SMC’s Ang starts bold NAIA reforms
THE consortium led by San Miguel Corp. CEO Ramon S. Ang won the government bidding in February 2024 to transform the Ninoy Aquino International Airport (NAIA) into a world-class facility.
SMC’s main partner is South Korea’s Incheon International Airport Corp., which built South Korea’s gateway to the world. While relatively low-profile compared to other airports in the world, the Korean facility is frequently recognized as one of the best-managed airports in the world. It has consistently been rated highly in various global rankings and awards for its efficiency, customer service and infrastructure.
The SMC consortium, through its corporate vehicle, New NAIA Infra Corp (NNIC), took over the airport last September 14. Barely two months later, it met with expected attempts to resist its initial reforms, with a media blitz against the new operator hit by the changes. That means the consortium has fast unearthed the problems at the airport and is moving fast to correct this.
Crowded terminals, long lines and delayed flights had become features of the NAIA in the post-EDSA era, which would certainly have made the assassinated Ninoy Aquino, after whom it was named, roll over in his grave every day. But these problems didn’t emerge overnight — they evolved from a system where a few privileged individuals and groups held monopolies on contracts and services.
These monopolies thrived off NAIA’s high traffic but reinvested little back into the airport. Decades of underinvestment, coupled with questionable practices, meant that NAIA never received the upgrades it so desperately needed. As a result, the airport faces an array of issues — from rat infestations and leaking roofs to faulty x-ray scanners, malfunctioning walkalators, broken elevators, and unreliable air conditioning systems, among many others.
There is even petty graft, as has been the “escort services” — a practice virtually unheard of in major airports worldwide. For a fee, certain passengers could skip lines entirely, creating an environment where a select few enjoyed convenience at the expense of fairness and safety for everyone.
The airport’s new operator has systematically been removing outdated practices — requiring open bidding for contracts, ending monopolies, and eliminating these “escort services.”
Lease
One example of past major mismanagement is the long-term lease on some hangars at the airport, which were leased at 20 centavos per square meter for 50 years, only to be subleased at rates as high as P350 per square meter. Such arrangements clearly favored a select few over fair use and sustainable development of airport resources.
Then, there is the issue of parking fees, which has drawn criticism since the new operator moved to raise overnight fees from P300 to P1,200. Many viewed this increase as the greedy outcome of privatization. However, the intent was to discourage overnight parking to free up space for short stays — P50 for two hours, similar to mall rates. This shift helps NAIA reduce congestion at arrival and departure areas and curb traffic on surrounding roads caused by vehicles circling while waiting.
The impact has been immediate. An estimated 1,800 parking slots opened up as non-airport users were deterred. NAIA’s parking lots became sparse, cleared of patrons from nearby establishments, condominium residents using the space for cheap long-term parking, and transport providers operating out of the airport lots.
In fact, more than 20 abandoned cars, some dating back nearly a decade, were uncovered. With the additional benefit of reduced curbside traffic, NAIA can now better serve active travelers.
Despite this positive outcome, some argue that “legitimate travelers” should still have access to long-term parking at reduced rates. But NNIC’s priority, especially with the temporary closure of Terminal 4 and increased traffic through other terminals, is to maximize limited space for short-term use. NNIC has already planned new parking facilities, expected in 2-3 years, which could offer more flexibility for long-term parking. Until then, the focus remains on the good of the majority rather than the convenience of a few.
Not profit-driven
Contrary to claims, the fee increases are not profit-driven: 82 percent of parking revenues, including the higher overnight rate, go directly to the government, with only 17 percent going to NNIC. This 82 percent share stems from the SMC-led consortium’s competitive bid to rehabilitate NAIA.
The same airline companies voiced alarm over fee increases, with a media blitz warning of their impact on tourism. This is perplexing, considering they were part of a consortium pushing for the contract and fully aware of pre-determined fee adjustments, which were set by the government through the Department of Transportation and the Asian Development Bank as financial advisors. The mandated fee increases were known in advance, and the new operator is simply implementing what was agreed.
The fee adjustments have been urgently needed since NAIA’s rates had not changed since 2000, despite a 142 percent rise in inflation. Airlines have long enjoyed some of the lowest takeoff and landing fees globally. This artificially low pricing left NAIA without the resources necessary to maintain, let alone upgrade, its facilities.
Now, after losing their bid to operate NAIA, some airlines have tried to sway public opinion against the fee increases by claiming it will lead to higher ticket prices. While it’s true that operating costs will rise, these increases are meant to reflect the real cost of running a modern airport. Passengers deserve transparency on how these costs are passed on, and airlines should reassure the public that any adjustments are strictly within the bounds of the mandated changes.
Ultimately, it comes down to fair contributions from all stakeholders to ensure NAIA’s rehabilitation. As beneficiaries of the airport, airlines and other users must recognize the importance of paying rates that sustain the improvements necessary to make NAIA a world-class facility.
Impact
Many who benefited from the previous system are feeling the impact, and these changes have brought NAIA’s longstanding issues into the public eye as never before. Those hit hardest by these changes are driving much of this scrutiny, thinking they could pressure Ang and his consortium to slow down or reverse the reforms.
My bet is that resistance to the reforms will dissipate as the SMC consortium goes deeper into its work to rehabilitate the airport. This resistance are petty compared to Ang’s audacious move to convert the NAIA into a world-class facility, which could be a revolutionary development for the country.
This is not an exaggeration if you consider the following;
First, while the NAIA has been since the 1980s our gateway to the world, it is a microcosm of everything wrong with this nation and institutions run by the State — monopolies, elite and politicians’ capture of regulatory bodies, corruption. It has been the country’s Augean stables of Greek mythology — so dirty and filled with manure for centuries that only the demigod Hercules could clean it up by rechanneling a nearby river to wash away its layers of filth.
Second, the history of countries (the US and Singapore, among others) known for their government’s efficiency and extremely low level of corruption shows that a breakthrough in totally cleansing one or two institutions was enough to inspire even the political elite into undertaking a nationwide anti-corruption drive.
This happened in the 1920s anti-corruptionduring America’s so-called Progressive Era from 1890 to the 1920s with, would you believe, the Department of Agriculture becoming the primary target of an intense ant-corruption drive. The campaign was extremely successful, helped by laws that Congress passed. (Too bad our Congress has been focusing on undertaking kangaroo courts to demonize past president Rodrigo Duterte.)
In a decade, US agriculture became the world’s most mechanized and productive industry that became the necessary base (mechanization drove workers to the industries, at cheap labor costs) for the growth of US industry, which was stimulated by its World War I and II.,
If there is one thing that made Singapore and Hong Kong as rich as they are now, it has been their anti-corruption campaigns, in the former led by Lew Kuan Yew’s Corrupt Investigation Bureau starting in 1959, and the latter through the Independent Commission Against Corruption set up in 1974. As a result, even with few natural resources, these two economies became financial powerhouses in Southeast Asia.
And third, the consortium that will modernize the NAIA is led by the now renowned SMC CEO Ang — who an admiring business and media community refers to as “RSA” — who has in 25 years since he took over the firm from Marcos, Sr. ally Edgardo Cojuangco, demonstrated his extremely excellent management and financial expertise. He has transformed what t for many decades has been essentially a beer-and-gin company into the country’s biggest conglomerate that includes infrastructure, power, fuel and oil companies. Analysts have said that there is no other CEO in the Philippines better than Ang for the NAIA project, not just for his management skills but because of the fact that, unlike most tycoons in the country, Ang’s passion has been in the engineering making him acutely aware of engineering problems, such as those he’ll confront in rehabilitating the NAIA. Ang, so far, has not failed in any of the new businesses he has started.
Strategic
RSA’s consortium is named SMC Strategic Airport Partners & Co., 33 percent owned by an SMC subsidiary and 10 percent by Incheon International Airport Corp. The two other partners RMM Asian Logistics Inc. with 30 percent share and RLW Aviation Development Inc. with 27 percent appear to be passive investors.
This means that RSA will be in total command of the project. Successful corporations have always required such strong one-man leadership, so it is unhampered by conflicting views and agendas in a consortium consisting of several normally egoistic magnates.
RSA’s group in February won the bidding for the concession revamp and management of NAIA, with its offer to give government an 82 percent share in revenues with government. This was astoundingly way above the 33 percent offered by a consortium of the country’s biggest magnates and 26 percent made by an Indian airport builder. The 15-year term of the concession is crucial: It eliminates the vagaries of government policy and changes in NAIA leadership every time a new administration comes to power. Even NAIA’s budget is determined on a year-to-year basis, authorized by a new budget law every year.
The rehabilitation of the NAIA will be the first case of an existing, crucial infrastructure that is going to the dogs to be done and managed by a respected, experienced tycoon.
RSA should succeed — for the nation’s sake. I cannot see any other government or private initiative that could rouse a national determination to finally push forward this sorry nation. RSA seems to be serious when he titled his message to stockholders in the company’s 2023 annual report “Our business is nation-building.”
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SMC’s Ang starts bold NAIA reforms
Source: Breaking News PH
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