An alternative to congested Naia to rise in Bulacan | Inquirer Business

An alternative to congested Naia to rise in Bulacan

San Miguel’s P735-B airport project can compete with world’s best
/ 03:42 AM October 16, 2019

Artist’s perspective of the New Manila International Airport

Food, drinks and infrastructure giant San Miguel Corp. (SMC) is embarking on its biggest project yet: a P735-billion airport complex in Bulacan province that could one day rival Manila’s congested Ninoy Aquino International Airport (Naia).

The project, dubbed the New Manila International Airport, will transform the coastal town of Bulakan, Bulacan, and help shape the future of air traffic around Metro Manila, the Philippines’ capital district.


At the same time, it has also increased scrutiny on SMC, a sprawling P430-billion conglomerate, and its ability to finance and sustain such a massive project. So far, SMC has not named any partners for the New Manila International Airport.

The conglomerate was formally awarded the project by the Department of Transportation (DOTr) on Aug. 14, 2019— three years since it was proposed by the conglomerate to the Duterte administration. SMC saw no rivals during the Swiss Challenge deadline on July 30.


On Sept. 18, the company was given the notice to proceed by the DOTr. SMC plans to hold a groundbreaking ceremony within December this year.

During the signing of the concession agreement, SMC president Ramon S. Ang hailed the airport as the company’s most significant contribution to the Philippine economy.

“It will be a sustainable, world-class facility that can compete with the best in the world and become a source of national pride for Filipinos,” he said.

Long-term solution

The New Manila International Airport will rise on a 2,400-hectare property located about 50 kilometers northwest of Manila.

SMC’s offer includes an 8.4-km tollway that will connect the New Manila International Airport to the North Luzon Expressway in Marilao, Bulacan. It said travel time from the airport to Manila would take about 30 minutes by car.

To be built at no cost to the government, SMC claims the airport will be open within five years.


Once completed, it will have at least four runways, eight taxiways and three terminals that can handle at least 100 million passengers a year—three times Naia’s capacity.

SMC, which will control the project via a 50-year concession, said the airport can be expanded to eventually handle 200 million passengers a year.

“Generally, I see Bulacan as a long-term solution to Manila’s airport infrastructure challenge. There are plans to improve Naia but capacity will continue to be limited,” Capa Center for Aviation chief analyst Brendan Sobie said in an email.

Rising demand

The view comes as air traffic demand in Metro Manila is showing no signs of slowing down.

The Japan International Cooperation Agency (Jica) earlier said demand here would rise to 59 million passengers in 2025 and then almost double to more than 100 million passengers by 2040.

Last year, Naia handled 45 million passengers—above its annual design capacity of 31 million.

Air traffic delays are a frequent occurrence in Naia, where flights during peak hours are capped at about 40 aircraft movements (take off and landing) per hour.

Without upgrades, the annual cost of delays at Naia will hit P3.8 billion for airlines and P11 billion for passengers by 2020, SMC earlier estimated.

Naia is unlikely to close in the near-term as a group of seven tycoons, in partnership with a unit of Singapore’s Changi Airport Group, intervened and sought to modernize, expand and operate the Philippines’ busiest airport through a 15-year concession period.

With back and forth negotiations lasting more than a year, the Naia Consortium’s P102-billion proposal will be reviewed by the National Economic and Development Authority. A potential Swiss Challenge could be launched in the coming months.

Among its salient features was doubling Naia’s passenger design capacity to 65 million annually and increasing aircraft movements to 52 per hour.

Sobie said airlines could increase capacity in Naia by up-gauging, or using higher capacity planes to carry more passengers given limited slots, but he cautioned that demand would soon catch up.

“While there are opportunities to squeeze more traffic out of the existing slots (particularly if the terminals improve and are expanded as now planned) the up-gauging can only do so much and I would say by around 2025 this will pretty much be completed,” Sobie said.

“So long-term, another airport is needed for Manila,” he added.

Other airports

Clark International Airport in Pampanga, located about 100 kilometers north of Manila, is likewise being expanded. The gateway, also considered an alternative to Naia, is about two hours away from the capital district and also serves the Central Luzon region.

Its operations-and-maintenance component was recently privatized via a 25-year concession to a group led by JG Summit Holdings, Filinvest Development and Changi.

A third international airport hub could come into play as the provincial government of Cavite wants to reclaim vast tracks of land and turn the Sangley Airport into an international hub.

Located at a “straight line” distance of about 11 km from Naia, the Sangley Airport is currently being upgraded for general aviation, which includes private aircraft flights, and limited commercial operations before the end of 2019.

The DOTr had earlier expressed no objection to the project.

Multiairport strategy

This airport rush stems from the DOTr’s multiairport strategy, the brainchild of Transportation Secretary Arthur Tugade. Provided their proposals contained no government guarantees, the DOTr would embrace all airport offers, Tugade said.

The policy has its critics. An official of the International Air Transport Association (Iata) previously called it “complicated” and urged the DOTr to study the matter and focus on coming up with an aviation master plan for Manila.

The policy also means competition for SMC’s New Manila International Airport, whose potential market will be divided among multiple gateways.

Despite these concerns, Tugade said it is the riding public that would benefit from having multiple airports.

“Let it be a battle of commercial competitiveness,” he said.

Massive cost

Jica’s long-term forecast showed there is plenty of demand to share in the coming years.

Still, questions loom over the size of SMC’s project and the massive debts it will need to assume, since banks typically finance about 70 percent of the project cost.

In the case of the New Manila International Airport, the debt component could reach more than P500 billion alone, or at least P100 billion a year assuming a five-year construction timeline.

The figure remains significant for SMC, which pulled in over P1 trillion in revenue last year. The conglomerate reported an operating income of P117.1 billion and a net income of P23.1 billion in 2018.

Strategic partner

Ang said SMC would lean on the support of foreign lenders but it would also need to raise equity on its own.

He said SMC’s shareholders would support the project but he said private equity is also an option, opening up the prospect of the entry of a strategic partner.

There are also few details on who will operate the airport. Ang said SMC is in talks with airport operators from Japan, Korea and Europe.

So far, the conglomerate said it engaged the services of global firms Groupe ADP, Meinhardt Group and Jacobs Engineering Group. The three companies were involved in building some of the biggest and busiest airports in the world, including Singapore’s Chiangi Airport, Atlanta Airport and France’s Charles de Gaulle Airport.

SMC also sought to allay critics who said local fisherman would be displaced with the construction of the New Manila International Airport.

“Part of the the master plan is to transform the host province into a seafood city of the country,” Ang said.

“Affected fishpond workers will also be relocated to suitable sites with resources and tools to re-establish their livelihood and, at the same time, provide them additional skills,” he said.

The company will also clean nearby rivers, build a flood barrier and spillway to help solve perennial flooding in the area.

SMC said prosperity would flow from Bulakan to other parts of the province and the broader economy. It said the New Manila International Airport would create an estimated 20 million direct and indirect jobs.

Big promise
It also expects to bring in 30 million foreign tourists to the Philippines and shift traffic from Manila, where economic costs associated with congestion amount to billions of pesos a day.

SMC and Ang are promising a lot but the businessman said the company will deliver.

“I will not waste my time or the time of Secretary Tugade and the government kung ito ay kwentong blues lang (idle conversation),” Ang said.

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