The Ninoy Aquino International Airport (NAIA) has been the Philippines' primary international gateway since it was built in 1956. The article below discusses the rehabilitation and modernisation PPP project, which will help alleviate the airport's chronic congestion. By Rosemary Ong, principal markets development specialist, Asian Development Bank
The Ninoy Aquino International Airport (NAIA) has been the Philippines' primary international gateway since it was built in 1956. It is overwhelmingly the Philippines' largest airport for both international and domestic travel.
Located in the capital Manila, the airport, initially built to cater for 33.2m passengers per year, has been accommodating 15m more, reaching close to 48m passengers in 2019, the last full year before the Covid pandemic. Several expansions and the addition of two terminals in 1999 and 2008 have done little to alleviate the airport's chronic congestion.
NAIA is among the top five busiest city airports in terms of capacity in the region, along with Changi Airport (Singapore), Suvarnabhumi Airport (Bangkok), Soekarno-Hatta International Airport (Jakarta), and Kuala Lumpur International Airport (Kuala Lumpur). The passenger traffic of NAIA grew at a compounded annual growth rate of 5.6% per annum from 2009 to 2019 pre-pandemic.
The airport has a total land area of approximately 600 hectares, of which around 70% is currently dedicated to airside facilities, such as the runways and taxiways, while the remaining 30% accounts for areas that cover landside facilities such as passenger terminal buildings.
It serves a large area spanning the Greater Capital Region, which includes Metro Manila; the provinces of Cavite, Laguna, Batangas, Rizal, and Quezon – located immediately south and east of Metro Manila, collectively known as Calabarzon; and the provinces of Bulacan, Pampanga, Nueva Ecija, and Tarlac-situated immediately north of Metro Manila, commonly referred to as Central Luzon.
NAIA is one of two operating airports in the Greater Capital Region, the other being Clark International Airport about 80km north of Manila. Another airport in Bulacan is under construction, while a much smaller airport, Sangley Point Airport within the Greater Manila area, continues to operate limited domestic flights.
Despite strong traffic and passenger growth, NAIA has long been plagued by underinvestment, result in in overcrowded terminals, long queuing times, substandard facilities, and a reputation – both local and international – as one of the world's worst airports.
Recognising NAIA's role as the Philippines' face to the world, the first place where many foreigners form their views of the Philippines, and the main entry and exit point for the country's millions of overseas workers, the government made bidding and awarding a PPP concession for NAIA a high priority.
The solution
The Department of Transportation (DOTr) launched the bid for the NAIA Public Private Partnership Project (NAIA PPP) in August 2023, supported by the Asian Development Bank (ADB) as transaction adviser. The PPP was designed to ensure that the capital expenditure needed to bring NAIA to international standards was undertaken during the first six years of the concession period, and that operations and maintenance improvements begin to be felt by passengers very soon after the concession period begins. Capital expenditure investments include modernising air traffic control systems, rehabilitating runways and taxiways, upgrading baggage handling systems, the expansion of terminals, and flood control measures.
These improvements are expected to increase aircraft movements from 42 to 48 per hour, expand passenger capacity to 62 million passengers per year, while simultaneously reducing delays, improving efficiency, and improving the overall passenger experience.
The operator is also expected to meet a set of defined key performance indicators to ensure that critical equipment always works, sufficient space for passengers is available, and waiting times are reasonable. To ensure compliance with prescribed standards, failure to meet these indicators would incur financial penalties for the operator.
NAIA is strategically situated near Metro Manila's major business districts of Bonifacio Global City, Makati Business District and Ortigas Business Center, offering convenient and efficient mobility for those traveling for work.
Unlike other airports in Manila's Greater Capital Region, such as Clark International Airport, New Manila International Airport (ongoing development) and the proposed redevelopment of Sangley Point Airport, NAIA gives business travellers the shortest commute to these business districts. This competitive advantage sets NAIA apart from other airports as the preferred and convenient option for both domestic and international travel.
By positioning the airport as the preferred choice of business travellers, the NAIA PPP project aims to further diversify its non-aeronautical revenues by providing services that cater to this market, such as business hotels, premium car and transfer services, premium airport lounges, and high-end shops. Business passengers will tend to pay a premium for the ease of flying in and out of the country from a central location like NAIA.
The other locational advantages of NAIA include:
* High passenger traffic potential – Metro Manila is densely populated and attracts many business travellers, tourists and migrants. This can significantly contribute to a higher volume of passenger traffic, leading to increased revenue opportunities for the concessionaire.
* Attractive for premium airlines – The central location of NAIA makes it more appealing for premium airlines to make NAIA their hub of operations. NAIA offers proximity to business districts and tourist attractions.
* Ease of connectivity – When the planned rail projects that connect to the airport become operational, NAIA will integrate seamlessly with the transport networks that connect the various parts of Metro Manila. This improved connectivity will further enhance NAIA's accessibility and build strong customer loyalty.
* Business and conference centres – NAIA is a short distance from the commercial, business and conference centres of Metro Manila's central business districts.
Within the project land provided by the Manila International Airport Authority (MIAA), the private sector concessionaire will have the opportunity to harness its commercial potential. As will be indicated in the concession agreement, the concessionaire is allowed to develop hotels and serviced apartments that are expected to generate revenues for the concessionaire and also upgrade the passenger experience and NAIA's overall image.
Commercial development could be an untapped revenue stream for NAIA. While runway limits may eventually curb growth on the airside, commercial development is an opportunity limited only by the concessionaire's skills in retailing and commercial development. At present, non-aero revenues from NAIA are relatively low in comparison with international counterparts and can still be improved.
Several ways of developing the land include:
* Real estate development – Leasing available land to aviation-related businesses and developing hotels and serviced apartments can generate substantial revenues. These amenities not only serve passengers and visitors but also generate revenues that can be reinvested into airport operations.
* Parking facilities – Expanding or optimising parking facilities on available land can accommodate increasing passenger parking needs and thus give additional revenues.
* Cargo and logistic centres – Developing cargo and logistics facilities near the airport can build up its shipping and logistics volume and revenues.
* Training and education – Collaborating with educational institutions to establish desk/laboratory-based aviation training centres or programmes can result in revenues from tuition fees while contributing to upskilling the workforce.
The competitive tender
NAIA's accessibility, proximity to business and commercial centres, growth potential and a thriving Philippine economy fuelling strong growth in domestic and international travel, made the NAIA PPP an attractive investment opportunity.
The NA/A PPP features a 15-year concession, renewable for another 10 years for a total of concession period of 25 years, that has optimised government receipts, through a pre-determined upfront payment of Ps30bn (US$513m) paid at commercial closure, and Ps2bn (US$34m) in annuity payments throughout the concession period.
Additionally, the winning bidder was determined based on the highest revenue share to government, provided annually throughout the concession period. Revenues from airport operations, including aeronautical and non-aeronautical, such as commercial operations, will be shared with the government, aligning both parties' interests.
This revenue-sharing structure guarantees that as NAIA's passenger numbers continue to grow, the government will benefit from a progressive income stream, ensuring that rising traffic translates into tangible fiscal gains.
DOTr and the Manila International Airport Authority (MIAA) embarked on a single-staged solicited tender process for the NAIA PPP, which was launched in August 2023. The competitive tender process culminated in December with four bid submissions from reputable international airport operators and established local players.
The bids process was transparent, fair, and decisive. After a thorough evaluation of both the technical and financial proposals, the SMC-SAP & Company Consortium led by San Miguel Corporation was selected as the winning bidder, offering the highest revenue share to the government at 82%.
Ultimately, the project proves that the solicited process yields superior results vis-a-vis the unsolicited route with much better financial outcomes for the government and a more secure revenue structure, as illustrated in the Table 1.
The winning bidder was the SMC-SAP & Company Consortium, comp rising San Miguel Holdings Corp., one of the Philippines' largest conglomerates, two local firms – RMM Asian Logistics Inc and RLW Aviation Development Inc – and South Korea's lncheon Airport Development Corporation, the operator of South Korea's main international gateway, lncheon Airport outside Seoul. After winning the bid, the consortium organised itself into a new company, the New NAIA Infrastructure Corporation, which then entered into the concession agreement with the government of the Philippines.
Financing structure
At the heart of the NAIA PPP Project is a carefully structured financing package in multiple tranches, mainly for upfront payment and capex. The project's financing was fully committed and provided on a non-recourse basis in local currency. The loan tenor for all tranches is 15 years, inclusive of the three-year grace period, and is competitively priced with a stepdown provision post-construction, and covenant debt service cover ratio at 1.1x, applicable only after the grace period.
The Ps80bn (US$1.4bn) senior debt facility consists of the upfront payment facility and capital expenditure facilities. Although there was considerable interest from foreign lenders, debt was oversubscribed domestically by a club of local banks led by Banco de Oro (BDO) Inc as mandated lead arranger. Other lenders are Bank of Commerce, Asia United Bank Corp, China Banking Corp, Security Bank, and Development Bank of the Philippines.
Equity is provided by San Miguel Corporation; RMM Asian Logistics Inc; RLW Aviation Development Inc; and lncheon Airport Corporation.
ADB's role
The involvement of the Asian Development Bank (ADB) provided assurance that the project was thoroughly prepared and supported by independent and unbiased guidance on complex issues. ADB served as an impartial facilitator, committed to ensuring transparency and fostering competitive tension through a structured, solicited tender process. This approach successfully attracted participation from a broad range of suitably qualified international and domestic investors.
As the transaction adviser for the NAIA PPP Project, ADB's role extended beyond financial structuring to include the integration of environmental, social, and governance (ESG) safeguards into the project's specifications. This includes climate adaptation measures, such as flood protection, as well as the integration of renewable energy solutions.
Additionally, ADB played a key role in facilitating stakeholder consultations and ensuring adherence to international best practices, further strengthening the integrity of the competitive tender process for the NAIA PPP Project.
Key lesson learned
The NAIA Rehabilitation Project highlighted the critical importance of an integrated, long-term master plan in addressing complex infrastructure demands.
Previously, NAIA had expanded organically from one passenger terminal to four, without any change to the intersecting runway configuration, compounding inefficiencies and operational challenges.
The project reinforced the need for the airport to prioritise climate adaptation and compliance with global standards, particularly in high-demand environments. Incorporating these elements early on ensures the infrastructure remains resilient, adaptable, and capable of handling projected passenger growth and extreme weather conditions.
Integrating technology upgrades for electronic check-in counters, baggage handling systems and flight information systems, and deployment of advanced IT systems for air navigational systems, and energy-efficient solutions, plays a key role in modernising airport operations, enhancing both capacity and the passenger experience.
Another key lesson was the value of a comprehensive public-private partnership (PPP) approach in managing and optimising large infrastructure projects.
Through a PPP, the project achieved a careful balance between private sector efficiency and the airport's public service mandate, benefiting from the strengths and resources of both sectors. This collaboration extended into social and environmental dimensions, with lessons learned on embedding inclusivity – especially gender-responsive designs and facilities – and ensuring environmental sustainability through emissions reduction initiatives.
Overall, the project underscored the significance of thorough due diligence, multi-stakeholder engagement, and strategic planning as critical components of effective, large-scale infrastructure development.
Setting a precedent
The NAIA PPP Project is a flagship infrastructure project for the Philippines that demonstrates how the government can mobilise private capital and maximise its receipts by structuring a bankable project. Through a competitive tender process that ensures transparency and adheres to best practices, the NAIA PPP Project sets a new standard for PPPs in the region.
With its robust risk mitigation strategies and the integration of social safeguards and sustainability measures, the NAIA PPP has created a blueprint for future airport deals not only in the Philippines but in South-East Asia and beyond. It underscores the benefits of a competitively tendered PPP in addressing infrastructure deficits.
The execution of this deal positions NAIA to become a world-class airport, serving as a catalyst for growth in the Philippine aviation sector and setting a precedent for future large-scale infrastructure projects across the region.
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