The first of its kind?

An international airport built and owned by an international airline in the Philippines. Why not!

Ever since Ramon S. Ang, president and chief operating officer of Philippine Airlines shared his vision of building PAL’s own international airport, a number of people have had creative indigestion trying to figure out the validity of such an idea. The usual naysayers have dismissed the idea as preposterous, while others have simply been overwhelmed just thinking of all the negative possibilities.

From what I know of Ramon Ang in his past pronouncements, if he shares an idea with friends he is actually using his friends and acquaintances as a sounding board for the idea. If he repeats the same thing in several occasions, chances are he is already studying and researching the idea. When Ramon Ang talks to the media about the “plan” he has actually done due diligence and probably has several business models on his proverbial conference table. When he starts talking details, layout, structure, financing, etc. it is no longer a matter of if, but when.

So when Ramon Ang shared his plans about building a totally new international airline, I did not concern myself with the usual myriad of imagined obstacles. What I spent my time on was researching the existing business models that convinced Ramon Ang to consider the project. That took half a day’s work on the Internet researching on privately owned, privately built and privatized airports. I also spent all of five minutes remembering the arguments on why government should get out of constructing and operating airports.

I learned that there are several international airports that are either wholly built, owned, or operated by private sector. In other cases, the airports are managed and operated by private sector while governments hold a minority share. Many of these evolved from being government built and operated but eventually being privatized through stock sales, PPP, or long term lease contracts.

Heathrow airport in London, which is the world’s busiest airport, is owned by the British Aviation Authority (BAA), which is a private sector consortium of international investors. The Indira Gandhi International Airport is also under a consortium that includes the GMR group that has 54% shares. By coincidence the GMR group is engaged in infrastructure development of highways as well as energy just like the SMC group of Ramon Ang. Other partners in the Indira Gandhi International Airport are the Malaysian group Berhad with 10%, the Fraport group with 10%, while the Airports Authority of India has 26% shares as the bucking minority.

Charles de Gaulle Airport in Paris is 50% owned by private sector investors and managers while the French government retains 50% of the “company”. The global trend is for governments to get out of the “airport business” because it requires so much capital; it is a politically sensitive business where political interests and voter pressures often undermine policy and business decisions.

In the Philippines, the very nature of government bureaucracy, the limiting power of legislation, and the pervasive corruption in government contracts, purchases and competing political interests have all worked against building a world class aviation infrastructure and professional body of regulators, managers and working professionals. There is often no money and no will to do things right.

Despite the submission of long-term development plans as well as short term, emergency needs, airport development almost always gets dropped in exchange for the short-term pork barrel priorities of politicians. Positions requiring “certified professionals” are filled with political appointees. Systems and equipment upgrades are lost to purchases of overpriced equipment peddled by politician-merchants. The latest experiment on privatization via the NAIA terminal III turned into an international case study of how politics and government can turn simple partnerships into global investment nightmares.

Quite frankly, I can find more reasons why government should get out of the business and let people like Ramon Ang and companies like PAL do what they do best and what is best for their business as well as the industry. When PAL was allowed to have sole use of NAIA terminal 2, critics called it favoritism and government relinquishing authority. But in the many years that have gone by, PAL’s use and management of the facility has proven that private sector can do a better job because it has to, knows how to and wants to. No politics, just profit.

Why is it so difficult to imagine private sector building an international airport considering how Henry Sy and family can build the Mall Of Asia and the Arena? We already have a row of hotels in the Resorts World area, so why not the next new airport? The land and all inputs will be privately funded through sovereign funds and corporations who already know of the track record of the project proponent. No government money will be used or borrowed. Ang has also stated that the international airport will be open to all existing carriers since PAL’s long term plans are for global expansion and not local domination. That makes the project an industry initiated and dedicated project.

Once the airport is built up, the developers have the elbowroom and the globally competitive compensation schemes to hire, train and develop much needed professional managers, supervisors and operators for the airport. With an open mind, the government can actually “piggy back” or ride on the developmental and operational concerns of private sector aviation and formulate a win-win situation, where government can be like “referees” or “judges” watching over trained professionals running the future airport. Government can also enter into a developmental MOA or agreement where government regulators can be “scholars” or “grantees” for qualifying trainings. At the end of the day, with less legislation and more collaboration, even the government can have their cake and eat it too, while the Philippines can have what they said we couldn’t: a world-class international airport.