No hope for dying NAIA

Just last month, six local companies and a US-based infrastructure investment firm announced that their consortium has submitted an unsolicited proposal to rehabilitate the Ninoy Aquino International Airport (NAIA).

The proposal came from the Manila International Airport Consortium (MIAC) composed of Alliance Global Group, Aboitiz InfraCapital, AC Infrastructure Holdings Corp., Infracorp Development Inc., Filinvest Development Corp., JG Summit Infrastructure Holdings Corp. and US-based Global Infrastructure Partners.

Their P100-billion proposal included an upfront payment to the national government, including investments in new facilities and technology.

MIAC projects that through this investment, NAIA will be able to serve up to 62.5 million passengers per annum by 2028, or double its current operating capacity.

According to the Department of Transportation (DOTr) and the Manila International Airport Authority (MIAA), they will review the proposal while continuing the ongoing development of a solicited procurement option as supported by the Asian Development Bank, which serves as DOTr’s transaction advisor. MIAA currently operates NAIA.

Five of the six companies in the consortium were actually members of an old group that submitted an unsolicited proposal to also rehabilitate NAIA. But in 2020, the Duterte government terminated talks with the previous consortium after its proposed revision to its P102-billion plan meant to ensure the project’s viability despite the lasting impact of the pandemic was rejected by authorities.

Megawide Construction Corp. and its Indian partner GMR later took over the project but they eventually lost their original proponent status since their P109-billion proposal was deemed too huge for Megawide to absorb at that time.

But even Megawide and GMR have expressed interest in getting another chance to submit an unsolicited proposal to upgrade the country’s main international gateway.

There are no details available yet as to what MIAC is specifically proposing. But observers are keenly awaiting the details, given how the old group’s proposal was seen by government back then as grossly disadvantageous to the country.

According to reports, the National Economic and Development Authority (NEDA) and the Department of Finance (DOF) at that time questioned the terms of the proposal, citing among others that government actually stood to lose revenues amounting to a staggering P137.7 billion at 10 percent net present value, or P275 billion at nominal value.

The old proposal, which pegged the consortium’s investment to improve NAIA at P102.1 billion, would have granted the proponents the right to immediately take over the airport and its operations and maintenance on day one of the proposed concession agreement, or even before doing or putting in anything.

With this, the consortium would immediately be able to collect all NAIA revenues from passenger service charges, aircraft charges, commercial spaces, porterage fees, among others.

On its own, MIAA earns about P6.5 billion a year from NAIA operations.

Also, according to the DOF then, apart from the billions in foregone revenues, awarding the NAIA rehabilitation project to the consortium would have also negatively impacted the overall financial position of the country, translating into losses of P81.7 billion at 10 percent net present value, or P146 billion at nominal value.

Meanwhile, the guaranteed payments offered by the consortium, according to government’s reckoning, would not even be enough to cover its expenses.

The government back then could also not agree to the consortium’s proposal that government should guarantee a minimum level of air traffic movements per hour (ATMPH) and passenger throughput of 52 ATMPH, or 52 commercial takeoffs and landings every hour, or one aircraft takeoff or landing every 1.15 minutes compared to the usual 31 ATMPH that NAIA logs.

Experts say that the 52 ATMPH is physically impossible with NAIA’s single runway system. While NAIA technically has two runways, they intersect and thus, cannot be used simultaneously.  At any given time, only one runway and one taxiway can be used.

The guarantee being asked of government is also said to be in violation of the BOT Law.

Having said that the 52 ATMPH is unattainable, under the old consortium’s proposed concession agreement, if this requirement is not met, it could then be excused from performing its obligations under the agreement, and even collect from government any of its lost revenues.

It could either extend the concession, reduce the government’s share, or raise passenger fees and other forms of payment collection.

Moreover, failure by government to meet its requirements, including adjusting passenger service charges no later than 60 days after the issuance of a Readiness for Operation Certificate or Acceptance Certificate for Phase 1 of the project, would mean the consortium doesn’t have to complete the rehabilitation.

In their proposed agreement, Phase 1 only covered immediate improvements, no major construction yet. But if government failed to adjust rates for this, the consortium would be excused from undertaking Phase 2 and Phase 3 of the rehabilitation. Meaning, the upgrade could turn out to be no upgrade at all, and government along with the traveling public would still be paying the consortium.

Unfortunately, no well-meaning proposal, no matter how moneyed the proponents are, could solve NAIA’s problems. This is because the reason for the air traffic congestion and flight delays NAIA and the travelers are experiencing is there is just no space to build a second parallel runway.

This is also the main reason why the government has entertained alternatives to NAIA, such as the massive, four-runway New Manila International Airport (NMIA) project of San Miguel Corp. in Bulacan, the upgrade of Clark International Airport, and the proposed Sangley Airport project.

San Miguel’s New Manila International Airport project, with a project cost of P735 billion or roughly seven times what is being proposed for NAIA, is going to be the single-largest investment in the Philippines ever. SMC is undertaking it on its own, with the help of foreign creditors and with no guarantees and no subsidies from government.

Now which makes more sense?

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