DOF welcomes MIAA Board approval of NAIA rehab PPP contract

Finance Secretary Ralph G. Recto has welcomed the Manila International Airport Authority (MIAA) Board’s recent approval to award a contract to a winning private sector consortium bidder for the rehabilitation of the Ninoy Aquino International Airport (NAIA)––the largest solicited Public-Private Partnership (PPP) project under President Ferdinand R. Marcos, Jr.

“This is certainly a welcome development for this long overdue project. NAIA has been operating beyond capacity for 9 years, leading to poor service and passenger inconvenience. The NAIA PPP project has been in the works for three decades, spanning six administrations. It has finally turned into a reality under the Marcos, Jr. administration,” Secretary Recto said.

With an estimated project cost of ​​PHP 170.6 billion, the solicited proposal to rehabilitate NAIA aims to address the longstanding challenges of undercapacity, congestion, and underinvestment in the country’s main gateway.

A solicited proposal refers to projects identified by the implementing agency from the list of their priority projects, with the selection of the private proponent done through a public bidding process.

The Department of Finance’s (DOF) Privatization and Corporate Affairs Group (PCAG) is responsible for evaluating solicited and unsolicited PPP proposals, which undergo a rigorous screening process before they are submitted to the Investment Coordination Committee (ICC) and to the National Economic and Development Authority (NEDA) Board.

The solicited PPP project for NAIA was approved by the NEDA Board, chaired by President Marcos, Jr., on July 19, 2023. The project was evaluated within a record-breaking six weeks––the fastest approved PPP proposal in Philippine history.

The last major expansion of NAIA happened 10 years ago when its Terminal 3 was operationalized in 2014, leading to its current capacity of 35 million passengers per year. This capacity was breached as early as 2015 when NAIA serviced 36.7 million passengers and 47.9 million during peak.

Led by the Department of Transportation (DOTr) and the MIAA, the project is expected to increase airport capacity from 35 million passengers annually to 62 million, expand air traffic movements per hour from 40 to 48, improve service by applying internationally benchmarked Minimum Performance Standards and Specifications, and utilize private sector expertise for modernization and capacity expansion.

On February 16, 2024, the MIAA board awarded the contract for the project to the SMC-SAC Consortium, which submitted the highest bid amount and is sharing 82.16% of future gross revenues with the government––passenger service charges not included.

The Consortium comprises San Miguel Holdings Corp., RMM Asian Logistics Inc., RLW Aviation Development Inc., and Incheon International Airport Corp.

It is required to rehabilitate, operate, optimize, and maintain the NAIA airport, which includes improvements to its runways, four terminals, and other facilities.

According to the DOTr, the concessionaire will begin operating the airport in 3 to 6 months. The public can expect service improvements as early as the first year of operations.

The SMC-SAC Consortium shall submit an upfront payment of PHP 30 billion to the government as a premium, as well as an additional PHP 2 billion in annuity payments.

The deal requires the Consortium to remit a certain percentage of its revenues to the government, which served as the main bid parameter for the auction.

The PPP deal is aggressively forecasted to generate around PHP 900 billion in revenues for the national government in the course of its entire concession period, which is 15 years with a provision for extension of another 10 years. This is opposed to the total dividends remitted by MIAA to the government from 2010 to 2023, which was only PHP 22.05 billion.

The total capital outlay (CO) for NAIA from the MIAA corporate operating budget (COB) was PHP 13.56 billion from 2012 to 2022. Only PHP 8.26 billion of this amount was disbursed during the said period.

The forecasted national government revenues amounting to PHP 900 billion from the said deal include payments from the winning bidder of the following: PHP 30 billion upfront payment, a fixed PHP 2 billion annual payment, and 82.16% national government revenue share, excluding passenger service charges.