June 5, 2019

On Bulacan Int'l Aiport, Duterte Finance Secretary's personal interests against Common Good?

Massive congestion in NAIA during the August 2018 Xiamen Air Incident, where a plane skidded off the runway, causing the cancellations of numerous flights as NAIA effectively lone runway is blocked.
Instead of allowing a new world-class airport, why does Finance Sec. Sonny Dominguez insist on us using an ultra congested airport and another one that's a bajillion miles away? Are Sonny's personal interests getting in the way of his decision-making? Is Dominguez, like the terminated ICT Secretary Rodolfo Salalima, another poster boy for regulatory capture?

Let's talk about that in greater detail.

NAIA, the worst airport on Earth

You may not know that that Ninoy Aquino International Airport (MNL/NAIA) is the 32nd busiest airport on the planet, but you probably aren’t surprised. The airport handled over 45 million passengers in 2018, a six percent increase from the previous year.

This is a far cry from the United States’ Hartsfield-Jackson International in Atlanta and China’s Beijing Capital International Airport, each of which handled over 100 million passengers in the same period. However, the fact is that NAIA is already handling 10 million more than its designed capacity of just 35 million passengers annually.

Most airports in the world have two runways each, enabling them to handle two simultaneous landings or takeoffs. NAIA has two runways too. However, NAIA can handle only one landing or takeoff at any given time because the two runways run perpendicular to each other, making simultaneous landings or takeoffs too dangerous.
A Third Runway

Addressing this issue requires building a third runway.

There was a plan to build a third runway during the Aquino Administration but it was shelved in 2015 after it was found out that it requires building over part of Paranaque’s Merville Subdivision and the closing off of Moonwalk Access Road.

That is, building the third runway requires [1] evicting hundreds of residents that would pretty much take forever, and [2] removing a crucial artery of C-5 road that will certainly worsen the already apocalyptic traffic situation in the Metro.

Building a third NAIA runway requires bulldozing a sizeable chunk of the heavily populated Merville Subdivision and building over a major feeder road to C5.
In short, it’s basically infeasible to increase the number of flights that NAIA can handle. Regardless of how many terminals we build, the fact remains that the number of aircraft that land and take off from NAIA will remain pretty much the same, unless there’s a way to more efficiently use the existing runways.

The NAIA Consortium

The Department of Transportation on 02 May 2019 approved the Ayala-led NAIA Consortium’s offer to upgrade NAIA. The consortium promised to increase capacity to 65 million passengers yearly as it promises to expand NAIA’s terminal complexes and increase hourly takeoff and landing movements up to 52 from the current 40, among others.

While laudable, this airport upgrade is just a band-aid solution.

These are the yearly growth rates of NAIA’s passenger traffic according to Airport Council International:

NAIA exceeded its 35 million capacity in mid-2015.
As can be seen above, NAIA, currently designed to handle only 35 million passengers annually, has already been overcrowded since mid-2015.

Today, NAIA handles over 28% more passengers than it should.

With the modest assumption that NAIA’s ridership will uniformly increase by 5% annually from hereon out, we can expect over 65 million passengers per year 7 years after 2018. That is, the band-aid solution that is the NAIA upgrade will be good enough only up to 2025.

Now, here’s the tragically funny part.

NAIA Upgrade Timeline

The NAIA Upgrade will be done in two phases:
Phase One: improvements and expanding the terminals at the existing NAIA land area. This will increase capacity to 47 million passengers annually and will take two (2) years to build. 
Phase Two: construction of additional runway, taxiways, passenger terminals and associated support infrastructure. This will increase capacity to 65 million passengers annually and will take ten (10) years to build.
I honestly don’t know how the Ayala-led consortium will manage to find land for the extra runway, but let’s assume for now that they’ll somehow succeed expropriating land in Merville Subdivision within the intended timeframe.

Now, the NAIA Consortium hopes to start the Swiss Challenge by mid-2019, which is basically a prettier to way to say the bidding process is still ongoing.Assuming that the bidding process is magically completed by end of 2019 and construction starts immediately thereafter, it takes another twelve years to finish the the entire project.

That is, the entire NAIA Upgrade will end in 2031 at the earliest. That is passenger demand will exceed the 65 million target capacity midway through construction and by the time it’s completed in 2031 (at the earliest), NAIA would need to cater to around 85 million passengers.

That is, by the time upgrades are completed, NAIA will be handling 20 million passengers more than the new 65 million limit. That’s 31% over capacity.

The NAIA upgrade simply can't keep pace with demand. Yes, NAIA should be upgraded, but we also need a new airport to accommodate rising demand.
Yes, there may be times of economic recession in the future but I think I'd rather not entertain that thought for purposes of passenger traffic projections.

In short, the NAIA Upgrade is basically like using a flimsy band-aid to cover a stab wound.

Mathematics necessitates a second airport

No matter how we put it, the NAIA upgrade will not be enough to meet passenger demand as the “overcapacity rate” by the end of construction will be even worse than before (28% in 2018 vs 31% in 2031).

The math shown in the previous sections show that with the NAIA Upgrade and without a second airport, regular Filipinos can look forward to longer flight delays, more flight cancellations, higher ticket prices and worst, the revival of inter-island shipping a la SuperFerry.

There’ll be too many passengers for such a relatively small airport, ergo not “every Juan can fly”. Imagine queuing up for a bus ride to the province on a Holy Wednesday, except that you’ll have to do it in an airport and not just only on Holy Wednesdays, but pretty much EVERY DAMN DAY OF THE YEAR.

Clark (CRK) is also an international airport but it’s simply too far away from Manila.

Fortunately, San Miguel Corporation (SMC) has a proposal for a Bulacan International Airport a.k.a. New Manila International Airport (NMIA). Bulacan shares borders with Metro Manila and the proposed site is less than an hour away from Valenzuela, Metro Manila’s northernmost city.

The airport will also be built in phases but if construction starts this year, SMC said it can have an airport that can handle 35 million passengers up and running in just 3-4 years.

That’s an additional major international airport by 2024, seven years before the NAIA Consortium finishes its upgrade plan.

This is not to say that NAIA will close down. As a matter of fact, most major cities have at least two airports servicing them, such as:
  • New York: Newark (EWR), La Guardia (LGA), and John F. Kennedy (JFK)
  • Tokyo: Haneda (HND) and Narita (NRT)
  • Bangkok: Don Mueang (DMK) and Suvarnabhumi (BKK)
  • Jakarta: Halim Perdanakusuma (HLP) and Soekarno-Hatta (CGK)
  • Taipei: Songshan (TSA) and Taoyuan (TPE)
  • Kuala Lumpur: KL International (KUL) and Sultan Abdul Aziz (SZB)
  • London: Heathrow (LHR), Gatwick (LGW) and four (4) others
Metro Manila and surrounding provinces offer more than enough current and future traffic to justify two airports.

Unfortunately, it appears that the NMIA proposal is under threat as some government officials seem to oppose it.

Sonny Dominguez vs Bulacan Airport (NMIA)

The Transportation Department started reviewing the SMC-financed Php 700-billion NMIA proposal in February 2017 and it granted SMC “original proponent status” in October of the same year. Had the procurement process proceeded as expected, a new airport should have started construction in mid- to late-2018.

Unfortunately, Finance Secretary Carlos “Sonny” Dominguez appears to have been hindering this effort.

Finance Secretary Carlos “Sonny” Dominguez
In an August 2018 interview, Socioeconomic Planning Sec. Ernesto Pernia said “Whether [NMIA] will be approved within the year or early next year, the only one who can answer that in terms of certainty is the Department of Finance.”

A month later, Dominguez questioned the Bulacan Airport proposal.

Dominguez denied causing NMIA’s delay, but his actions suggest otherwise.

In particular, he raised the following issues:

  • NMIA may depress real estate values in New Clark City.
  • NMIA may cause traffic congestion in North Luzon Expressway (NLEX)
  • NMIA may require realignment of Manila-Clark Railway
  • NMIA’s proponent may have questionable financial capabilities

Dominguez is being really weird

FIRST, the government is NOT a real estate company, so I do not understand why Dominguez is worried about real estate values in Clark.

SECOND, the solution to potential traffic congestion in NLEX is road widening, not blocking NMIA which, as was shown in earlier sections, is a critical transportation infrastructure.

THIRD, I don’t know why railway realignment is an issue for Dominguez because NMIA can simply connect its airport rail link to the nearest railway station, which is what’s done in many major airports worldwide, such as:

  • New York JFK: JFK Airtrain connects to NYC Subway via Howard Beach and Jamaica Stations (see below)
Related image
  • Singapore Changi: A spur line connects to SMRT’s Tanah Merah Station (see below)

  • Bangkok Suvarnabhumi: Bangkok Airport Rail link, a short 6-station line, connects to Phayathai MRT Station in downtown Bangkok. (see below)

In fact, SMC even plans to create a 200-kilometer elevated rail system that will connect the NMIA to EDSA, Metro Manila’s main traffic artery, enabling travelers from EDSA to arrive at the airport in just 20 minutes.

Kinda like the Hong Kong Airport Express, but elevated and much longer.

FOURTH, SMC is third largest conglomerate in the Philippines according to the 2018 Forbes 2000 list, next only to SM Investments and BDO Unibank. Moreover, SMC will be in partnership with Incheon International Airport in developing and maintaining NMIA.

Assuming Dominguez is still doubtful of SMC’s financial solvency, then why doesn’t he allow the Swiss Challenge to proceed and see if the challenger has better financial capacity for a similar undertaking?

SMC has been given original proponent status in late 2017 so the Swiss Challenge should’ve been over by 2018… but it still isn’t because, well, DOMINGUEZ.

Why does Dominguez seem so hell-bent at preventing NMIA?

Dominguez: The New Salalima?

I remember those times in early 2017 when I heavily criticized then Information and Communications Technology Secretary Rodolfo Salalima, the chief legal counsel and senior adviser of Globe Telecom until his cabinet appointment on 30 June 2016, for being the poster boy for regulatory capture.

Former DICT Sec. Salalima, whom Duterte asked to resign
Regulatory capture, or where the regulated becomes the regulator, is a form of government failure which occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating.

In Salalima’s case, what we saw was a telecoms regulator whose entire career prior to his appointment suggests deep loyalty to telecoms firm Globe.

President Duterte eventually fired him in late 2017 because, in the President’s own words, “many complained to me that he appeared to be partial because he's a former vice president of Globe.”

Dominguez’ situation may not be very different from Salalima’s.

Dominguez and the Zobel de Ayalas

Early in his career, Dominguez joined the Bank of the Philippine Islands (BPI) until he became the President of BPI Agricultural Development Bank, known today as BPI Direct Savings Bank after a name change in 1990.

Finance Sec. Sonny Dominguez
BPI and its subsidiaries are majority-owned and -controlled by Jaime Augusto Zobel de Ayala, who currently sits as Chairman of the Board.

Dominguez left BPI and Zobel de Ayala when former President Corazon Aquino made him Enviroment Secretary in 1986, but the two still share strong a business relationship up until Dominguez’ 2016 appointment as PRRD’s Finance Secretary.

Dominguez’ family owns conglomerate Alcantara Group of Davao City. The Alcantara Group, in turn, owns Alsons Consolidated where Dominguez was a director, leaving just days before he took over the Department of Finance in 2016.

Alsons has an existing multi-billion peso joint venture (JV) real estate project with Jaime Augusto’s Ayala Land called Aviana Development Corp. Incorporated in 2013, Aviana is developing an approximately 27-hectare waterfront property in Lanang, Davao City.

An artist's depiction of Davao City's Azuela Cove, a joint venture between Dominguez's family corporation and Jaime Augusto Zobel de Ayala's Ayala Land. It is still under construction.
In short, Dominguez’s family has a multi-billion-peso business relationship with Jaime Augusto Zobel de Ayala.

Why is this relevant?

The NAIA Consortium is Ayala Corporation’s brainchild, the same Ayala who "coincidentally" happens to be the premier business partner of Dominguez’ Family and a sister company of the bank where Dominguez spent his young professional life.

New Manila International Airport in Bulacan, on the other hand, is by San Miguel Corporation and a Korean Company: Ayala has no stake in the project.
IMPORTANT NOTE: Since 2014, NMIA developer San Miguel Corporation’s largest shareholder is Iñigo Zobel, relative of Jaime Augusto Zobel de Ayala. These two Ayalas, says sources and to put it lightly, are not the same. Iñigo inherited his fortune from father Enrique Zobel who in 1983 was estranged from the Zobel de Ayalas “main branch” where Jaime Augusto belongs. That is, Iñigo’s businesses are separate and oftentimes in competition with Jaime Augusto’s Ayala Corp.
Now, some may see NMIA as a threat to the profitability of the Php 350-billion NAIA upgrade project, especially since NMIA, upon total completion, will be able to handle 100 million passengers yearly, potentially turning it into the country's premier aviation hub and NAIA into a secondary airport.

But from the point of view of an average Filipino, I do not care which is which, as long as we have aviation infrastructure than can meet the public demand, and that is what we can't have if we won't build a new airport.

What we have here is a Finance Secretary who has the final say on the NMIA proposal, despite his strong personal links to NMIA’s competitor. Instead of inhibiting from the issue out of delicadeza, Dominguez further complicated matters as he openly spoke against NMIA despite his family’s business interests with the Ayala Corporation.

And by the way, Dominguez’ efforts toward protecting real estate values in New Clark City may benefit not only the new metropolis, but also the suburbs surrounding it.

Ayala Land also has multiple suburban housing projects that can cater to prospective workes of New Clark City.
And guess what? Ayala Lands’s Avida Northdale, Montala Alviera, Marquee Residences, BellaVita, and Avida Settings Alviera, are all situated in New Clark’s surrounding cities and municipalities.

Are Dominguez’s clashing interests a mere coincidence or a case of regulatory capture?

By the way, the Dominguez-led Department of Finance recent attacks against NMIA's developer over power and energy contracts doesn't help Dominguez's cause, as the Alcantara Group owned by Dominguez's family, also has interests in the energy sector.

TP’s Lowdown

While I do not possess the power to read minds, I can’t help but suspect that Dominguez decisions, in light of his conflicts of interest, may not be in the best interest of the Filipino Public.

Dominguez and the Ayalas are billionaires who probably can afford flying in their own private jets at their most convenient time, but regular people like you and I fly commercial.

Only billionaires, Heads of State, and rappers and like Drake can afford private planes. All other humans fly commercial.
Like you, I have to suffer through the aviation hell that is the Ninoy Aquino International Airport every time I fly, the same NAIA that looks less like an airport and more like a can of sardines as each day goes by.

Unfortunately, it appears that our own Finance Secretary’s interests do not coincide with those of the General Public, who wants nothing but a more humane commuting experience.

I do not care who builds a new airport as long as one is built. But if Dominguez keeps on blocking the construction of the new airport and insists that everyone use a congested NAIA or the Clark Airport that’s light years away from the capital, then what we have in Dominguez is not a public servant, but a government official who, just like Secretary Salalima, must be fired. [ThinkingPinoy | RJ Nieto]


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