Megawide-GMR want to start Naia upgrade while passenger, air traffic ‘still limited’

MANILA, Philippines—Despite the downturn in aviation, Megawide Construction Corp. and Indian partner, GMR Infrastructure, want to jumpstart the $2 billion upgrade of Manila’s Ninoy Aquino International Airport (Naia), betting that travellers and congestion will return once the COVID-19 pandemic passes.

For Megawide-GMR—the same venture behind the Mactan Cebu International Airport’s (MCIA) operations and expansion—current conditions are ideal to upgrade Naia given the years it will take before activity bounces back.

“This is the best time to redevelop Naia while air traffic movement and foot traffic inside the terminals are still limited,” said Megawide Chair and CEO Edgar B. Saavedra in an interview on Tuesday (Sept. 22).

Megawide-GMR became the frontrunner to upgrade Naia after negotiations last July failed between the government and Naia Consortium, an alliance of Filipino tycoons and Singapore’s Changi Group.

After two years of talks, the consortium withdrew in the middle of the pandemic, with members citing the government’s steep terms apart from evolving views within their ranks on the project’s viability.

This came despite the government’s decision to relax its terms, including the extension of the project’s concession period from 15 years to 25 years to allow the private sector more time to recover their investment.

Megawide-GMR’s offer has yet to be approved, which will pave the way for a competitive challenge and allow other companies to top their proposal.

The Megawide-GMR proposal is aimed at eliminating congestion in seven years or less. The plan calls for the gradual expansion of capacity to about 65 million passengers per year.

Before the pandemic, Naia was struggling with over 45 million passengers annually—above its existing design capacity of 31 million passengers per year. This led to frequent flight delays and cramped passenger waiting areas.

Saavedra said his company’s offer will also include a passenger railway link to connect Naia’s terminals within the sprawling 650-hectare complex. This is different from Naia Consortium’s offer to link the terminals through a dedicated bus system.

Megawide-GMR’s offer is facing challenges given resistance from segments within the government against the private sector operating Naia.

Last week, Rep. Jericho Nograles questioned the need for the private sector’s participation, saying the state-run Manila International Airport Authority has adequate financial resources to pursue the massive project.

However, there are no major plans for the government to upgrade Naia because the project is designated as part of its flagship Build Build Build infrastructure pipeline to be developed by the private sector.

Nograles is also seeking to disqualify Megawide, claiming it lacked the necessary equity to finance the full upgrade cost of about P107 billion.

“Our credentials and capabilities have been questioned in the past but Megawide has consistently delivered first-world infrastructure projects,” Louie Ferrer, Megawide managing director for transportation, said during the interview.

He pointed to projects such as the MCIA, Parañaque Integrated Terminal Exchange, and the new terminal at the Clark International Airport, which will double capacity at the Pampanga gateway once it opens to the public by January 2021.

Saavedra said Megawide, a construction company that has successfully diversified into infrastructure, said it can raise the money to finance the different phases of the project, as required by the Build Operate Transfer law.

The BOT law’s guidelines stated the “prospective project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be.”

“We have no doubt that we will be able to sustain future expansion without issue despite qualification requirements having been based on initial development phases only,” Saavedra said.

“As an example, the requirements for MCIA only considered capex [capital spending] for the initial phases of the project, and we were able to deliver the full renovation of terminal one and a brand new, award-winning Terminal 2, inclusive of additional airside facilities,” he added.

The Naia upgrade is among several projects meant to ease congestion in Manila.

Conglomerate San Miguel Corp. is also preparing to start work on a P735 billion airport city in Bulacan province, north of Manila, while the Cavite government is pushing for a P500 billion international air hub in Manila Bay.

The COVID-19 pandemic and subsequent travel bans have since reshaped the aviation sector.

The International Air Transport Association said recovery that would bring the industry to levels prior to the pandemic could take two to three years.

Meanwhile, airlines around the world were forced to shrink and downscale operations while others received bailout money from their governments.

In the Philippines, airlines have restored less than 20 percent of their pre-COVID network due to travel restrictions and weak demand.

Through the Air Carriers Association of the Philippines, the airlines are seeking assistance from the government for emergency loans and credit guarantees to survive the pandemic.

TSB