,” it added.

‘Bearish’

The Fitch unit said it was particularly “more bearish” on small-sized airport projects located in provinces, which have niche demand that is usually dependent on tourism or limited domestic travel.

“As recovery of the aviation sector is expected to take a while, plans for these smaller projects, be it the construction of a new airport or the expansion of existing facilities, could be delayed in the short-term,” it said.

Elsewhere in Asia, Fitch Solutions said airport projects in markets such as Papua New Guinea and Myanmar are at risk due to their political environment, opaque business environment and a lack of strong legal and financial institutions.

In contrast, Hong Kong has the most favourable airport pipeline profile. The completion of the construction of a third runway at Hong Kong International Airport in September 2021 is “a positive milestone in the expansion of Hong Kong's transport infrastructure,” the Fitch unit said. — Ian Nicolas Cigaral