A giant step toward modernization

Francisco Tatad

THE government took a giant step toward air travel modernization when it awarded the management of the Ninoy Aquino International Airport (NAIA) to San Miguel Corp. (SMC), the food and infrastructure conglomerate, for the next 25 years. SMC has partnered with Incheon International Airport of South Korea, rated as the world’s fourth best airport after Singapore’s Chiangi, Qatar’s Doha Hamad and Japan’s Tokyo Haneda, to run NAIA.

It is the largest privatization deal ever undertaken by the government, and promises to put the Philippines within a few years on equal footing with the leaders of the travel and tourism industry in Southeast Asia. With good reason, the magazine Biz News Asia calls it “the deal of the century.”

This project is long overdue. The NAIA, with its four runways, had fallen into disrepair, plagued recently by bureaucratic inefficiency and bedbugs infestation. It needed to modernize; the status quo would no longer hold. This created an ideal opportunity and an irresistible challenge for SMC’s visionary president and CEO, Ramon See Ang, to come in. The 70-year-old Ang — RSA to the business community and to all his friends — did not simply want to win a deal for SMC; he wanted a deal in which all stakeholders, beginning with the Philippine government, would win big. This is his life’s philosophy, which he wants to see realized in every business transaction.

So, he made an offer that could not be matched by his competitors. He offered to pay the government an unbelievable 82.16 percent of all airport revenues except passenger terminal fees, which will be shared 70 to 30 percent in favor of the government. This translates into P1.034 trillion in 25 years — P80 billion upfront and P2 billion per year until 2048. Or an annual yield of $18 billion to government — 4.5 times what MIAA netted in 2023.

The second highest bidder, Yuchengco-GMR, which built the Mactan International Airport in Cebu, offered 33.30 percent of all airport revenues; it would have delivered to government P7 billion or more a year. The third highest bidder, Manila International Airport Consortium (MIAC), composed of six conglomerates headed by leading Philippine taipans on Forbes magazine’s annual listing of the world’s billionaires — Aboitiz, Ayala, Gokongwei, Lucio Tan Group, Megaworld and Gotianun —offered 25.91 percent of all airport revenues, which would have paid P6 billion or more a year. Over the next 15 years, SMC will invest at least P125 billion in equipment, machinery, software, roads and buildings.

There is no time to lose. In planning for an airport, the planners have to plan years ahead if they are not to fall behind. By the time an airport project is finished, it is already outdated because of the speed of technological development. This is what I learned many years ago from the technocrats at Changi Airport in Singapore when they invited me for an official visit; I was a senator then. Their planning threshold, they told me then, was at least 50 years; they were already working on their third runway, even before they could exhaust the full use of their second. Applying the same principle, RSA’s people will have to work double time, or more than double time, to catch up with the leaders of the industry.

In recent years, airport services have fallen below standard. SMC will have to attend to all those irritating little details and make every passenger’s transit through security, immigration, baggage loading and unloading as pleasant as possible. It cannot allow travelers with disabilities to stand in line while waiting for wheelchair attendants. The traveler’s maximum comfort has to be a primary concern. But as airport czar, RSA has grander plans. Aside from NAIA’s four runways and the Caticlan airport, which SMC operates to service the gateway of the world-famous beaches of Boracay, SMC is also building the P735-billion New Manila International Airport in a 2,500-hectare property north of Manila in the town of Bulakan, province of Bulacan. Dubbed the San Miguel Aerocity, it is intended to operate six runways and service 100 million to 200 million passengers for the next 50 to 75 years.

SMC’s takeover of NAIA does not quite put it on the same level as the Asean airports that operate several other airports at the same time. “Airports of Thailand” operates six airports; Angkasa Pura Indonesia operates 15; Airports Corp. of Vietnam, 22; and Malaysia Airport Holdings Corp., 39. Yet RSA’s vision for the future could soon put the Philippines in close competition with its neighbors.

A few years ago, US President Barack Obama complained that Asia had far more world-class airports and other public infrastructure than most of First World America. I have not been through any US airports lately and cannot therefore say whether after this serious complaint they have adjusted to Asian standards. Apparently, RSA had heard the same complaint and felt the criticism applied to the Philippines as well, so since the government could not do much about it, it became his urgent mission to intervene and change the big picture.

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