In a bid to promote investment and address current challenges, the government has intensified efforts to liberalise air transport. As part of this aim, officials have embarked on the two-pronged strategy of boosting the capacity of the country’s primary international gateway, Ninoy Aquino International Airport (NAIA) in Manila, and developing secondary international facilities to alleviate congestion there. Following several years of economic expansion and targeted marketing campaigns by the Department of Tourism, the Philippines has enjoyed significant growth in both domestic and foreign tourist numbers: a record 7.12m overseas travellers visited the country in 2018 (see Tourism chapter).
However, the ability of airports to handle the growing number of visitors is a major concern. Many airports are overcapacity and inefficient, which is dampening the travel experience for tourists and increasing costs for airlines. However, a number of airport projects are set to boost connectivity and ease congestion in the long run. These plans include the construction of a large international airport in Bulacan to ease bottlenecks at nearby NAIA, and the expansion of Clark International Airport (CIA) to accommodate the higher levels of air traffic that will accompany the relocation of government offices from Manila to the city.
In addition to the large number of privately owned airports, airstrips and airfields in the country, the Philippines was home to 85 government-owned airports as of January 2019. Classified by the Civil Aviation Authority of the Philippines, these included 11 international airports, 13 Class-1 and 19 Class-2 principal airports for domestic use – which differ according to the size of aircraft they accommodate – and 41 community airports. The new San Vicente Airport in Palawan had not yet been classified as of early 2019, but it is a domestic centre.
As the largest airport, NAIA is the main international gateway to the Philippines. According to data from CAPA - Centre for Aviation, a snapshot of the week beginning April 16, 2018 shows that 52% of flights out of NAIA were bound for international destinations, while the remainder were domestic trips. The three largest operators at NAIA were local Cebu Pacific, Philippine Airlines and Philippines AirAsia, which offered 340,000, 325,000 and 125,000 seats that week, respectively. Hong Kong’s Cathay Pacific, meanwhile, was the largest foreign operator, offering some 27,000 seats during the same week. Just under 130,000 seats were bound for North-east Asia, 65,000 for South-east Asia and 45,000 for the Middle East, representing the bestserved regions from Manila. Hong Kong was the top international destination with 69,000 seats and Singapore was second with around 54,000 seats. Cebu, Davos and Ilocos were the top-three domestic destinations.
Race for NAIA
Originally built for a capacity of 30m, by 2012 NAIA was receiving over 40m travellers per year. The facility currently handles around 43m passengers and the figure is growing by about 6% annually. As the airport is under significant capacity constraints, a number of private sector players have submitted proposals to expand the current four-terminal hub. In February 2018 NAIA Consortium, a group of seven Philippine conglomerates, gave the Department of Transportation (DOTr) and Manila International Airport Authority (MIAA) – the government agency responsible for the management of NAIA – an unsolicited proposal to upgrade and operate the airport for 35 years. One month later Megawide Corporation and its India-based partner GMR Infrastructure submitted a similar proposal. According to international media, Megawide Corporation presented a plan valued at $3bn to upgrade and operate the airport for 18 years – significantly less in terms of both investment and duration than the $6.7bn proposal by the NAIA Consortium.
GMR Megawide, which manages MCIA, said their investments would increase aircraft capacity at NAIA by up to 35%, double existing terminal space and more than double capacity to around 72m passengers per year. However, after granting the NAIA Consortium original proponent status in September 2018, the DOTr and MIAA accepted their revised proposal in early May 2019 to upgrade the facility for $2bn and manage it for 15 years. Proposals were still being reviewed by the DOTr that month, with the body saying it planned to award the project by August 2019.
Efforts to decongest Metro Manila are having an indirect effect on flight operations. For example, the steady relocation of government offices to Clark City is anticipated to redirect a portion of air traffic from NAIA to CIA. To facilitate the increasing volume of flights to the airport, the government has sought international investment to increase capacity, while also improving transport links between CIA and major cities.
As of July 2019 CIA ran flights to 10 international locations and 24 domestic destinations. In 2018 the airport handled 2.7m passengers, 50.7% of which were domestic and 49.3% of which were international. This figure appears to be on the rise, up 63% year-on-year in the first five months of 2019. In order to boost capacity at CIA, an engineering, procurement and construction contract for a new terminal building was awarded to a consortium of Megawide Construction and GMR Infrastructure in December 2017. In May 2018 the Bases Conversion and Development Authority (BCDA) – which subsequently moved its operations to Clark Freeport and Special Economic Zone in November 2018 – began the bidding process for the operations and maintenance concession for the facility, including the management of the existing terminal, and the management and operation of the new terminal building.
In January 2019 the DOTr and BCDA signed the operations and maintenance agreement with the winning North Luzon Airport Consortium, comprising Singapore Changi Airport and local firms Filinvest, JG Summit Holdings and Philippine Airport Ground Support Solutions. Once completed, the revamped and new terminals will serve an estimated 8m passengers per year.
Efforts are also under way to integrate the airport into the transport system and boost connectivity to major cities through the North-South Commuter Railway Project. The 163-km railway network will link CIA directly to Clark City, Metro Manila and other major Philippine cities. In May 2019 the Asian Development Bank approved $2.75bn to finance the construction of a 53.1-km section of the network linking CIA to Clark Freeport Zone and Malolos, a suburb north of Manila. Upon becoming operational in 2025 this segment of the railway will have a capacity for 342,000 passengers per day, and significantly reduce travel times between CIA and Metro Manila from its current level of roughly two-to-three hours to one hour.
In an earlier example of an unsolicited proposal, San Miguel Corporation (SMC) – the Philippines’ largest company in terms of revenue – submitted a P736bn ($13.7bn) plan for a new airport in Bulacan shortly after President Rodrigo Duterte took office in 2016. The project, referred to as the New Manila International Airport, was approved by the National Economic Development Authority in April 2018 and stipulates the financing, design, construction, operation and maintenance of the airport under a 50-year concession. Since the approval of the agreement, partnership talks have taken place between SMC and Incheon International Airport Corporation, South Korea’s main gateway operator.
The DOTr began a Swiss challenge procurement process in April 2019, giving other companies 60 days to submit a competing plan for the facility. The offer went uncontested, however, and the DOTr has given its official approval for the project to be completed by SMC. According to SMC’s initial proposal, the new airport will be constructed in phases on 2500 ha of land. The first phase – which is expected to begin in late 2019 – will see the construction of two runways and a terminal space to accommodate 35m passengers per year, with an estimated completion date of 2022 or 2023. Upon completion, the airport will have four parallel runways and capacity for more than 100m passengers annually. SMC will implement the updates and operate the airport for a concession period of 50 years.
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