Lufthansa Technik likely landing fresh NAIA lease

MANILA, Philippines — A prized investor at the Ninoy Aquino International Airport (NAIA) is likely securing a new deal to renew lease in the gateway, keeping over 3,200 jobs safe and supporting the expansion of local aviation.

The 25-year lease of Lufthansa Technik Philippines (LTP) is scheduled to expire this month, but the provider of aircraft maintenance, repair and overhaul (MRO) is poised to sign a renewal.

Transportation Secretary Vince Dizon told The STAR that LTP still has issues on the higher lease charged by the San Miguel-led New NAIA Infrastructure Corp.

NNIC is charging a monthly lease of P710 per square meter in NAIA. The concessionaire is authorized by an administrative order to collect higher fees from airlines, locators and travelers to fund the P170.6-billion rehabilitation of the airport.

If the rate is applied to LTP, it would have to pay P160 million monthly to keep its 226,000-sqm base in NAIA. This will be 11 times higher than the P14 million a month in LTP’s expiring lease.

This is why Dizon, as soon as he came in as transport chief in February, focused on brokering a new deal for LTP, convinced it would be a loss for NAIA if the locator walks away.

For one, LTP employs more than 3,200 Filipinos in its base, and they can deliver MRO services on Airbus A320s, A330s, A340s and A380s, as well as Boeing 777s.

With LTP operating in NAIA, it is able to attract some of the world’s best carriers to source their MRO requirements in Manila, boosting the city’s profile as an aviation hub.

Given this, Dizon made it clear to NNIC that it must find a way to keep LTP operating in NAIA. Dizon said something would be firmed up soon between NNIC and LTP, although he declined to provide details.

“I think Lufthansa is too important a locator for us not to find a common solution to the situation. Between San Miguel and Lufthansa, something will be worked out,” Dizon said.

“We have made it clear to San Miguel that Lufthansa must stay. It is too important a locator with thousands of jobs dependent on it. A major component of the aviation industry [in the country] is dependent on it, so it is too important and we have to find a solution,” he added.

LTP extends MRO services to the country’s largest carriers Cebu Pacific and Philippine Airlines, both of which are receiving more Airbus aircraft for fleet expansion.

Financially, LTP has to secure favorable rates for its NAIA lease if its Filipino owner MacroAsia Corp. wants to sustain profitability in the pandemic aftermath.

Regina Capital Development Corp. head of sales Luis Limlingan said the best case scenario for LTP is to obtain either a fixed discounted rate or a gradual increase in rent.

“A preferential rate would be the optimal scenario for LTP if successfully negotiated. However, without such an arrangement, higher rental fees could significantly erode margins and weigh on profitability despite its strong performance in the first half,” Limlingan told The STAR.

“Given that profitability remains on an upward trajectory, securing either a fixed preferential rate or a gradual rental escalation will be critical in mitigating the impact. A sudden increase in rental costs could materially strain cash flows and limit future capacity to distribute dividends,” he said.

MacroAsia’s earnings from associates, including LTP, increased by 75 percent to P611 million in the first half.

LTP, which MacroAsia owns a 49-percent share in, has booked a profit of P1.1 billion as of June, and remitted P537.8 million to MacroAsia.

Still, LTP recognizes the risks coming its way, particularly on higher fees, and it is ready to pass on some of the costs to its clients if push comes to shove.