Airline Warns vs Fee Hikes in Iloilo Airport Expansion

By Rjay Zuriaga Castor

Budget airline Cebu Pacific (CEB) has expressed concerns that the proposed privatization of Iloilo International Airport in Cabatuan, Iloilo, could lead to increased operational costs, which may ultimately burden passengers.

Alexander Lao, CEB’s chief commercial officer, acknowledged that privatization is expected to enhance the airport’s capacity and efficiency. However, he cautioned against potential cost increases that could impact travelers.

Lao urged private operators to explore alternative revenue sources instead of passing costs onto passengers.

“Hopefully, there are other ways that a private operator can probably raise or get this return on investment without necessarily raising the cost of capital,” Lao told Daily Guardian on Thursday, Jan. 30.

Lao suggested that non-aeronautical revenues, such as income from airport shops, duty-free outlets, specialty stores, marketing spaces, digital ads, and sponsorships, could serve as viable revenue streams.

He pointed to the recent privatization of Ninoy Aquino International Airport (NAIA), which resulted in significant fee increases that directly impacted the overall cost of travel.

The New NAIA Infrastructure Corporation, led by San Miguel Corporation, has implemented substantial fee hikes since taking over operations. Overnight parking fees surged from PHP 300 to PHP 1,200, while terminal fees for international flights are set to increase from PHP 550 to PHP 950. Meanwhile, domestic terminal fees will rise from PHP 200 to PHP 390. 

MAXIMIZING ILOILO AIRPORT’S POTENTIAL

When asked about the immediate concerns that should be addressed amid CEB’s expansion, Lao emphasized the need to maximize the airport’s current capacity and efficiency.

“The potential for the airport is clearly there […] The airport is quite a massive piece of land. The terminal capacity—there are actually parts of the day when it can be utilized a lot more, so I think the airlines can work around that,” he said.

To optimize airport operations, Lao called for better coordination between the public and private sectors.

He also hinted that the Notice of Award for the Iloilo Airport privatization is expected by the third quarter of this year.

PRIVATIZATION PROCESS AND NEXT STEPS

In December 2023, Public-Private Partnership (PPP) Center Deputy Executive Director Jeffrey Manalo confirmed that the Villar Group’s unsolicited proposal to operate and maintain the airport successfully passed the negotiation phase.

Following the negotiation, the proposal must be reviewed and approved by various government bodies, including the Department of Transportation (DOTr) and the Civil Aviation Authority of the Philippines (CAAP).

The National Economic and Development Authority (NEDA) Investment Coordination Committee (ICC) will also assess the proposal. For projects exceeding a certain value, NEDA ICC endorsement is required before final approval by the NEDA Board.

Once endorsed, the proposal will undergo a comparative challenge period, lasting at least 90 days, where other firms may submit competing offers. The original proponent retains the right to match any competing bids.

The P12.79-billion PPP project for Iloilo Airport includes expanding the passenger terminal building (PTB) and constructing an apron adjacent to the new PTB expansion, among other improvements.