5 Things You Need to Know About the 'Superconsortium's' P267 Billion Bid to Rehabilitate NAIA

The unsolicited proposal to rehabilitate the Ninoy Aquino International Airport (NAIA) from some of the country’s biggest companies and conglomerates offers the quickest way to transform the country’s aging main aviation hub for the benefit of passengers and the country in general, officials from the so-called “superconsortium” said on Monday (June 19).  

Representatives from the Manila International Airport Consortium (MIAC) met with the media to lay out MIAC’s P267 billion plan to develop NAIA, which the group first submitted to the government via the Department of Transportation last April 27. The six representatives included Kevin Tan, chairman and president of Alliance Global Infracorp Development Inc.; Cosette Canilao, president and CEO of Aboitiz InfraCapital Inc.; Josephine Gotianun-Yap, president and CEO of Filinvest Development Corp.; Jose Gabriel Olives., chief financial officer of the LT Group; BJ Sebastian, senior adviser of JG Summit Holdings Inc., and Cezar Consing, president and CEO of Ayala Corporation.

They were joined by their international partner and the seventh member of the consortium, Global Infrastructure Partners (GIP), represented by its vice chair and partner Dr. Jim Yong Kim.

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This is not the first time that the “superconsortium” submitted an unsolicited proposal to rehabilitate NAIA. But according to Tan, the group was encouraged to try again with the entry of a new government led by President Ferdinand Marcos Jr. 

“We were responding to the call of the current administration,” Tan said. “There’s now a more outward and open approach to PPPs (public-private partnerships). And also, we’re responding to the dire needs now of NAIA, especially after COVID. We’re seen a number of concerns, and that’s really our biggest motivation as a group to help transform the airport.”

Here’s what you need to know about this new version of the proposal from the MIAC:

1| The entire proposal costs an aggregate amount of P267 billion over a concession period of 25 years

The amount includes P211 billion of capital investments, P57 billion of which is committed capital that will be rolled out within the first five years. According to Canilao, this upfront payment is one of the biggest changes between the new proposal and the old one that was rejected by the DOTr of the administration of former President Rodrigo Duterte. The remaining P154 billion will be invested throughout the concession period.

In addition to the P267 billion capital investment, the MIAC projects that the government will receive an additional P280 billion from revenue sharing and taxes.

Responding to criticisms that the consortium increased the total amount of the investment from the initial P100 billion, Canilao clarified that the amount had always been P267 billion and that other amounts mentioned in the media were erroneous.

2| Two other changes between the old and new proposals

One major change in this new unsolicited proposal involves the Material Adverse Government Action (MAGA) provision, which essentially involves regulatory risks tied to actions of future governments that may affect PPP projects. According to Canilao, this specific issue has been addressed through the government’s revised IRR (implementing rules and regulations) that clarifies that the private sector participation in the development is “more enabling.” 

The second major change is MIAC’s partnership with GIP, a globally recognized infrastructure investor and airport operator. GIP’s portfolio includes London Gatwick Airport, the second busiest airport in the United Kingdom; Sydney Airport in Australia; and Edinburgh Airport in Scotland. 

“GIP is very experienced in managing and operating a single runway airport that’s very similar to what we have in NAIA,” Canilao said. 

The Aboitiz official declined to reveal any further details about the new proposal, saying that it's currently being reviewed by the DOTr.

(From left to right) Cosette Canilao, president and CEO of Aboitiz InfraCapital Inc.; Kevin Tan, chairman and president of Alliance Global Infracorp Development Inc.;Jose Gabriel Olives., chief financial officer of the LT Group; Cezar Consing, president and CEO of Ayala Corporation; Josephine Gotianun-Yap, president and CEO of Filinvest Development Corp.; BJ Sebastian, senior adviser of JG Summit Holdings Inc., and .

Photo by PJ Cana.

3| Specific improvements to NAIA

Representatives from GIP broadly outlined the specific improvements the consortium’s proposal has planned for NAIA, using the model the company used in London Gatwick Airport. This includes employing security concepts and technologies that would greatly improve and optimize processing times at NAIA, as well as provisions to add taxiways and staging ways in lieu of adding more runways, which is virtually impossible given the current location and setup of NAIA today.

With the proposal, GIP’s Philip Iley also committed to improving efficiencies of airplane movements per hour, which is the number of arrivals and departures of aircraft into and out of the airport. NAIA is currently doing between 30 and 40 movements per hour on an average day. For comparison, London Gatwick, which, like NAIA, is also a single runway airport, is currently doing nearly double that number, or around 55 movements per hour.

“The second airport to investigate is LaGuardia (in New York),” he said. “LaGuardia nearly has an identical runway system today in terms of a main runway and a cross runway. They regularly do 65 to 70 movements per hour. So it is possible.”

In terms of capacity, MIAC said NAIA already registered peak capacity of 47.9 million passengers in 2019 (pre-COVID), which is far above the declared capacity of the airport at 31 million. And it’s only going to get bigger. NAIA is projected to welcome up to 55 million passengers by 2028. 

With MIAC’s proposal, the plan is for NAIA to be able to comfortably accommodate as many as 70 million passengers annually by the end of the concession agreement.

“NAIA can and must do better,” said Iley, who did not mince words when he said that the current passenger experience going through NAIA today is “one of the worst in the world.” 

“We are confident that we can transform the experience of moving through NAIA in the long term,” he said. 

4| The MIAC is pushing for the full 25-year concession to run and rehabilitate NAIA rather than a shorter timeframe

The government, through the DOTr, has come out with a similar proposal to rehabilitate NAIA for around P141 billion for 15 years, but proponents of the MIAC are pushing for the full 25-year concession for their target amount of P267 billion 

According to Iley, based on GIP’s own studies, only about 10 percent of current airport concessions worldwide last for less than 20 years.

“But they are more management contract in nature, rather than a full transfer of risk with the private sector,” he added. “I think when you’re talking about 10 to 15 years, that’s not really a concession; that’s more of a temporary solution where you’re just asking someone to manage rather than to invest and transform.” 

Photo by PJ Cana.

5| Passenger charges to go through NAIA may increase

Iley said that there are plans to increase the passenger facility charge (PFC), which is the fee charged to passengers to use the airport, but stressed that this would be linked to certain deliverables and timeframes.

Iley also explained the thinking behind the decision to eventually raise PFCs. “The PFCs in NAIA are probably the lowest aeronautical charges of any airport in Southeast Asia and in India, and perhaps even the lowest in the world, and they haven’t been reviewed in years. Other airports in the country, in Mactan and Clark, are already charging at a slightly higher level.

“We don’t intend to put the PFCs (in NAIA) above the levels that are charged at Mactan and Clark already,” he added. “So they wouldn’t become the most expensive in the country, and even then it would still be incredibly low on a regional basis. And keeping PFCs as low as possible to keep Manila competitive is a direct result of the duration of concession. The longer the concession, the lower the fees.” 

“A government decision favoring a 25-year concession plan will show its commitment to attract strong foreign and local players for future PPP projects,” said Olives. “An effort to ensure meaningful private sector participation in PPPs will benefit other projects in the future, as more private sector players will be enticed to participate.” 

MIAC officials said the proposal is currently with the DOTr and so the ball is now in the government’s court.