Int'l airlines not taking risks with NAIA 3

By Lala Rimando,

Posted at Jul 23 2009 09:53 PM | Updated as of Jul 27 2009 11:39 PM

A year after NAIA 3 opened, only local planes are using it

MANILA—There’s a nagging question as the Arroyo government and airline executives here mark the first anniversary of NAIA 3’s commercial operations: Where are the planes?

The Ninoy Aquino International Airport Terminal 3 (NAIA 3), the newest and biggest of the 3 terminals in the country’s main gateway, has been the home of local airlines Cebu Pacific, some units of Philippine Airlines (PAL), and Air Philippines. 

The other airlines, however are stuck in the old and congested Terminal 1. The international airlines in particular are playing it safe, not taking risks with NAIA 3 that continues to be hounded by ownership issues.

On July 22, 2008, Cebu Pacific launched its first flight out of NAIA 3. It was considered a major boost to efforts of the Arroyo government to finally see the landmark infrastructure project come to life after 6 long years of legal, political, and financial wrangling with project proponents. 

Not long after, Philippine Airlines units, PAL Express, and Air Philippines followed.

Ownership Issue

The local airlines took a big risk then. (Read: Local airlines take risks in moving to NAIA 3  ) And the risk exists up to now. Technically, the lessor of the terminal is the Philippine government through the state-owned Manila International Airport Authority (MIAA). But that’s because MIAA made a P3-billion down payment in 2006 to project proponents, Piatco and German firm Fraport, after the Supreme Court ruled that MIAA could expropriate the privately financed terminal building.

Yet, the Philippine government cannot claim total ownership of the terminal until it has paid the full cost of the project. 

The total cost of the project is yet to be finalized. A lower court is yet to verify the building’s true value through a court-appointed engineering firm. That “true value” would then be the basis for the “just compensation” due to Piatco. 

A compromise agreement—a parallel effort to the court-supervised valuation process—is still in the works. Recently, Justice Secretary Agnes Devanadera said that the Philippine government is willing to pay Piatco about $200 million just to resolve the terminal’s ownership issue. (Read: Devanadera: Gov't owes Piatco some $200M)

Lower Amount

That $200 million is way lower than the $425 million that Fraport had supposedly shouldered in the terminal’s construction costs, as it told International Center for the Settlement of Investment Disputes (ICSID), a Washington-based international arbitration court. (In 2007, ICSID ruled that Fraport cannot claim this amount from the Philippine government since the German firm was found to have violated Philippine laws.)

The proposed compromise amount is also lower than the $525 million compensation that Piatco is demanding from the Philippine government in another arbitration case, this time in the Singapore-based International Chamber of Commerce (ICC). Piatco filed the case against the Philippine government for nullifying the airport terminal contract. The case is still pending with the ICC.

While these legal and financial issues are going on, the international airlines are staying put in the 3-decades-old NAIA 1. 

In a statement, MIAA General Manager Alfonso Cusi said, “Today, we celebrate not only the success of NAIA T3 start-up operations but also to appreciate and acknowledge the efforts of the distinguished personalities behind the milestone opening of T3 a year ago despite all odds.”

Terminal 3 Manager Florencio Montalbo Jr. said that he and his team had worked together to improve a host of technical, operational, and passenger-oriented improvements, such as appropriate signboard installations, x-ray repositioning, manpower services, and proper office managements. (Read: NAIA upgrades check-in systems

Biggest Winner

As of June 2009, about 11 months after it opened its doors, Terminal 3 has posted a total of 56,552 domestic flights and 8,802 international flights to various destinations. It has also served a total of 5.73 million domestic passengers and 960,360 international passengers.

Cebu Pacific, a latecomer in the industry but the most aggressive here and abroad, is the biggest winner in the NAIA 3 bet. 

The consolidation of its domestic and international flights—used to be separately stationed at the Domestic Terminal and NAIA 1, respectively—meant lower costs and more room to grow its Manila-based operations.

In a previous interview, Cebu Pacific CEO Lance Gokongwei told that the better ambiance in NAIA 3 vastly improved their bookings, especially from their corporate accounts. At the onset of high fuel cost last year and the global economic recession that followed, business travelers and corporate clients who still want to fly their clients or employees to various destinations have made Cebu Pacific an alternative airline to book flights mainly because it now operates in NAIA 3.

Cebu Pacific has since clinched the top spot from PAL for flying the most domestic passengers. The Gokongwei-led airline is expecting to carry close to 9 million passengers by the end of the year.
The delayed commercial operations of NAIA 3 also benefited the Diosdado Macapagal International Airport (also known as the Clark airport) in Angeles City, which is just about 80 kilometers from Manila. 

The number of flights of budget regional airlines has since leapfrogged. The current terminal has a capacity of 2 million passengers, and Clark airport officials are bidding out a project to create a new terminal to accommodate a fast-growing number of passengers.  (Read: NAIA capacity seen rising to 32 million)