Airlines call on gov't to expand NAIA-3

By Aura Marie P. Dagcutan, BusinessWorld

Posted at Jan 20 2011 12:17 AM | Updated as of Jan 20 2011 09:04 PM

MANILA, Philippines - Local airlines on Jan. 19 called on the government to expand Terminal 3 of the Ninoy Aquino International Airport (NAIA), saying domestic passenger volume will exceed the terminal’s capacity this year.

This developed as the consortium that built the terminal expropriated by the government in 2005 said the state airport operator has been illegally collecting rentals from tenants, and that the government owes it $846 million.

At an aviation industry conference on Jan. 19, an official of Cebu Air, Inc., operator of budget carrier Cebu Pacific that operates at NAIA-3, said 18.6 million domestic passengers are projected to travel this year, way above the terminal’s capacity of 13 million annually.

NAIA-3, however, is not being used at full capacity and handles only around 8 million passengers a year. Other airlines use the old domestic terminal while flag carrier Philippine Airlines has both domestic and international operations at NAIA Terminal 2.

Alex B. Reyes, Cebu Air vice-president for commercial planning, said in a speech at the annual aviation summit at Villamor Airbase in Pasay that this year will be “exciting for the commercial aviation industry” with the expected growth in passenger volume.

“We based the projection on the compounded annual growth rate of the industry of 9%. NAIA Terminal 3 is one of the largest terminals in the world but we need to expand it,” he said.

Mr. Reyes said the NAIA-3 building should be extended.

“The country needs a low-cost, simple terminal extension that would cater to the Philippine market. We don’t need those expensive and high maintenance airport terminals in other countries,” he said.

Mr. Reyes said the clamor for expansion was due to the additional fleet being acquired by local airlines. “We will continue to offer the lowest fares in every route we operate in, and offer better connectivity and flight schedules, as we take delivery of five more brand-new Airbus A320 aircraft in 2011. The airline’s 25th Airbus aircraft is set to arrive in the last week of January 2011,” he said.

PAL President Jaime J. Bautista told reporters the company will expand its fleet by 50% through its sister company Air Philippines.

“Through our sister company Air Philippines, we see the growth in low-cost carriers. More and more are traveling domestically this year,” he said.

Cesar M. Chiong, Air Philippines executive vice-president and chief operating officer, said airlines that are not operating at NAIA-3 will also benefit from the expansion, pointing to domestic connecting flights.

“Yes. We need an expansion,” he said.

Sought for comment, the Manila International Airport Authority (MIAA) said it could not commit to an expansion.

Jose Angel A. Honrado, MIAA general manager, told BusinessWorld in a telephone interview yesterday 8 million to 9 million passengers used NAIA-3 last year.

“The airlines are continuously increasing their fleet through the years.

However, we can’t still give the date when the full capacity of the airport terminal would be exhausted.”

Cebu Pacific expects to fly 10 million passengers this year from NAIA-3 alone, out of the total 12 million estimated this year from the airline’s hubs in Manila, Cebu, Pampanga, and Davao.

The graft-ridden NAIA-3 project was mothballed for 5 years after the Supreme Court ruled in 2003 that the pre-qualification and award of the project and the concession agreements six years earlier were null and void ab initio for violating the Constitution, the build-operate-transfer law, and the rules on public bidding.

German airport operator Fraport AG, the major investor in the consortium that built NAIA-3, filed a case before a World Bank body on Sept. 17, 2003, claiming $425 million from the Philippine government.

The government decided to expropriate the terminal in 2005 to hasten its opening, paying an initial P3 billion in compensation to the consortium Philippine International Air Terminals Corp. or PIATCo ahead of court proceedings.

Last Dec. 23, the International Center for the Settlement of Investment Disputes (ICSID) -- a unit of the World Bank group -- reversed an August 2007 ruling dismissing Fraport’s $425-million claim. This allows Fraport to pursue arbitration proceedings.

The 2003 Supreme Court ruling barred the exercise of “acts of ownership” by the government until the airport developers have received just compensation following court expropriation proceedings.

But NAIA-3 was finally opened to flights in July 2008 after the government decided to just place all rental collections from terminal operations in an escrow account to avoid exercising acts of ownership until the dispute is resolved.

On Jan. 19, PIATCo said it still has rights as the legitimate owner of the airport terminal.

Napoleon J. Poblador, PIATCo spokesman, toId BusinessWorld in a telephone interview the government would have to pay “just compensation” worth $846,428,946.

“The company is entitled with this just compensation according to the computation of the Supreme Court ... ,” he said.

In a newspaper advertisement on Jan 19, the company said it would “use every legal means available to protect its rights as the legitimate owner of NAIA Terminal 3.”

“PIATCo remains as the legitimate owner of the NAIA Terminal 3 and granting such concessions and leases or getting a third party to operate the same, whether by public bidding or otherwise, is an act of ownership,” it said.

“MIAA is usurping PIATCo’s rights as the legitimate owner and is violating the Supreme Court decision dated Dec. 19, 2005 holding that PIATCo must be fully compensated for the NAIA Terminal 3 which it owns and that until such full payment the government is prohibited from performing acts of ownership such as awarding concessions or leasing any part of the NAIA-3 to other parties,” it said.

Transportation Secretary Jose P. de Jesus declined to comment on the matter.

Mr. Poblador said that government wants to pay PIATCo only about $150 million.

“If the government would not follow the decision of the higher court, we are seeking other legal options,” he said.