Numbers Don’t Lie
By Andrew J. Masigan
Anyone who has recently landed or departed from the Mactan-Cebu International Airport (MCIA) will attest that it is both an architectural and operational triumph. MCIA represents redemption for the Philippines after having had the infamy of operating the worst airport in the world in previous years.
In the recent World Architectural Festival held in the Netherlands, MCIA bagged the grand prize in the transport category, edging out the world renowned Changi Jewel Airport of Singapore. The panel of judges praised MCIA’s architectural design for its simplicity, elegance and ingenious use of Filipino materials. Earning high praise were the use of mother of pearl in the flooring to resemble the sparkling sand of Cebu’s beaches and the high arched roofline that represents the tides of the ocean. Also applauded were the check-in counters which are covered in intricate weaves, reminiscent of banig (local woven mats). These, among many other architectural innovations, are the reasons why MCIA is now considered one of the best airports in Asia.
In terms of passenger experience and efficiency, MCIA was named one of the best airports in Asia in the 2019 survey conducted by sleepinginairports.net. This is the same ratings organization that named NAIA the world’s worst airport from 2011 to 2013 and among the 10 worst from 2014 to 2016. MCIA was acclaimed for its comfort (gate seating and rest zones); services, facilities and things to do; food options; immigration and security; customer service; cleanliness; navigation and ease of transit; and “sleepability.”
Megawide, in collaboration with GMR of India, is the group behind MCIA. The formidable duo is the only group that has delivered a 21st century, world class airport to the Filipino people. They have proven that a Filipino company is indeed capable of engineering excellence, architectural innovations and operational efficiency.
Although NAIA is no longer one of the worst airports in the world, it pales in comparison with other airports in the region in terms of size, aesthetics, efficiency and comfort. As the country’s premier gateway and the nation’s face to the world, NAIA has brought shame to the country for its aging facilities and chronic runway and terminal congestion.
The Duterte government has sought to privatize the NAIA, recognizing that private companies have both the financial resources and management savvy to better rehabilitate and operate the airport. In 2018, it awarded the original proponent status to a consortium of seven conglomerates (a.k.a. the Consortium) to renovate, upgrade, expand and operate NAIA.
Two years were spent negotiating the terms and conditions of the deal, which moved at a snail’s pace. When the pandemic hit, the Consortium proposed even more adjustments to the terms to ensure the project’s bankability amid plummeting passenger volume. The consortium’s proposed terms proved unacceptable to the government. Hence, it decided to revoke the consortium’s original proponent status altogether.
As the second-in-time proponent of the project, the Megawide Group was offered the original proponent status on the condition that it would accept all the terms and conditions of government, some of which carry high financial risk. After studying the project in record time (just seven days), the folks at Megawide felt it could do to NAIA (a total transformation) what it did for MCIA, even with the government’s rigid conditions. It decided to move forward with the project. Days later, the government granted Megawide original proponent status.
Megawide has grand plans for NAIA and is investing P107 billion to make the country’s principal gateway another symbol of Filipino pride. In its first year, airside capacity will be expanded to solve runway congestion once and for all. Full-length parallel taxiways for both runways will be built along with additional Rapid-Exit Taxiways (RETs) for the primary runway. The second runway will be extended as well. With this, peak hour capacity will increase by 50% from 40 to 60 movements per hour.
Simultaneously, visible improvements will be done to the terminals on year one. Within 24 months, Megawide will rehabilitate and expand the existing terminals for which the total area will be doubled to approximately 700,000 square meters. When completed, both the airside facilities and the terminals will be able to handle 65 million passengers a year, two times its capacity today.
All these will be accompanied by the massive beautification works that Megawide is known for. Megawide is determined to transform NAIA into one of the best airports in the world. This will come to full fruition by 2026.
Despite the impeccable track record of Megawide, some members of the National Economic and Development Authority’s Investment Coordinating Committee (NEDA-ICC) are standing in the way of the deal by questioning the company’s financial capability. Mind you, not even the Department of Finance nor the Department of Transportation have expressed doubts over Megawide’s financial capability.
Certain members of the NEDA-ICC assert that Megawide must have equity equivalent to 30% of the entire project cost. This comes as a surprise since NEDA has always required project proponents to have sufficient equity to finance only the different phases of the project when they become due, not the entire project.
In fact, when the government offered the privatization of the Bacolod, Iloilo, and Puerta Princesa airports, it required the proponents to show equity equivalent to only 5% to 20% of the cost of each phase. So to require Megawide to present equity equivalent to 30% of the entire project cost is inordinately excessive, not to mention inconsistent with generally accepted practices. So arbitrary is this requirement that insiders are speculating it is being done to sabotage the project to allow a certain political dynasty to take over the deal.
Megawide has already demonstrated that they have 30% equity on hand to finance not only the first phase but the first two phases of the project. This is validated in their audited financial statements. And if the government were to insist on requiring equity of 30% of project cost, Megawide could meet this requirement if the issuance of treasury shares, additional preferred shares (already filed with the SEC), and the retained earnings for 2020 are to be factored-in. Either way, Megawide’s finances are more than sufficient and should not be made an issue.
Look, I stand in defense of Megawide because they have proven adept in rehabilitating airports to great success — MCIA is a shining example of what they are capable of. They play by the rules and succeed on the back of hard work and good financial management — not through political favors. They have accepted the steep terms of the government even if it carries high financial risks. Above all, they are Filipino firm that is blazing the trail in engineering — they deserve to be supported by the government and our people.
Other parties intent on grabbing the project from the original proponent will have an opportunity to do so in the Swiss Challenge. Let the battle happen in the challenge, not through political maneuvering.
Andrew J. Masigan is an economist
