Philippines Aviation NEWS: Cebu Pacific expects to fill NAIA-3 by 2012, wants expansion

MANILA, Philippines - Cebu Pacific said it has opened discussions with government for the expansion of the capacity of the NAIA Terminal 3, the base of the Gokongwei-owned budget airline's operations in Manila.

In an aviation summit in Manila, Cebu Pacific vice president for commercial planning Alex Reyes said they have initiated talks with the Manila International Airport Authority to expand NAIA-3's capacity to 20 million passengers a year from the current 13 million.

He noted the facility is starting to look "inadequate," hence the need to firm up plans for an annex to the terminal.

"That way, T3 can accommodate not just Cebu Pacific's growth but the entry of additional foreign carriers. If foreign carriers operate at T3, we will benefit as the long-haul carriers will provide feed to our domestic network into the country's tourist spots," he said.

Cebu Pacific is one of the 2 local airlines operating in NAIA-3. The other international airlines remain wary of transferring their Manila operations to NAIA-3, a controversial but much-needed facility.

Capacity limits expansion

Reyes went on and disclosed that Cebu Pacific intends to fill up the entire NAIA 3 by late 2012 or early the next year, but the plan is anchored on the expansion of the terminal.

"First, we wish for infrastructure that stays ahead of the curve. In other words, terminals, runways, and navigation systems...that are more than adequate for the next 5 years. Having the infrastructure in place means companies will have the confidence to invest billions to further grow their business," he added.

President Aquino earlier identified tourism and infrastructure as the target drivers for economic growth in the coming years, with an aim to double Philippine tourists to 6 million by 2016.

"This is a welcome development for commercial airlines, but it will be an added strain on our airport infrastructure," said Reyes.

By the end of 2011, Cebu Pacific is expected to operate a fleet of 37 aircraft, from 32 today. Between 2012 and 2014, it will take delivery of an additional 16 Airbus A320 aircraft.

Reyes said other airlines are also growing and beefing up their fleets.

"We are going to see much busier skies around the country. If we don't act quickly, we will see grid lock on our ramps, on our airways, in our terminals."

Open skies

Aside from improvement of the physical structure, Reyes stressed the need for "soft" infrastructure at NAIA-3. These are rules, procedures, and highly skilled aviation personnel who manage the airways and check whether everyone is operating under international safety standards.

"By soft infrastructure, we also mean the air rights or entitlements between our country and our major trading partners. Today, there are no more air rights available between Manila and the major capital cities such as Tokyo, Singapore, Jakarta, Kuala Lumpur, Bangkok, as well as Hong Kong. This means no new international services can be started between Manila and those cities, which are a major source of tourists for the country. Removing constraints such as the lack of air rights will boost the growth rate of the industry," he said.

Most of the over 3 million tourists and Filipinos working overseas arrive in the country through the Manila airport, still the country's main gateway.

However, aside from the capacity of the 3 airport terminals handling international flights at NAIA, the capacity of the existing runways has also stifled the capacity growth of the airport.

Ninoy Aquino International Airport, which was named after the late father of President Benigno Aquino III, is located right smack in the middle of the metropolis, making runway expansions impossible.

President Aquino is set to finalize an open skies regime within the month. This aviation policy allows for a relaxed regulatory environment that paves the way for more international airlines to mount flights to the Philippines sans the usual bilateral air agreements with other countries.

However, Manila airport will not be included among the secondary international airports that will be part of the open skies regime.

The fate of the Manila airport -- and NAIA-3 terminal in particular -- will be partly dependent on how the Aquino government will support the open skies policy with the necessary infrastructure, including roads and rails, to make visits to the the country's capital stress-free.

Controversial NAIA-3

The dramatic business growth of the Gokongwei-led budget carrier reached a tipping point when it consolidated its local and regional flight operations at NAIA 3.

It took the risk when the controversial terminal facility opened at half of its 13 million capacity in July 2008 despite the legal, financial, structural and safety issues that hounded it.

The risk paid off. Two years after, it clinched the top spot in the domestic airline market from decades-long industry leader Philippine Airlines.

There were instances when Cebu Pacific would be reminded of the many issues that haunt NAIA-3. It has received eviction notices from Piatco, the Filipino-German consortium that built NAIA-3.

After German airport firm Fraport AG won a favorable decision from an international arbitration court in December, the German ambassador to the Philippines echoed Piatco and said the NAIA-3 concessionaires -- including Cebu Pacific -- are illegal tenants.

The Gokongweis remained determined to stick it out at NAIA-3.

Cebu Pacific Air chief executive officer Lance Gokongwei had even earlier said that the Gokongwei group, through parent firm JG Summit, is interested in bidding for a contract to operate NAIA-3.

Despite its budget and no-frills business model, Cebu Pacific seems bent on not letting go of a key terminal originally designed to cater to the needs of legacy airlines.

Budget airlines' needs

CEO Lance Gokongwei had said that some of the country's airports in destinations outside Metro Manila have yet to fit the requirements of a budget airline operations.

Reyes echoed this during the summit. "We have about 85 airports around the country. Often, what we find is that the basics just don't get done. We find perimeter fences unfinished. We find safety markings incomplete. We find x-ray machines that breakdown more often than they should."

"When our perimeter fences are not completed, when airport security is compromised because of budget constraints - these are unacceptable for an industry that prides itself in putting the safety of the riding public above all else," he added.

"We do look for simple terminals requiring little maintenance - warehouse-type single-storey structures such as the Budget Terminal in Singapore - that can comfortably move thousands of passengers in a day. These are the types suited for Philippine conditions.

"We are also in need of airports with night-landing capabilities, especially for the fast-growing tourist spots such as Naga, Butuan, and Legazpi. More night-capable airports will mean airlines can schedule flights beyond sunset, helping to decongest Manila's runways during the noon to early afternoon peaks.

NEHA JAIN

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