16 May 2013, Business World

Air travel in the Philippines could see major changes this year, with the government working to improve airport services and update older facilities in Manila and Cebu City.

As air traffic increases both internationally and domestically, the private sector has a range of investment opportunities. The Ninoy Aquino International Airport (NAIA) in Manila is set to expand its operations and improve international services after the government put out a call for tenders on a number of refurbishment projects, which should help reduce congestion and delays. At the same time, domestic services are expected to receive more attention after several major multinationals bid on a project to build a new terminal at the Mactan-Cebu International Airport in Cebu City, the country’s fifth-largest urban center.

According to the Manila International Airport Authority (MIAA), the NAIA handled 31.56 million airplane passengers in 2012, a 6.2% increase from 29.72 million recorded in 2011. Of these, 13.93 million boarded international flights and 17.63 million travelled domestically. Today, the NAIA is the 34th-busiest airport in the world, up from 46th in 2011, according to the Center for Aviation, a think-tank.

However, the NAIA has been troubled by delays, disorganization and lax safety and security records. These woes were exacerbated in 2007, when the US Federal Aviation Authority, acting on the recommendation of the International Civil Aviation Organization (ICAO), downgraded the Philippines’ standing as a compliant member of the ICAO due to safety and management issues. As a result, Philippine Airlines (PAL) has not been able to expand its US service beyond Honolulu, San Francisco and Los Angeles.

More recently, the government has taken steps to open up the market. In 2011, President Aquino signed a number of laws liberalizing the aviation industry, and formed the Philippine Air Negotiating Panel and the Philippine Air Consultation Panel, with the aim of pursuing a more effective open skies policy. At the same time, foreign carriers were exempted from a pair of taxes amounting to 5.5% of gross turnover.

Building on earlier plans, the government announced in January this year that it was accepting bids on tenders for refurbishments and renovations at NAIA, including a baggage porter system, a new remote-controlled and -monitored air navigation hazard prevention system, roof repairs in Terminal 2, speaker upgrades in Terminal 1 and five new mini-buses to shuttle passengers. The government has also ordered aviation schools and general aviation aircraft to transfer operations elsewhere by 2014, which should reduce delays and congestion.

Further positive developments came about in March and April, when the ICAO announced that the NAIA had passed a five-day safety audit, clearing the way for further expansion into North America and the EU. Ramon S. Ang, the president and COO of PAL, told local media he would like to see flight services expand to New York and European destinations in the coming years. Weeks later, the Aquino administration announced it would tender bids for P434.5 million ($10.58 million) worth of upgrades and refurbishments at airports across the country.

As the Philippines braces itself for double-digit growth in air traffic in the coming years — passenger volumes are expected to reach 40 million by 2021 — the government is also looking to focus more on domestic services, most notably with the redevelopment of the Mactan-Cebu International Airport. This build-operate-transfer project involves the construction of an eight-million capacity passenger terminal, as well as a 20-year concession to operate and maintain all facilities at the airport.

The government set a deadline of April 22 for bidders to submit pre-qualification documents. Among those that expressed interested are several domestic firms (Metro Pacific Investments, JG Summit Holdings, San Miguel Group), as well as a partnership between local company Megawide Construction and India’s GMR Infrastructure.