SMC-led group wins bid for NAIA privatization

MANILA, Philippines — A consortium led by San Miguel Corp. (SMC) together with the operator of South Korea’s Incheon airport has bagged a 15-year concession to rehabilitate and run the Ninoy Aquino International Airport (NAIA), in a privatization tack that promises P900 billion in revenue for the government.

SMC SAP & Co. Consortium yesterday received the notice of award to upgrade NAIA, marking one of the quickest privatization processes for any government asset in history, with the bidding lasting less than six months.

With the award, the group will manage the airport until 2039 in line with the 15-year concession granted by the Department of Transportation (DOTr).

This can be extended by up to 10 years depending on the performance of the consortium, which would be tasked to invest at least P122.3 billion – or P4.89 billion per year – during a 25-year period.

For the first six years of the concession, the consortium would be required to spend a minimum of P88 billion for upgrading the services of the airport.

The consortium won the contract for offering the government the highest revenue share of 82.16 percent, beating rivals that tendered way below its offer.

GMR Airports Consortium was planning a 33.3 percent revenue share for the government, while the Manila International Airport Consortium pitched the lowest at 25.91 percent.

In total, the government expects to raise more than P900 billion in revenue from turning over the operations and maintenance of the country’s premier gateway.

Broken down, the government will get over 82 percent share in earnings from NAIA operations, an upfront payment of P30 billion and annuity cost of P2 billion.

Transportation Secretary Jaime Bautista said it is urgent that NAIA is improved to accommodate the resurgent demand for air travel, as the New Manila International Airport (NMIA) – which is also being built by SMC in Bulacan – will become operational only by 2028.

As mandated, SMC SAP & Co. has to elevate the passenger capacity of NAIA to at least 62 million per annum. Bautista said the Philippines would require an airport that can facilitate as many as 100 million per annum by 2050.

“It (NAIA) is a very congested airport with the capacity of 35 million passengers per annum but is handling almost 50 million now. We really need to modernize this airport so we can provide a better service for our passengers,” Bautista said.

He added the government plans to sign the concession agreement with SMC SAP & Co. Consortium by March, and give the group a maximum of six months to arrange financing.

As part of the turnover process, the DOTr will redistribute employees of the Manila International Airport Authority, retaining some in the agency and transferring others to the concessionaire.

MIAA general manager Eric Ines also said at a press briefing that airport employees would not lose their jobs.

SMC SAP & Co. Consortium vowed to strictly comply with the demands of the concession, particularly elevating the service quality in NAIA and remitting fresh revenues to the government.

“Our proposal is designed not only to elevate NAIA to world-class standards but also to ensure that the government benefits from the most advantageous revenue-sharing agreement,” the consortium said in a statement.

“This aims to secure a favorable outcome for our shareholders, while also prioritizing fairness and long-term sustainability over immediate profits,” it added.

Finance Secretary Ralph Recto believes the privatization of NAIA will resolve the longstanding problems of congestion and under-investment in the airport.

He noted that the airport has operated beyond capacity for almost a decade, to the detriment of passengers.

Private sector leaders also welcomed the DOTr’s decision to issue the NAIA concession to SMC SAP & Co. Consortium, with Go Negosyo founder Jose Concepcion III underscoring the importance of enhancing connectivity facilities to lift the economy.

In its rehabilitation of the country’s biggest airport, SMC will get help from foreign partner Incheon International Airport Corp., the company handling one of the best gateways in the world, according to Skytrax.

Reacting to the development, Sen. Grace Poe said a rehabilitated NAIA will not only give Filipinos and foreign visitors safety and convenience, but will instill pride in them as well in welcoming the world through a world-class gateway.

“We trust that the DOTr will continue to ensure efficiency and transparency every step of the way in this monumental development project,” Poe, chair of the Senate committee on public services, said.

The senator said the winning bidder faces a herculean task of removing NAIA from the list of the world’s worst airports. — Rudy Santos, Cecille Suerte Felipe