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Gov’t, NAIA consortium in deadlock, threatening modernization bid

/ 01:09 PM July 07, 2020

MANILA, Philippines — Filipino tycoons backing an ambitious proposal to modernize and operate the Ninoy Aquino International Airport said on Tuesday they reached a stalemate in their negotiations with the Philippine government, threatening the collapse of the P102 billion project.

Talks are in a deadlock after the group known as Naia Consortium revised their proposal, citing the new coronavirus (COVID-19) pandemic’s devastating impact on the aviation sector in the Philippines and abroad.

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“The consortium proposed changes to update the Naia project’s framework to ensure the bankability of the Naia project,” Naia Consortium said in a filing to the Philippine Stock Exchange.

“Unfortunately, the government indicated that it is not willing to accept most of the consortium’s proposed options and the consortium can only move forward with the Naia project under the options it has proposed,” it added.

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Naia Consortium was established two years ago by seven of the country’s largest business groups to upgrade Naia, the country’s busiest airport.

The goal was to expand Naia’s passenger capacity and increase flights to combat worsening congestion while establishing the gateway as a “major regional airport” comparable to Singapore’s Changi Airport and Suvarnabhumi in Bangkok.

This was before COVID-19 slashed traffic in Naia by over 80 percent, with full recovery seen two or three years away.

“The far-reaching and long lasting consequences of the coronavirus pandemic on airline travel, airline operations and airport passenger traffic necessitated a review of the assumptions and plans to ensure that the Naia project will be viable in the ‘new normal’,” Naia Consortium said in its statement.

Officials from the Department of Transportation and Naia Consortium did not immediately respond to requests for comment on Tuesday.

At present, there is no government project to significantly upgrade or expand Naia. One of the Duterte administration’s early actions was to shelve most of the previous administration’s pipeline of public private partnership (PPP) projects, including the P74 billion Naia Development PPP.

“The next few years will be challenging for any aviation-related business. It will not be viable for (Naia Consortium) if the terms and conditions are very stringent,” Edgar Saavedra, chair and CEO of Megawide Construction Corp., told the Inquirer on Tuesday.

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Megawide is the operator the Mactan Cebu International Airport, the country’s second-biggest gateway. In 2018, Megawide also offered to develop and operate Naia, however, its offer was not chosen because its proposal was submitted after Naia Consortium.

Saavedra said they have yet to decide on whether to revive their Naia offer.

“It depends on the terms of reference. If it’s too tough, then we can’t accept it too,” he said, adding that banks are “more conservative” in financing projects in aviation due to the health crisis.

“This is not a good time to expand big in airports,” he said.

Naia Consortium’s proposal, which would have a 15-year concession, was first submitted in February 2018 and was revised several times. Negotiations dragged on for years due to strict requirements imposed by the Duterte administration, which sought to minimize the government’s risk.

The consortium was further weakened last March 9 with the exit of Manuel V. Pangilinan-led Metro Pacific Investments Corp., one of the country’s largest infrastructure groups.

A source close to Metro Pacific earlier told the Inquirer the project was not bankable given the government’s strict conditions and questions over the payment of billions of pesos in real property taxes.

Cosette Canilao, CEO of Naia Consortium member Aboitiz InfraCapital, said in an earlier interview the health crisis had affected the viability of the proposal in its present form.

“We all know that the aviation industry is one of the hardest hit sectors. We have to incorporate the impact of this pandemic in our discussions,” Canilao told the Inquirer last June 24.

Naia Consortium’s remaining members are Ayala Corp., Aboitiz Equity Ventures, Andrew Tan’s Alliance Global Group Inc., and Lucio Tan-led Asia Emerging Dragon Corp.

Members also include the Gotianun family’s Filinvest Development Corp. and the Gokongwei group’s JG Summit Holdings Inc. Their technical partner is Singapore’s Changi Airports International.

Naia Consortium’s proposal is among a host of airport projects meant to ease congestion in Manila and nearby provinces.

San Miguel Corp. had also proposed a $15 billion international gateway in Bulacan province, northwest of Manila.

Near the mouth of Manila Bay, the Cavite government wants to build a brand-new $10 billion international air hub on reclaimed land through a partnership with taipan Lucio Tan and state-run China Communications Construction Company Ltd.

Both of the projects have also been delayed by the pandemic.

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TAGS: airline operations, coronavirus Philippines, COVID-19, NAIA Consortium, Ninoy Aquino International Airport (NAIA)
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