Today we will know if San Miguel Corp.’s pitch to build an airport in Bulacan will get the government’s blessing. If things go as scheduled, the National Economic and Development Authority’s Investment Coordination Committee (Neda-ICC) will resolve with finality whether SMC will be given the right to construct the airport under the build-operate-transfer (BOT) scheme.
Under SMC’s proposal, it plans to run the airport for 50 years before it turns over its operations to the government. The conglomerate is sweetening the pot by building an expressway linking the airport to the North Luzon Expressway via Marilao, Bulacan.
But, as in any BOT undertaking, SMC’s proposal will go through the so-called Swiss challenge in which the government will entertain other bidders. But SMC, as the original proponent, has the right to match an offered bid higher than its proposed project cost.
The ICC has been assessing the planned project: a P700-billion “aerotropolis” spanning 1,168 hectares; exclusive of a city complex to be built at a 2,500-hectare site along Manila Bay in Bulacan town. It will have six parallel runways with an estimated primary yearly volume of 100 million passengers, or more than three times that of the Ninoy Aquino International Airport (Naia).
“We have an ICC technical board meeting on January 11 [today]. Before that, we will be able to ascertain if it is ready. In other words, is there new information that would lead us to sharpen our analysis? [Today] is a critical day,” according to Neda Undersecretary Rolando G. Tungpalan.
The government, however, is still open to accepting the tender of seven of the country’s largest corporations to rehabilitate the Naia.
A “super consortium” of Aboitiz Equity Ventures Inc., Andrew Tan’s Alliance Globe Group Inc., Ayala Corp., Gotianun-led Filinvest Development Corp., Gokongwei-led JG Summit Holdings Inc., Lucio Tan’s LT Group and Manuel V. Pangilinan-led Metro Pacific Investments Corp. would join forces to rehabilitate the country’s main gateway.
Serving 42 million passengers a year, the Naia reels from deterioration. Its four passenger terminals simply could not cope, dismally serving just over 40 percent of its designed passenger traffic capacity.
Even if SMC gets the nod, the government still considers the improvement of the Naia as a priority, in conjunction with the expansion of the Clark International Airport as the country’s second major airport by 2020.
Through the years, only one domestic and three international terminals have been built at the Naia, with the frequency of plane arrivals and departures at only 40 an hour. It has only one long runway, crossed by a shorter one. Building another runway is now a daunting task because the airport’s peripheral areas have been converted to residential areas. There is simply no more space for growth on its 6.7 hectares of land.
The best time for every single major new airport construction, from conceptualization to first flight, is seven years. Conceding that an airport’s location could be anywhere anyone wants to build it, it will never see the first landing for a minimum of another seven, or more likely, 10 years. So, what is to be done over the next seven to 10 years?
The year-old Duterte administration, no matter how aggressively it pursues the construction of a new airport, will find it impossible to build one. The promotion and expanded use of Clark (and the ports of Subic and Batangas) to get the northbound traffic from the Naia, as well as the trucks bound for the port of Manila totally off Edsa, is really a no-brainer.
Our country needs more airports. Most of the world’s major cities today have two, even three or more, major airports actively servicing its people. Even with Clark and/or another new airport in the south, the Naia should continue to operate.
What we are saying here is that it doesn’t mean that the government should focus on the Clark Freeport alone. The country still needs the Naia and the airport SMC is set to build. In this respect, I believe that the proposal of SMC to construct another airport is very much welcome.
The move to privatize state-owned airports is gradually sweeping across the world. France, for example, first turned over management of their state-owned airports to local authorities, and now to private entities. In Japan 30- to 40-year concessions to run some of its airports are being sold by the government.
Compared to other major infrastructure investments, airports present a good risk profile to the private sector because they offer a wide range of income sources, including landing fees, airline contracts and other aviation-specific sales, as well as retail, shopping and hotels.
It is not surprising that, with the continually growing demand for aviation, local conglomerates see airport operations as a good business investment, as shown by the level of interest for the rehabilitation bid of the Naia. Its upgrade would entail a huge initial investment, but profitability prospects in the long term are promising.
Not only is the private sector more equipped for long-term planning for more efficient operations and maintenance of Naia’s four terminals, company owners and executives look at a 20- to even a 50-year horizon, while government appointees have only short terms.
What dampens the willingness of the private sector to make such investments, however, is the lack of a stable environment. The current month-to-month contract renewal of all service or concessionaire contracts at the Naia is sending the wrong signals to would-be investors. These suppliers are less able to invest and build value for the long term since there is no assurance that their contracts will be renewed. Moreover, the employees of a Naia service provider or concessionaire without a long-term engagement contract become disengaged themselves. Engaged workers are the key to a more profitable and more productive business because of the reduced employee turnover.
It’ll be a win-win situation, not only for local and international air travelers, but also for the Naia to secure private investment. The time to ensure a stable regulatory environment for our premier gateway is now.
For comments and suggestions, e-mail me at mvala.v@gmail.com.