Bundling of provincial airport deals pushed

By: Miguel R. Camus@inquirerdotnet

Philippine Daily Inquirer / 05:19 AM March 12, 2018

The Aboitiz Group made a strong case for combining provincial airport contracts, stating that in the case of its own unsolicited offer to upgrade and operate four regional gateways, savings over the concession period would amount to some P7.4 billion.

This is the first time a specific figure on the cost benefits of having multiple smaller airports under a single operator was revealed.

The test case was the erstwhile bundled P108-billion Aquino administration-era regional airports public private partnership (PPP) contract. It originally included the operations, maintenance and development of the Bacolod-Silay, Iloilo, Davao, Laguindingan, and New Bohol air gateways.

It drew intense interest from the private sector, including the Aboitiz group, because of growth prospects in domestic travel and the bundling itself, which would allow private groups to achieve operational scale given that some of the gateways had less passenger traffic than others.

In this manner, some of the more commercially viable airports can offset weak business in others, while all benefit from upgrades.

That PPP package was not auctioned off in 2016 given the looming elections. It was scrapped altogether during the Duterte administration, which first decided to unbundle the projects without giving a clear reason and then eventually pulling these out of the PPP pipeline. It had stated, at the time, a funding preference for official development assistance loans.

The savings for bundled airports were outlined by officials of Aboitiz InfraCapital. They went into greater detail on the offer to upgrade and operate the Iloilo, Bacolod-Silay, Laguindingan and New Bohol gateways.

“If you don’t pool them together, imagine each of the airports would need its own corporate functions,” Iara Arcilla, Aboitiz InfraCapital manager, told reporters on Friday. The aforementioned savings would run for the entire length of the proposed 35-year concession.

Without such bundling, the company argued that some of the airport operations would require government support via subsidies.

“Our goal is to run the airports in the most efficient way possible and make it the highest level of service it can be. The only way to do that is really pool resources together,” Arcilla said, adding that upgrades in the airports were urgently needed given capacity constraints.

The company estimated that spending will amount to P148 billion over the concession period.

Arcilla also sought to allay worries about potential antitrust issues and higher costs should a single operator control multiple airports.

“The airport industry is very regulated,” she said.

Aboitiz InfraCapital may have to compete with businessman Dennis Uy’s Chelsea Logistics Holdings Corp., which also submitted a proposal to develop and operate the Davao and New Bohol (Panglao) International airports.

Read more: http://business.inquirer.net/247521/bundling-provincial-airport-deals-pushed#ixzz59Usrt600