PH's biggest conglomerate’s move to rehab NAIA to benefit gov't

At a glance

  • NAIA upgrade to support tourism and economic growth

The Ninoy Aquino International Airport (NAIA) is central to the vast and complex interconnectivity of the country. And as such, its role in driving the growth of Philippine tourism, and consequently the economy, is paramount.

IMG_2587.jpeg **London Gatwick Airport North Terminal Airfield**

Approximately 80 percent of all scheduled international and domestic air passengers pass through its halls. This makes it a major enabler of inbound tourism, which represents 12.9 percent of local GDP and 13.6 percent of total local employment.

And the demand for the airport to accommodate heavier air traffic can only increase. 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).

As part of the solution to address Metro Manila’s growing aviation needs, plans have been drafted to develop multiple airports in nearby provinces, including greenfield projects.

While these will help address congestion and load issues over the long term, these should be done in parallel with the immediate rehabilitation of NAIA. Any major metropolitan city over 20 million people always has more than 2 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 a little more than ten years from now.

“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, Chairman and President of Alliance Global-Infracorp Development, Inc and a Director 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 this year for the upgrading of 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,” Mr. Kevin Tan added.

The Consortium notes that the rehabilitation of NAIA will not invalidate, but instead will support the rationale for expanding and strengthening the airport ecosystem serving Metro Manila. Given the region's size and disaster-prone nature, it will greatly benefit from redundancies, much like similar cities such as London, Seoul, and Tokyo, and several other capital cities in the world.

Further, NAIA’s cross runway feature is not the capacity constraint some paint it out to be if developed to world class standards by an experienced operator. Philip Iley, GIP Partners 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 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 team committed to gains for all stakeholders, especially the Filipino traveler

Preserving NAIA and developing it into a facility that can match its potential, as well as that of the country’s tourism and economy, is an endeavor worthy of any collaboration. And it is precisely that which resulted in the members of the MIAC coming together with the shared vision of upgrading and transforming NAIA into a world-class airport.

The MIAC is composed of GIP and the 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

Together, the consortium has unparalleled scale, track record, resources, and expertise to deliver best-in-class solutions for the transformation of NAIA, and aims to set the country’s airport infrastructure up for success in line with the government’s “Build, Better, More” program. Airports currently and previously owned or operated by members of the Consortium include Mactan-Cebu, Clark, London Gatwick, Edinburgh, London City and Sydney airports.

To illustrate its faith in NAIA and its commitment to the Project, the MIAC proposal projects a total investment cost of PHP 210 billion. This covers approximately US$ 1 billion of capital investments over the first five years, and another projected US$ 2.8 billion over the remainder of its proposed 25-year concession period. This investment will enable the airport to undertake facility updates and maintenance work, implement new operating processes, and introduce new technologies which are designed to expand passenger capacity, shorten waiting and processing times, introduce more comfortable and modern facilities, and provide better connectivity between terminals, among others.

Aside from this significant investment, the consortium’s proposal also includes an unprecedented US$ 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 US$ 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.

NAIA: the Heart of Philippine Air Transport and Key to Philippine Tourism and Economy

All of this cannot come at a better time. The travel and tourism sectors, which already contribute approximately 22.5% of local gross domestic product (GDP) in 2019, are set to become even bigger growth drivers in line with the Philippines’ bid to become a powerhouse in the ASEAN region. Specifically, they are expected to increase their contribution to GDP in line with the recently approved National Tourism Development Plan (NTDP) 2023-2028, where targets include 51.9 million international arrivals by 2028.

Furthermore, the projected implementation of the Regional Comprehensive Economic Partnership (RCEP), a 15-member trading bloc representing 30% of world GDP and the largest trade agreement in history, is expected to increase local tourism. This presents the country with the opportunity to serve as a regional hub for the movement of people, services and goods, within ASEAN and the greater RCEP region.

“Leveraging on these opportunities hinges on the improvement and expansion of critical airport infrastructure—particularly the Ninoy Aquino International Airport (NAIA) as the only operational capital city gateway airport in the short to medium term. We are here and ready to make NAIA the engine of growth for the country’s tourism industry and economy,” says The Consortium.