SMC Consortium Bags P170.6-B NAIA Privatization Project: A New Chapter for the Philippines’ Gateway?

The San Miguel Corporation-led SMC-SAP & Company Consortium won the bidding to privatize the Ninoy Aquino International Airport (NAIA). The awarding gave the ₱170.6-B rehabilitation project to one of the largest and most diverse conglomerates in the Philippines. It also ended the ‘fastest solicited public-private partnership (PPP) project’ of the Philippine government—only lasting for six months starting from the pre-bid conference last September. 

The San Miguel Corporation-led consortium includes four members, namely the San Miguel Holdings Corp., RMM Asian Logistics, Inc., RLW Aviation Development, Inc., and South Korea’s Incheon International Airport Corporation.

SMC Consortium Bags P170.6-B NAIA Privatization Project

Image from Senior Times PH 

NAIA, which gained a notorious reputation as the ‘world’s worst airport’ and the ‘world’s most stressful airport,’ has also made headlines recently for the troubling bed bug and rat infestation blasted online by local social media users. According to a statement by SMC, the consortium sees it as an honor to be chosen to spearhead the ‘long-awaited’ rehabilitation of NAIA. 

“Our proposal is designed not only to elevate NAIA to world-class standards but also to ensure that the government benefits from the most advantageous revenue-sharing agreement,” SMC said in a statement. “This aims to secure a favorable outcome for our shareholders while prioritizing fairness and long-term sustainability over immediate profits.”

The SMC-SAP & Company Consortium’s offer was attractive to the government from the very beginning of the project’s solicitation. The SMC-led group offered to give 82.16% of its gross revenue to the Philippine government, an amount that is more than double compared to what its competitors offer. According to Transportation Secretary Jaime Bautista, the PPP also reignited the Philippine government’s decades-long NAIA privatization efforts, which started 30 years ago. 

According to the consortium, operations and maintenance (O&M) or NAIA under the new management will begin within the year, with initial works like improving parking, seating, baggage retrieval system, bridges, and elevators to be available for use by 2025. The concession period itself will last for 15 years. In the 8th year, a review will determine whether to extend the concessions for an additional 10 years.

The Bidding War

Bautista announced the winning bidder on Friday, February 16. During the announcement, he also thanked the Department of Transportation and the Manila International Airport Authority, which participated in the bidding process. 

The bidding war began in September 2023, which included the GMR Airports Consortium (GMR Airports International B.V., Cavitex Holdings, Inc., and House of Investments, Inc.), which offered 33.30% of their total gross revenue. Another bidder was the Manila International Airport Consortium (MIAA, Aboitiz InfraCapital, Ayala’s AC Infrastructure Holdings Corp., Alliance Global-Infracorp, Filinvest, and JG Summit Holdings), which offered 25.91% of their gross revenue. The Asian Airport Consortium also participated in the bid but fell out in the beginning due to non-compliance. 

A New Chapter for the Philippines’ Gateway?

Image from Sakari Exam 

The intent to privatize the NAIA started during the term of then-president Fidel V. Ramos in the 1990s. However, the project was not pushed through and was revived only recently by the recent PPP solicitation. Many senators, such as Senator Grace Poe remain optimistic about the undertaking, who cited that the recommendation is “a proposal not only whose time has come, but is also well past its due.”

The awarding of NAIA’s O&M to the SMC-led consortium is surely a new chapter for the notorious airport. However, how the chapter goes depends on the consortium itself. Price changes in the airport are expected due to the privatization. Rental rates, navigation charges, and ticket pricing can change. This expectation also considers the predicted inflation in the coming years. Although MIAA General Manager Eric Jose Ines said that the passenger service charge will not increase. 

The awarding itself still needs to be finalized. SMC and the DOTr still need to sign the concession agreement within 30 days of the issuance of the Notice of Awards. ₱30-B upfront payment to the government must be done by the SMC. 

References

Privatizing Naia. (n.d.). Inquirer Opinion. Retrieved March 8, 2024, from https://opinion.inquirer.net/163863/privatizing-naia

SMC consortium ready to elevate NAIA to ‘world-class standard’. (2024, February 8). Philippine News Agency. Retrieved March 8, 2024, from https://www.pna.gov.ph/articles/1218518

SMC-led group wins bid for P170.6-B NAIA rehab. (2024, February 15). Manila Bulletin. Retrieved March 8, 2024, from https://mb.com.ph/2024/2/15/smc-led-group-wins-bid-for-naia-rehab

SMC-SAP & Company Consortium wins NAIA PPP Project. (2024, February 16). PPP Center. Retrieved March 8, 2024, from https://ppp.gov.ph/press_releases/smc-sap-company-consortium-wins-naia-ppp-project/