NAIA rehabilitation needed even with new airport projects in development

Unsolicited proposal of PH’s biggest conglomerates - fair, transparent and fastest route to a new NAIA

NAIA’s importance as the primary airport of the Philippines is undeniable: approximately 80% of all scheduled international and domestic flights find their way through its halls. Its contributions as a preeminent enabler of inbound tourism, which represents 12.9% of local gross domestic product (GDP) and 13.6% of total local employment, make it a critical driver of the growth of Philippine tourism and the economy.

The need for NAIA to accommodate more travelers is increasingly paramount. Since 2003, NAIA has seen a consistent increase in passenger volume, reaching a pre-pandemic peak of 47.9 million passengers in 2019. This already exceeds its declared capacity of 31.0 million passengers per annum (MPPA).

Further compounded by the fact that travel demand is closely breaching pre-pandemic levels, strains and challenges to NAIA have gained the attention of the public, with difficulties inevitably impacting passenger experience and airline service quality.

In light of Manila’s growing aviation needs, plans have been made to develop, build and operate multiple airports in nearby provinces, including greenfield projects. However, while these airport projects will help address congestion and load issues over time, these have to be done in parallel with the immediate rehabilitation of NAIA.

Any major metropolitan city over 20 million people requires more than two airports to ensure it can meet air traffic demand and withstand shocks and one-off interruptions. In particular, Metro Manila air traffic demand is expected to exceed over 100 million passengers per year, within approximately ten years.

“NAIA is currently the only large-scale operating airport currently serving Metro Manila,  and it has an ecosystem of supporting infrastructure that would take decades to replicate,” shares Kevin Tan, CEO of Alliance Global Group and a member of the Manila International Airport Consortium (MIAC), a partnership among six leading Filipino conglomerates and US-based Global Infrastructure Partners (GIP), which submitted an unsolicited proposal to the Philippine Government in April of this year, for the upgrading of the NAIA.

“Therefore, it is imperative to rehabilitate and expand NAIA, which we believe will still play a central and critical role even as Metro Manila expands its airport network,” Tan added.

Moreover, NAIA’s cross runway feature is not the capacity constraint some paint it to be, if developed to world-class standards by an experienced operator. Philip Iley, GIP Partner and Head of Transport who sits on the Board of Gatwick cites London’s Gatwick Airport as a prime example. Global Infrastructure Partners, its main operator and owner for more than a decade now and one of the partners in the MIAC consortium, has been able to optimize Gatwick’s sole runway to increase peak air traffic movements (ATMs) to 55 per hour, with a plan to increase to 60. NAIA’s runway capacity is currently declared at 41 ATMs per hour.

Super consortium seeking a 'win-win' for all stakeholders

Acknowledging the critical part that NAIA plays in the country’s tourism and economy, the members of the MIAC have joined together with one singular vision and that is to upgrade, rehabilitate and transform NAIA into a world-class airport.

Aside from GIP, others partners in the consortium include six of the largest Filipino conglomerates: Aboitiz InfraCapital, Inc., AC Infrastructure Holdings Corporation, Asia’s Emerging Dragon Corporation, Alliance Global - Infracorp Development Inc., Filinvest Development Corporation, and JG Summit Infrastructure Holdings Corporation.

The MIAC, backed by the strength of its individual members possesses unmatched scale, track record, resources, and expertise to deliver best-in-class solutions for the transformation of NAIA and aim to set the country’s airport infrastructure up for success in line with the government’s “Build, Better, More” program. 

Among the airports currently and previously owned or operated by members of the Consortium are Mactan-Cebu, Clark, London Gatwick, Edinburgh, London City and Sydney airports.

The MIAC Proposal projects a total investment cost of P210 billion. This covers approximately $1 billion of capital investments over the first five years, and an investment of another projected $2.8 billion over the remainder of its proposed 25-year concession period.

This investment will be geared toward undertaking facility upgrades, maintenance work, implementing new operating processes, and introducing new technologies which will increase passenger capacity, shorten waiting and processing times, introduce more comfortable and modern facilities, and provide better connectivity between terminals, among others.

The Consortium’s offer also includes an unprecedented $1 billion concession payment to the government—the largest ever concession payment offered for a transportation PPP project in the country, whether solicited or unsolicited.

“We believe that an upfront payment now to the government can potentially contribute to the country’s response to fiscal challenges due to the economic impact of the COVID-19 pandemic and current tightening global financial conditions. It would also allow the government to redeploy some of the funds into provincial projects that are in urgent need of funding,” says Cosette Canilao, President and CEO of Aboitiz InfraCapital, Inc. and a Director of the Consortium. “It provides immediate value and impact that is worth more than any mulled or pending plans to redevelop NAIA land.”

The government is also set to derive additional income from the revenue sharing arrangements as well as through business and other taxes.

In total, the MIAC proposal is projected to create $ 14.6 billion worth of direct and indirect economic value throughout its proposed concession period while boosting regional trade, foreign investment, local commerce, and inbound tourism.

The financial and monetary gains that will result from the acceptance of the MIAC Proposal make it a strong and formidable offer worth considering. It also presents a fair, transparent, and fast route to deliver the much-needed improvements to NAIA under a public-private partnership (PPP) framework. Through this partnership, numerous benefits will be delivered to all stakeholders involved—including passengers, the government, and the greater public.

Sabin Aboitiz, CEO of the Aboitiz Group of Companies adds, “It is our hope to partner with the government and deliver to Filipinos the NAIA they deserve, now. We are confident to deliver a significantly improved passenger experience in the very near term.”