It’s final: Gov’t allows airlines to join Mactan-Cebu airport bid

MANILA, Philippines (UPDATED) – Business groups with stakes in airlines can participate in the auction of the P17 billion Mactan-Cebu airport expansion project after all.

On Friday, February 1, the Department of Transportation and Communications (DOTC) announced a tweaked version of its  bidding rules to accommodate foreign and local business groups with stakes in airlines eyeing to expand and operate the country’s second busiest airport.

Last December, the DOTC barred these groups from joining the first multi-billion airport project under the public-private partnership (PPP) scheme, citing inherent conflict-of-interest issues. A group that owns an airline may discriminate against rival airlines if it has the right to assign the worst or best baggage carousels, gates, check-in counters, explained Transportation Secretary Joseph Emilio Abaya then.

The flip-flopping comes after Abaya’s peers in the Aquino Cabinet essentially reminded him that, before Abaya assumed his position, there were already efforts by other agencies to dangle the PPP projects as carrots to foreign investors they were trying to attract. Abaya took over the DOTC portfolio last October 2012.

“After careful evaluation and deliberation on the best policy to adopt for the new Mactan-Cebu International Airport Terminal Project that would both maintain a level playing field and allow the infusion of expertise and experience into the operation of the new terminal, we have decided to modify our ITPB for the project,” Abaya said in a statement on Friday, February 1.

Safeguards

Airlines and airline-related entities, however, cannot be directly involved in the entity that will eventually operate the Mactan-Cebu airport. 

The parent company of commercial airlines can only own up to 33% of the shares in the winning consortium. 

These are the key “competition safeguards in the concession agreement” that the DOTC said are meant to deter potential conflict-of-interest situation during the operation stage.  

These are the major changes in the newly re-published Instructions to Prospective Bidders (ITPB) that are part of efforts to “provide the government with more competitive proposals from the private sector,” the agency explained.

The December 27 original ITBP has been amended to “allow airline companies, their subsidiaries, affiliates, and their parent companies to have a limited stake in the entities that will qualify to bid for the project.”

Interested bidders

The revision is also “DOTC’s response to appeals from both local and foreign companies interested in taking part in the bidding process,” the agency added. 

Groups that are keen on the airport project and have also protested the DOTC’s original bidding rule include the Gokongwei and San Miguel groups, which respectively operates Cebu Pacific Air and Philippine Airlines (PAL). Recently, the Gokongweis stressed that they have the necessary skills needed for the project.

The Ayala and Aboitiz groups have previously announced their partnership and have tapped US-based ADC & HAS Airports, Inc. to join their consortium, which will bidding for the airport project.

The Manuel V. Pangilinan-led Metro Pacific Investments Corp. has been negotiating with Asian and European partners with expertise in airport operations. 

The back-and-forth discussions on whether these and other business groups could join the auction has resulting in delays in the bidding schedule. Pre-qualification for the airport project was supposed to have been held January 28, but it was moved to February 13. Submission and opening of qualification documents was also moved to February 27 from 18.

The project

This P17.5-billion project involves the:

• construction of a new world-class international passenger terminal building in Mactan-Cebu airport, with a capacity of about 8 million passengers per year
• renovation and expansion of the existing terminal
• installation of all the required equipment
• operation of both new and existing facilities

The existing terminal, which currently caters to both domestic and international passengers, will eventually be converted into an exclusively-domestic passenger terminal. – Rappler.com