SMC-led consortium bags P170-B Naia rehab project

As early as next year, passengers using Ninoy Aquino International Airport (Naia) could expect improved management of the congested international gateway as a consortium led by San Miguel Corp. (SMC) takes over its operations and maintenance, according to the Department of Transportation (DOTr).

The DOTr announced on Friday that the solicited bidding for the highly coveted P170.6-billion Naia rehabilitation project concluded with the SMC SAP & Co. consortium winning the bid.

The Ramon Ang-led group’s commitment to provide a revenue share of 82.16 percent to the government from Naia operations bested the bids from GMR Airports Consortium (33.3 percent) and Manila International Airport Consortium (25.91 percent). The Asian Airport Consortium was disqualified for failing to meet all the terms of reference of the project.

SMC’s consortium partners are local companies RLW Aviation Development Inc. and RMM Asian Logistics Inc., and South Korean airport operator Incheon International Airport Corp.

Transport Secretary Jaime Bautista told reporters at a press conference in Pasay City that the government was expecting the San Miguel-led consortium to be able to upgrade passenger experience by 2025.

Timothy John Batan, transport undersecretary for planning and project development, said these improvements would include making waiting time at check-in and immigration counters shorter and more predictable, more available parking slots and additional seats at the predeparture areas.Concession period

Batan said they also expect the consortium to work on making airport facilities, such as elevators and escalators, more reliable during the first year of the concession period.

Albay Rep. Joey Salceda, the House ways and means chair, said he would get the SMC-led consortium to commit to immediate airport improvements, including installing walkalators along the full length of Terminal 3, the interconnection of Terminals 1, 2 and 3, and better lounge facilities for overseas Filipino workers.

“Immediately, there will be enhancements. I’m getting the proponent to commit,” he said in a statement.

The concession agreement is scheduled for signing within 30 days. This will be followed by financial closing that will take three to six months before the group officially implements the improvements.

“There is a need for the winning bidder to arrange the financing. There is a need to implement the takeover considering there are employees of Naia who will join and employees of Naia who will remain with MIAA (Manila International Airport Authority) as regulators,” Bautista said.

He assured the MIAA staff that no one would be retrenched.

The SMC-led group’s concession period is 15 years, which can be extended by another 10 years depending on the results of a performance evaluation during the eighth year.

The Naia upgrade project includes the rehabilitation of the passenger terminals and airside facilities, such as runway, aircraft parking area and airfield lighting. It would include facilities to enable intermodal transfers at the terminals.One of the key considerations for SMC group’s winning bid was the revenue share with the government, which was more than twice those of the consortium’s rivals.

“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,” SMC said in a statement on Friday.

Batan said that financial evaluations were conducted to “make sure the concessionaire is able to deliver on their commitments for the project.”

Transport Undersecretary for Aviation and Airports Roberto Lim explained that the “formula for the highest bid is based on the gross revenue, excluding the passenger service charge.”

‘Long overdue’

Lim said that passenger service charge comprises about 40 percent of the total revenues of Naia.

The remaining 60 percent is from other fees from aeronautical charges paid by airlines and commercial revenues from airport kiosk operators and parking fees, among others. This is where the 82.16-percent government share will come from, Lim said.

Finance Secretary Ralph Recto said the airport needed an upgrade for close to a decade.

“This is certainly a welcome development for this long overdue project,” he said. “Naia has been operating beyond capacity for nine years, leading to poor service and passenger inconvenience.”

Bautista noted that Naia currently has an annual capacity of 35 million passengers, way below than the actual volume of nearly 50 million.

Rehabilitating Naia will increase its capacity up to around 60 million. But this will still not be enough as passenger volume is projected to reach 100 million by 2050, Bautista said.

During the full 25-year concession period, the DOTr estimated the public-private partnership (PPP) project to generate P900 billion, or P36 billion annually. This includes the P30-billion upfront payment, the P2-billion annuity payment and revenue share.

Salceda, who was the principal author of the PPP code, said this was an “excellent deal for the government” as it would produce an internal rate of return of about 11.4 percent.

The House tax chair, who also oversees PPPs as a financing mechanism for the government, said he also looked forward to “a declogged pipeline of PPPs” modeled after rate-based bidding, as what was done for the airport rehabilitation contract.

“It works. So, let’s do it more often,” Salceda said.With this concession agreement, Ang will have control over two major airports, including the New Manila International Airport (NMIA) being built in Bulacan, which was designed to handle 100 million passengers annually.

NMIA is targeted to be operational by 2027 or 2028, Bautista said.

He said he did not see any conflict in the operation of the two airports, noting that both gateways were crucial to dealing with the expected surge in air travelers.

‘Stressful’ airport

Bautista said the Naia rehabilitation—one of the first major PPP projects by the current administration—was three decades in the making. The idea of upgrading the country’s main gateway was first attempted during the Ramos administration, he said.

Prior to the solicited bidding process, the most recent attempt was by Megawide Construction Corp. and its partner GMR, which received an original proponent status (OPS). However, the OPS was revoked by MIAA in December 2020 for unclear reasons.

The airport has been receiving complaints from passengers due to operational inefficiencies, including long queues at immigration and lack of transportation in and out of the terminals. A tourism blog called Naia one of the “most stressful airports” in Asia.

Last year, Naia was hit by a power outage that caused numerous delays and cancellations of domestic and international flights. —WITH A REPORT FROM KRIXIA SUBINGSUBING INQ