ONCE awarded to the winning bidder by next year, the Ninoy Aquino International Airport 1 (Naia 1) would only be the third passenger terminal in the Philippines placed in private hands.
The other two are the Mactan-Cebu International Airport and the Caticlan Airport in Panay Island, serving the world-renowned Boracay beach resorts.
With the Naia under private investors hands, transport officials hope to redeem its image as a corrupt and filthy airport unworthy of any international recognition and be one among the highly prized engines of growth helping propel the country toward full modernization.
The study on the Naia privatization would be decided this year and by 2017, the Department of Transportation (DOTr) believes there should already be a winning bidder, says Undersecretary for Transportation-Aviation and Airports, Robert Lim.
“By next year, we have a strong belief that there would be a decision, although this year, definitely there’s already a decision. But the awarding would be next year,” Lim reveals to the BusinessMirror at a recent interview.
Two years ago, the Public-Private Partnership Center said the government would open the redevelopment, operations and maintenance of the Naia to competitive bids by the mid-2015.
Then-President Benigno S. Aquino III failed to pursue its privatization under his term and has passed the baton to President Duterte, especially to the DOTr.
Two years ago PPP Executive Director Cosette V. Canilao identified the four potential bidders as United Kingdom-based Pinsent Massons Llp., Ernst & Young, International Technical Assistance Consultants (Itac), and Nathan Associates Inc.
“We’re now evaluating their proposals with the Department of Transportation and Communications [DOTC],” Canilao said, adding that the agency has allotted $2 million or $3 million to finance the feasibility study of the Naia privatization project.
Naia General Manager Ed Monreal told the BusinessMirror that Ernst & Young has begun studying a privatization study subject to the approval of the National Economic and Development Authority (Neda).
“It’s in the plan that we will have to provide the basic services because the Naia, including customs and immigration, will remain regulatory agencies, although I have yet to receive the specifics. I think the private firm would manage operations, take off and landing, or apron [tarmac] management,” Monreal said.
He added that many sectors have agreed to the proposal because they think that would make the Naia 1 a very competitive airport.
According to Monreal, the private management of the Naia 1 would be done for a number of years at the end of which ownership of the Naia would revert back to the government, “unless the private sector performed so well they are given an extension to continue the operations.”
At the moment, the Naia has more than 6,000 employees and another 1,000 would be added once the Office for Transportation Security (OTS) has approved their hiring.
Initially, the OTS accepted some 500 applicants who would manage the x-ray machines, although within the year, its personnel would be under the Manila International Airport Authority (Miaa) supervision.
“No, the OTS will not be abolished. They will provide oversight functions in all the commercial airports where their presence are needed. But the Miaa will now manage the personnel who will operate the x-ray machines at the initial point of entry to the airport,” Monreal said.
It was unclear, however, whether the commercial concessionaires would be placed under a megaconcessionaire from whom they would apply retail permits to operate.
Monreal said he has yet to be provided the number of concessionaires at the airports, such as restaurants, food-and-beverage shops, coffee shops, fast-food outlets, gift shops and others.
It remains unclear whether the Duty Free operations at the Naia 1 would be placed in the hands of the winning bidder, Monreal admits, although he said the retailer Rustan’s is already the megaconcessionaire at Naia 3, from whom other locators would have to apply for retail permits.
The Miaa generates approximately P5-billion annual income, mostly from landing and takeoff fees or those related to airline operations.
Other income is derived from real-estate rentals, business concessions, transport concessions and franchises, and many more.
As far as Monreal knows, the Naia 1 would be privatized, although he is unaware whether the rest of the four passenger terminals would be handed over to private hands, as well.
“I don’t know the details, but maybe they would start privatization with the Naia 1,” he said.
He added that the Naia privatization came about because running a complex agency like an airport needs immediate action only a private firm can make.
Some experts the BusinessMirror interviewed said the Miaa ought to be run by a CEO just like a large private corporation.
Foremost examples of these are the Hong Kong Airport, Singapore Airport, Malaysia International Airport, Taipei Airport and Narita Airport in Japan.
Monreal said a private firm could procure needed items quickly and in as short a time as possible. But under the government, one has to go through a process dictated by the procurement law, so that in the end, government is slow to react.
“These are the nitty-gritty that the private firms are good at.”
At the same time, Monreal said the government is assured of yearly income that would be guaranteed by the winning private entity. “If I am not mistaken, the winning private bidder in Cebu had to make [an] up-front deposit running into the millions of pesos.”
Airport veteran concessionaires, who have been at the Naia for decades, told the BusinessMirror the upside of privatization is the guarantee of yearly income and without the headache of managing hundreds of employees.
“The downside is that the private investors might decide to increase the rentals and this cost would be passed on to the passengers,” the concessionaire said, requesting not to be named.
They heard this is already happening at the Mactan-Cebu International Airport, although they have yet to officially confirm if the report is true. Onie Nakpil, chairman of the Asean-Airline Operators Council, said the privatization of an airport tends to increase access to sources of private capital for airport development.
Under a private entity, airports tend to become more efficient, competitive and financially viable, he added. “Participation in the program has been very limited, in part because major stakeholders have different if not contradictory objectives and interests,” he said.
On the other hand, Nakpil added that there is increasing interest in airport privatization because the government is making it easy for private companies to comply with the requirements.