Most commercial airports in the world are government-managed because of the huge financial requirements needed to build and run them.
An airport complex must have a series of runways and taxiways; lighting fixtures for the whole aerodrome; a passenger terminal building; a bonded cargo compound; a search-and-rescue department; and an efficient transport system. It must have an air-traffic control system and associated radars and telecommunication; separate police and fire stations; and public and private security groups.
These and a host of related facilities are needed to assure the efficient and continued flow of people and cargo in and out of the airport.
In the long run, an airport complex becomes a city in itself.
Because of the beehive of activities related to their operations, airports ultimately become magnets that attract businesses and a host of other commercial enterprises. Eventually, airports get surrounded by schools, restaurants, entertainment centers, condominiums, hotels, casinos, transport hubs and many more.
Following in their wake are the mass of humanity that powers and operates the businesses, including entire communities as byproducts of the airport complex.
It is no coincidence that the municipalities adjacent to the Ninoy Aquino International Airport (Naia) have become bustling conurbations: the cities of Pasay, Makati, Taguig, Parañaque, Las Piñas and Muntinlupa are good examples.
Demanding job
Running an airport complex today, however, has become so demanding, it requires an experienced captain of industry or a topnotch CEO to manage the whole ensemble.
For example, the Hong Kong International Airport (HKIA), the world’s busiest cargo gateway and one of the world’s busiest passenger airports, is being operated by the Airport Authority of Hong Kong. In turn, the HKIA has appointed Jack So Chak-kwong as chairman to run one of the world’s largest passenger terminal buildings.
So Chak-kwong, 70, is a recipient of the Order of the British Empire. He is a former chairman of the Hong Kong Trade Development Council, chairman of the Consultative Committee on Economic and Trade Cooperation between Hong Kong and Mainland China, chairman of Harrow International School Hong Kong and vice chairman of the Hong Kong Philharmonic Society.
He is also a member of the Chinese People’s Political Consultative Conference, honorary consultant to the mayor of San Francisco, former international business advisor to the mayor of Beijing and was independent director of HSBC, one of the largest banking and financial services organizations in the world.
HKIA is an important contributor to Hong Kong’s economy, with approximately 65,000 employees. More than 100 airlines operate flights from the airport to over 180 cities across the globe. In 2015 it handled 68.5 million passengers, making it the eighth-busiest airport worldwide.
Airport privatization
Today many airports are ripe for privatization to improve their chances to compete in the new global economy.
What is airport privatization? Simply put, it is the transfer of ownership or management or both to the private sector, with the private entity paying the government a form of rent or some other kinds of arrangements.
The manner of ownership covers a wide spectrum: “Airports owned and operated by government departments, 100-percent government-owned corporations, independent airport authorities, mixed enterprises with government majority ownership and mixed enterprises with private majority ownership,” according to “UK Essay.”
UK Essay, a thesis written by students, provides a bird’s-eye view of the pros and cons of airport privatization.
“The reasons to privatize an airport include an improved ability for an airport to diversify its operations, to enhance profitability, to fund expansion and to improve competitiveness,” UK Essay said.
The arguments for privatization include the falling availability of public funds and a need to change to the market-oriented outlook that private businesses develop, it added.
Why privatize Naia?
AS things stand today, the Ninoy Aquino International Airport (Naia) is a likely candidate for privatization.
While neighboring Asian airports have bounded way ahead of us in terms of efficiency, tourist arrivals and income, the Naia has become the laughing stock of the world.
As Hong Kong, Singapore, Malaysia and Taiwan count their tourists in the tens of millions, the Naia is happy to announce that we have 4.5 million tourists last year.
Our neighboring airports get worldwide recognition for excellence, while the Naia gets a black-eye after it was voted twice as the world’s worst. Despite mass condemnations to stop the nightmare called tanim-bala at the Naia, our authorities celebrate the arrest of passengers found with bullets in their possession, hailing the “arrests” as signal achievements in the fight against terrorism.
Tanim-bala (literally meaning “planting bullets”) has become a fearful byword among members of the overseas Filipino workers (Ofw) community. OFWs now look at their country’s airport as a source of scourge.
Needless to say, foreign travelers are wary of the Naia, as well. Many potential foreign visitors have opted to stay away, and this is shown in the poor tourist arrivals.
“They simply don’t get it,” said an exasperated airport concessionaire, referring to airport officials who don’t punish their employees mulcting travelers.
Privatization benefits
UK Essay said airports were originally considered part of a nation’s essential infrastructure, which is why less attention was paid to profit than to operations.
“The three means of economic gains to be found in privatization are improvements in operating efficiency—the private for-profit business model more often leads to a further exploration for means to cut costs and boost revenues than does public management; the introduction of new management styles and marketing skills directed to serve users with a more consumer-oriented approach; and the ability to make better investment decisions.”
“Privatization enables a long- term focus to meet the demands of international competition; to maintain a customer-focused plan; and to free the government from providing subsidies to an unprofitable enterprise.”
The BusinessMirror asked British Ambassador Asif Ahmad his opinion about the plan to privatize the Naia:
“Privatization of airports has been a huge success in the UK. Heathrow has expanded and has modern terminals. Other London and provincial airports are also thriving. Airlines can rely on commercial terms being applied, as opposed to the drivers of local government. Big policy decisions, however, remain in government hands, so there is no loss of control,” he said.
“As we will see in Mactan-Cebu, privatization will bring in far better passenger experience. The terminal building, like so many in Asia, has a British designer,” he added.
BAA, formerly the British Airports Authority, owns six British airports and operates more facilities, including rail services. Wikipedia says this British company runs the retail at Boston Logan, Baltimore Washington and Pittsburgh International Airport.
The BusinessMirror tried to get the opinion of the managers of the big carrier concessionaires at the Naia, but they refused to give their views.
One Naia raking official, who requested not to be named, said privatizing the Naia would speed up procurement. He cited the example of the set of batteries that power the emergency generators. They were found to be defective in October 2015, yet it took six months to procure them through public bidding.
The Naia suffered one of the longest power outages—six hours —before partial power was restored last month. Only then were the batteries were bought.
UK Essay said airport privatization has become a trend in the past 30 years, as economies change and the air-transport sector matures. Airport management and ownership, once mainly the domain of governments, has evolved into a mix of public and private airport ownership.
“Airports must now compete with other airports around the world for business, and government may not be the best owner for a globally competitive enterprise. Airports must have the freedom to compete on the commercial level, and not just provide a service to the traveling public. Airports seek privatization, in part, to improve their abilities to develop a customer-focused business plan,” UK Essay said.
Operators of private airports have the rights of ownership, and take the responsibility of the operation with a view to earning money for investors. They pay the government an agreed amount in return.
Since the inception of the former Manila International Airport in the 1960s, which became the Naia, our premier airport had seen a parade of general managers who have all been appointees by the sitting president.
The last one, retired Gen. Jose Angel Honrado, is a former helicopter pilot and was appointed by President Aquino, his nephew. He has been the general manager of the Manila International Airport Authority (Miaa) since 2010. Honrado served as security consultant of President Aquino during the May 10, 2010, elections. He served as spokesman of the Armed Forces of the Philippines, and also as aide-de-camp of the late former President Corazon Aquino.
DOTC proposal
The Department of the Transportation and Communications (Dotc) last year has announced a proposal to privatize the Naia.
That arrangement in itself remains questionable. The Miaa, like the Hong Kong Airport Authority, is supposed to be independent. Yet, the Miaa depends on the Dotc for funding, although it earns P5 billion a year in revenues alone from airport takeoff and landing fees.
Maximum capacity
The Japan International Cooperation Agency (Jica), a consultant for the Dotc, said the Naia could no longer accommodate another round of increases in passenger traffic next year:
“The Naia would totally be capacity-saturated in 2015, and not be able to cater to the increasing passenger demand anymore.”
The report noted that by next year, the airport was seen to handle 37.78 million passengers, the bulk of which, or 21.31 million, would be domestic traffic, while the remaining 16.46 million would be international passengers.
A quarter century from now, the Naia’s passenger traffic would reach 101.49 million, the Jica study added.
The optimal capacity of the Naia’s three terminals is 30 million passengers per year, while its maximum capacity is at roughly 35 million passengers annually.
Interested parties
Aboitiz Equity Venture Inc. (AEV) President and CEO Erramon Aboitiz said the company is interested to join the privatization bidding for the Naia. Other conglomerates that expressed interest in the bidding include Ayala Corp., San Miguel Corp. and Megawide Construction Corp.
Unfortunately, the administration of President Aquino will end next month and the Naia privatization would land in the lap of the next president.
Privatized airport
We have the second-busiest airport in the country, Cebu-Mactan International Airport (CMIA), as an example of a privatized operations.
In October 2014 the the GMR-Megawide Cebu Airport Corp. (GMCAC) assumed management of the terminal operations of the MCIA.
Brewing conflict
Two years into its private capacity, MCIA General Manager Nigel Paul Villarete is already having a run-in with the private operators.
It was reported that, initially, Villarete said he would remain as the airport’s manager to oversee its management, but will leave the operations of the landside and airside to the private entity.
Now, Villarete said he wanted the access control to the Mactan terminal, one of the biggest assets of the airport department, to be in his hands.
The chairman of the Asean-Airline Operators Council, Leoncio Nakpil, who had 25 years’ experience in aviation, said having the power to control access to the terminal is the same power that Honrado holds dear at the Naia. The Public Affairs Office and the Media Affairs Division (MAD) are two offices that issue access pass to the terminals. Both offices are under Honrado.
Barred media access
When he took over in 2010, one of Honrado’s first official acts was to ban the media from gaining access to some areas of the premier airport. The MAD had barred media access to the tarmac and other areas within the terminal buildings.
It was alleged that it was his way of getting back at the media, who reported that Honrado, who was Armed Forces liaison man at the Naia, failed to cover up the discovery of a shipment of firearms by a Luzon congressman returning from the United States.
Honrado has denied the accusations.
Oversight role
Nakpil said any plan to privatize the Naia should be a “package deal,” and the manager’s role would be confined to oversight, seeing to it that the operators adhere to the laws governing the airport’s day-to-day operations.
If any violation occurs, then the private operator is penalized, he said.
Nakpil said the current Naia management, with the power to control access to the airport, used this leverage to compel some of the air carriers to do his bidding.
“This is one of the reasons some of the airlines could not add more flights,” Nakpil said. He added that if some carriers will get the nod of the Civil Aeronautics Board or the Civil Aviation Authority of the Philippines for more flights to and from the Naia, they still would not be able to mount these flights.
“You can have additional flights, but where are you going to park your airplanes if the Manila International Airport Authority refuses to give them parking slots,” Nakpil asked.
This same leverage is exerted on airport concessionaires, who are always threatened with the withdrawal of entry privilege if they do not obey Honrado’s demands, Nakpil added.
UK Essay said the arguments for privatization are many. Less public investment is needed; on the one hand, public funds are less available than they once were and, on the other hand, private corporations have a market-oriented outlook for their business plans.
Private operators have deep pockets, they have their eyes on increased revenues, and tend to get the best managers to make sure they run the airport competitively.
Employees and management are motivated to perform better, and a deregulated airline industry would lead to growth, which the existing model of airport management and ownership could not deliver.
2 comments
Just make sure there are no Abayas an Honorados to run the airports.
Abaya and Honrado should be shot
LOL!!!!