Laguindingan Airport Expansion PPP proposal expected approved by year end

September 24, 2019


The original proponent of the Public Private Partnership to expand the Laguindingan Airport (IATACGYICAORPMYexpects government to approve its proposal by the end of 2019.

“Because of the National Development Authority – Investment Coordinating Council (NEDA-ICC) wanting us to copy the Operation and Maintenance (O&M) contract from Clark, we basically had to start from square one, rewrite the entire contract; we have submitted it to the Civil Aviation Authority of the Philippines (CAAP), they have approved it, and it is now being reviewed by the Department of Transportation (DOTr) before submission to NEDA ICC,” said Jose Emmanuel Reverente, VP-Aboitiz InfraCapital, Inc. (AIC) during a presentation during the 28th Mindanao Business Conference held recently in Iligan City.

Aboitiz InfraCapital Vice President for Finance Jose Emmanuel Reverente presents  their vision of the check-in counters for the expanded Laguindingan Airport by 2022 under their P42.7 Bilion unsolicited proposal

“Since we have copied the Bohol Panglao Airport proposal that has been approved by NEDA ICC Technical Committee, we are optimistic the revised Laguindingan contract will go through much faster,” he added. “We are very hopeful by the end of this year, the contract can be awarded to us after the Swiss Challenge process.”

Last February 26, the Civil Aviation Authority of the Philippines (CAAP) granted AIC original proponent status (OPS) for its unsolicited proposal to upgrade, expand, operate, and maintain the Laguindingan Airport  for a 35-year concession period.

Reverente said AIC use the lens of “infrastructure ecosystems” currently acting on the following spaces: airports, passive telecommunications infrastructure (common towers), water and sanitation to drive economic progress and uplift the lives of every Filipino.

It is part of the NAIA consortium that aims to improve the NAIA, and Bohol Panglao International Airport.

Regional Gateway

AIC said the Laguindingan Airport is a strategic entry point into Northern Mindanao which has experienced tremendous growth over the past years and is progressively catching up with the more developed parts of the country.

“As a regional airport serving Northern Mindanao and its adjacent regions, CGY/RPMY  has been serving six provinces, two highly urbanized cities and five component cities with an average of two million passengers annually for the last three (3) years,” said Ma. Teresa R. Alegrio, Region X Governor of the Philippine Chamber  of Commerce and Industry (PCCI), which has been instrumental in pushing for the airport’s immediate expansion.

 “Laguindingan Airport has become an important logistic network for over 150 medium to large scale industries including four major thermal power plants, the Agus-Pulangi Hydroelectric Complex. 3 industrial parks, and emerging tourism destinations,” Alegrio noted.

 “Our proposal to the national government is to run the Laguindingan International Airport including operations, maintenance, rehabilitation, and expansion over a 35 year concession,” Reverente said.

“Our plan is to spend initially P4.2 billion pesos to expand the airport; and a total of P43-billion pesos over the concession period half for repairs/capital expenditure and the other half to maintain a high state of readiness of the capital assets,” he added.

Immediate Expansion

Reverente said the first phase of their plan calls for the immediate expansion of the terminal building.

“It is not in our best interests to construct it over a long period of time. We will want to finish it as soon as possible, so we can have that capacity readily available. We prefer to build it in phases. An integrated PPP approach that allows us to build and operate the airport is the right combination so the P43-billion we would like to invest into the expansion  and maintenance,” he said.

It’s one thing to build the infrastructure but another thing to maintain its operational readiness over the entire concession period, he stressed.

Passenger Traffic Growth

When it started operations in 15 June 2013, air passenger traffic at the Cagayan de Oro Lumbia Airport that Laguindingan Airport was designed to replace had already exceeded the 1.6 million design capacity of the new passenger terminal building (PTB).

“To put it bluntly, the replacement airport was congested upon opening,” said a former DOTC official involved in its planning.

When the passenger traffic exceeded 2 million annual passengers last year, the need for a larger terminal that could accommodate the current and expected passenger volume over the medium term became urgent and critical.

On a year-on-year basis alone, the Civil Aviation Authority of the Philippines ( CAAP) figures for the past 10 years show passenger traffic at the Cagayan de Oro Lumbia Airport increasing at an annual rate of 8.7% from 902,133 in 2008 to 2,079,683in 2018 (doubling passenger volume every 8.5 years).

The 11% increase in the number of flights from 2017 to 2018 (17,478 aircraft takeoffs and landings) was mainly responsible for the meteoric rise in both passenger and cargo movements.

 “We expect passengers to rise from 2 million to almost 12 million over the 35 year concession period,” Reverente said.

AIC Vision 2022

In his presentation, Reverente unveiled digital renderings of AIC’s Proposed Master Plan and how the CGY/RPMY airport would look by 2022 after the initial expansion phase.

“For the first phase we plan to expand the existing terminal left and right to increase capacity to about 4 million passengers per year.  After initial expansion, passenger boarding bridges will be expanded to 5 from the present 3,” Reverente said.

“Even without international flights and larger airplanes, the passenger terminal is not big enough so our first task is to expand the passenger terminal. We believe building the terminal first to accommodate the projected passenger traffic over the short term is the better use of capital at the start. When there are more passengers coming through the airport, then the next step is to extend the runway to accept larger aircraft which normally are required to fly longer distances.”

Ultimate master plan will expand airport terminal to be able to accommodate up to 20 aircraft at any given time.

 “Pre-departure and arrival areas, includes digital signage so check in counters are flexible and can be expanded or reduced depending on the number of flight departures for any given airline at any given time to expedite check in process.”

Runway Extension

However, DOTr Sec. Arthur Tugade announced last 15 July the proposed extension of the 2.1 kilometer runway to 2.4 or 2.5 kilometers is proceeding as planned.

Tugade said the P250-million (M) budget for this project is already included in the 2020 National Expenditure Plan (NEP), which Congress wants approved before the year end.

This was part of the Feasibility Study expansion proposal endorsed by the Regional Development Council for Region 10 (RDC-X) and approved by the NEDA Board in 2014.

Rising Cargo Traffic

The runway extension is also expected to address the recent growth in air cargo traffic which soared 44% from 2017 to 25,366 metric tons (MT) in 2018.

Another factor expected to increase cargo traffic is the 105-hectare (ha.) Laguindingan Technopark now being constructed adjacent to the airport as part of Ayala Corporation’s Habini Bay mixed-use development covering Laguidingan and the adjacent municipality of Alubijid.

Aboitiz InfraCapital Vice President for Finance Jose Emmanuel Reverente presents a rendering of their vision for the expanded Laguindingan Airport by 2022 under their P42.7 Bilion unsolicited proposal

During a previous visit, executives of German logistics giant DB Schenker said such technoparks are expected to “drive massive airfreight” similar to what the Ayala’s Laguna Technopark did in Luzon.

“If the runway is already extended, it is even more important for us to expand the passenger terminal. Our plans also include the refurbish and expansion of the cargo terminal. We believe if the airport is run as a commercial enterprise, we will be able to respond much more swiftly to changes in the economic environment without having to go through a multi-year NEDA process,” Reverente noted.  

“As a private enterprise, Aboitiz will help market Northern Mindanao as a destination globally to assist marketing efforts of Dept of Tourism , DTI and other government agencies increase passenger and cargo traffic to Laguindingan Airport,” he added.

2020 DOTr Aviation Sector Budget

During the recently concluded 28th Mindanao Business Conference, Cabinet Secretary Karlo B. Nograles confirmed DOTr had proposed  funding for the aviation sector amounting in the 2020 budget to P865 million for the development of airports and the upgrading of airport facilities.

“Of this figure, P100 million will be allocated for the development of Laguindingan Airport. For the Surigao airport, based on the latest inspection, we believe we will be able to meet the November 2019 completion target for the initial 400-meter repair, and the full 700-meters by February 2020,” he added.

DOTr will reportedly utilize the P100 million to start detailed engineering works and much needed repairs on the Laguindingan Airport as part of the P2.9 billion augmentation budget to fund its priority projects, including the development of four airports, the construction of the Pagasa Island port, and the implementation of the public utility vehicle modernization program.

The DOTr originally allocated P400-million (M) for the terminal building expansion of the Laguindingan Airport, but this was reduced to P180-M, then again halved to P90-M, before being slashed altogether by the Department of Budget and Management (DBM) from the 2019 General Appropriations Act (GAA).

However, the business sector lobbied strongly for the restoration of the reduced budget and the P90-M was eventually restored through a Congressional Initiative by Rep. Juliette Uy (2nd District, Misamis Oriental).

Sources at the DOTr said a portion of the P90-M would be used for the Detailed Engineering (DE) of the proposed expanded passenger terminal building. The bidding process for an independent consultant to undertake the DE is now being processed and the contract is expected to be awarded by the latter part of 2019.

The balance of the P90-M would used to rehabilitate dilapidated portions of the terminal building such as the comfort rooms.

Even if the original P90-M would already be used up, expansion of the PTB would still continue with the proviso the funds used for this purpose would be reimbursed to the national government by the winning bidder for the PPP project to develop and expand the airport faculties.

”While we appreciate the P90M Congressional Initiative Fund restored by Rep. Juliette Uy, this amount is barely enough to refurbish the dilapidated areas including the poorly designed comfort rooms and malfunctioning elevators,” said Engr. Elpidio M. Paras, president of Promote Northmin Inc.

 “Government should now fast track the entry of private sector companies to expand and improve all the facilities of Laguindingan so that it can already accommodate direct flights from regional and international destinations, including lengthening the runway to meet wide body jet aircraft,” he added.



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