NAIA is a basket case

With its reputation as one of the worst airports in the world, NAIA is ripe for turnover to a competent private sector manager, but that may never happen.

It is great that Transportation Secretary Jimmy Bautista is eager to privatize NAIA management and he has set a Dec. 27 deadline for submission of bids. But there is a coalition of syndicates with strong interest in keeping the NAIA as is. They even managed to quickly get a competent general manager out.

In an interview with ANC, Roberto Lim, DOTr undersecretary for aviation, said that “maybe we can say that the first quarter of next year [2024], it is doable, that there will be a conclusion, meaning to say, an award that could possibly be proclaimed by the government.” But he also admitted that it is “a very tough and tight schedule.”

The P170.6-billion NAIA rehabilitation, operations and maintenance program is the administration’s first major privatization project. A pre-bid conference has been set for Sept. 22.

Sec. Jimmy expects the privatization of NAIA to improve overall passenger experience and increase the current annual passenger capacity of Naia to at least 62 million from the current 32 million. The concession period will run for 15 years and can be extended by another 10 years.  On top of the bid amount, an upfront payment of P30 billion to MIAA and an annual fixed payment of P2 billion is expected from the successful bidder.

Bidders, whether individually or as a consortium, must have a net worth of at least P25 billion, must have experience in operating an international airport with at least 25 million passengers a year and must have personnel with deep experience running airports.

What DOTr expects from the winning bidder seems ambitious. Pre-pandemic, NAIA only earned P15 billion, and this year they expect NAIA to earn P11.5 billion. Perhaps, DOTr is conceding NAIA should be earning a lot more if properly managed by a competent private sector entity.

Indeed, from the revenue numbers in a press statement from MIAA, which manages NAIA, revenue expectation this year seems anemic even with revenge travel in full bloom.

Revenue from passenger service charges, both domestic and international, is expected to rise to P4.17 billion this year, while revenue from aeronautical fees is expected to grow to P3.55 billion. Revenue from rentals is expected to rise to P2.59 billion. Concession fees, including terminal and other areas, are expected to increase to P532.63 million. Revenue from parking is expected to rise to P366.73 million.

The winning bidder is committed to rehabilitate passenger terminals and airside facilities, such as runway, aircraft parking area, and airfield lighting; provision of facilities enabling intermodal transfer at the airport; and construction of connection from Naia Terminal 3 to Metro Manila Subway which is under development.

In exchange, the private airport manager will earn revenues from passenger service charges, landing and takeoff fees, aircraft parking, etc. The winning private operator will also be allowed to conduct airport-related commercial activities within the land owned by the airport. NAIA has a total land area of 440 hectares compared to BGC’s 240 hectares.

Past efforts to privatize NAIA operations have failed. The most recent attempt was a P267-billion unsolicited proposal from the Manila International Airport Consortium, led by the country’s top tycoons.

What to do with NAIA had been discussed in policy meetings for some time now. With a land area larger than BGC, property developers had been salivating at the possibility that NAIA will get a second life along the lines of BGC. It will be Metro Manila’s last opportunity to have a properly master planned development after BGC turned out to be more of the same haphazard development meant to generate the most profits.

But for the next 15 years, NAIA will continue to be our principal airport until such time as the Bulacan airport of San Miguel becomes operational. Ramon Ang has talked about delivering the terminal and the first two of the four runways in the next three years and the rest by 2027. So, if RSA delivers on the Bulacan Airport before the 15-year concession period of NAIA expires, it could make NAIA redundant as an airport.

It is said that the President wants the privatization of NAIA operations to happen as soon as possible. It will take strong political will from the President to make this happen by next year.

I am told that there are many vested interests in keeping NAIA as it is today because they profit from it. The parking concession was described to me as tubong lugaw. There are various maintenance contracts, including the nightly repaving of the main runway, the maintenance contract for the air conditioning and electrical systems, private security services, and the various service concessionaires. All these will be revenue sources for the winning private bidder. But some current insiders or friends of insiders will lose big.

It will be recalled that when it seemed almost certain that the Megawide GMR consortium that used to manage the Mactan Cebu airport had a good chance to be given management of NAIA via an unsolicited bid, the consortium executives were sued for violation of the anti-dummy law. The case was dismissed by a local court, but had so demoralized the consortium that they agreed to sell their contract at Mactan Cebu to Aboitiz Infrastructure.

With the new Public Service Act that allows foreigners to manage airports, I understand Sec. Jimmy is inviting foreign bidders.

When the President was recently in London, he also visited and was briefed on the operations of Gatwick Airport, an airport with runway configuration like NAIA’s. Gatwick Airport, one of several airports servicing London, operates 57 movements per hour with a single runway. NAIA, on the other hand, with two cross sectional runways, struggles to operate about 40.

The Megawide GMR proposal made in 2018 was focused on fixing the deficiencies in NAIA operations to produce dramatic improvements without a new runway.

Going back to the headline, here is one definition of basket case by Merriam-Webster: something (such as a business or government) that is dysfunctional, run-down or close to failure. That describes NAIA today.

Boo Chanco’s email address is [email protected]. Follow him on X (twitter) @boochanco