PHL mulls over future of airports as transport execs eye Clark The Broader Look by Recto Mercene | October 19, 2016

October 26, 2016 at 17:30

PHL mulls over future of airports as transport execs eye Clark

The Broader Look by Recto Mercene | 

HOW do you solve a problem like Naia? Slowly, it seems, as solving the air-congestion woes at the Ninoy Aquino International Airport (Naia) would take some time, according to transportation officials.

Hence, the Duterte administration asked Secretary Arthur P. Tugade to appraise the Clark International Airport (CRK) as an alternative, beginning with creating it as a domestic flight hub.

This idea was forwarded to Philippine Airlines (PAL) and Cebu Pacific, the two largest carriers in terms of volume, for their comments. Both air carriers had given their side of the issue.

PAL Holdings Inc. President Jaime J. Bautista said the national flag carrier is considering the government’s suggestion to prevent further frustration for its passengers. Bautista said the airline usually gets the brunt of the blame for whatever issue arises when their airplanes gets delayed at CRK.

“Philippine Airlines is now studying the possibility of transferring its turbo-prop flights to [CRK], following a request from the Philippine government to consider the idea of transforming [CRK] into a hub for domestic flights in another effort to decongest [the Naia] in Manila,” Bautista was quoted as saying in Philippine Flight Network, claiming to be the leading source of airline and aviation news in the country.

“We are working on it,” Bautista said. “The reason why the government wants us to move some flights to Clark is because we want to decongest Manila to prevent inconvenience to the passengers.”

However, Bautista reaffirmed that not all its domestic flights would be transferred. The airline still needs to study the proposal further to assess the impact on passengers and operating costs before making any decisions, he added.

“We will work with them [authorities],” Bautista said. “We will present to them our position.” However, Bautista added that the Philippine government needs to provide additional infrastructure prior to shifting additional flight operations to CRK.

Working from scratch

IN a telephone interview, PAL Spokesman Cielo Villaluna said the carrier would need a catering-service provider, additional catering manpower, ground coordinator for transport by land and enough fuel supply.

“PAL is not transferring,” Villaluna said. “We will be practically starting new operations at Clark and we need all the things that we take for granted at the Naia to be present in CRK, as well.”

She added that operating separately in CRK would entail signing a new contract agreement and approved slotting schedule, while Pal plots new routing schedules, which they would market to customers.

“These are preparatory steps,” she told the BusinessMirror, adding that the actual challenge is transporting the passengers from CRK going out to anywhere in Luzon and those passengers coming into CRK to take their outbound flights.

PAL Holdings has a market capitalization of P128.16 billion. Its stock traded between P5.16 and P5.45 on October 19.

Next gateway

ACCORDING to its web site, the government envisions CRK “as the next premier international gateway of the Philippines and the best services and logistics in the Asia-Pacific region.”

The CRK is one of the biggest aviation complexes in Asia with two runways in parallel configuration that can easily be extended to 4 kilometers to accommodate new-generation wide-bodied aircraft.

“The primary runway [Runway 02R/20L] has a length of 3,200 meters and a width of 61 meters,” CRK operator Clark International Airport Corp. (CIAC) said. The primary runway “is fully equipped with all navigational aids and lighting facilities and has a Category 1 rating for precision approach.”

“The secondary runway [Runway 02L/20R] has a length of 3,200 meters and a width of 45 meters,” the CIAC said. It admitted Runway 02L/20R “is not yet equipped with navigational aids and lighting facilities and is currently used for Visual Flight Rules [VFR] only.”

Aside from PAL, air carriers flying out of CRK at the moment are Cebu Pacific, Qatar Airways, United Arab Emirates, Dragon Air and Tiger Air.

Income decline

THE CIAC said in its 2015 annual report that its gross revenue rose by P45.369 million, an increase of 8 percent, “which was due to the fairly reasonable growth in both the aeronautical and nonaeronautical revenues.”

“International flights reflected there were more travelers flying in CRK compared to the previous year,” CIAC President Emigdio P. Tanjuatco III said in the report.

On May 6, 2015, South Korea’s budget carrier Jin Air officially launched its daily flights to CRK since operating four times weekly in 2011. The airline, which is a subsidiary and a low-cost carrier of South Korea’s flag carrier Korean Air, has also greatly contributed to the boost of passenger volume this year, he added.

Incheon, South Korea, and Hong Kong, SAR, topped the CRK’s market share in terms of destination at 23 percent each. These are followed by Doha, Qatar (20 percent), and Singapore (17 percent). Cebu (5 percent) is the only domestic market in the configuration.

The annual report also revealed that international flights from CRK decreased to 5,709 in 2015 from 5,715 in 2014. More domestic flights were seen at CRK last year at 948, compared to only 936 in 2014.

However, passengers in international flights increased to 826,706 last year, compared to 786,809 passengers in the previous year. The low number of passengers in domestic flights last year (41,824 compared to 90,948 in 2014) pulled down total passengers to 868,528 in 2015, compared to a total of 877,757 passengers in 2014.

And while gross revenue increased, the net income of CIAC declined by 36 percent, from P45.52 million in 2014 to P29.779 million in 2015.

“The decrease was basically due to the upward movement of the depreciation expense as an offshoot of the completion of the terminal expansion project and the procurement of various airport and navigational aids equipment,” the CIAC said in its report. The government-owned and operated firm also pinned the decrease in net income to the “increase in the amount of the loan drawdown” in 2015, “which prompted the escalation of the interest expense.”

OTP improvement

VILLALUNA said the crucial CRK build—not transfer—is happening at a time when PAL registered a marked improvement in its On Time Performance (OTP) in September, after carrying out operational initiatives in support of the government’s call to ease air-traffic congestion.

These initiatives include the implementation of a revised flight schedule beginning September 1 and the adherence to flight-departure slot schedules, as mandated by aviation authorities.

Villaluna said implementing the revised flight schedule resulted in an average of 280 flights daily, from an average of 295 daily flights.

Another initiative is the enhancement of passenger-handling and ground-handling performance.

“PAL posted an 80.2-percent OTP for the second week of September, a marked increase from the same period last year, which was pegged at 73.8 percent,” Villaluna said.

The 80.2 percent reflects an uptick from the OTP of the first week of September, which was placed at 74 percent, she added.

PAL’s average OTP from January to August was 64.4 percent, according to Villaluna.

“While the airline strives to meet these goals, factors such as aircraft situations, weather and other operational exigencies will affect OTP targets periodically,” she added.

The Civil Aviation Authority of the Philippines (Caap) is strictly implementing the rule allowing a maximum of 40 flight movements per hour. This figure is the required combined number of takeoffs and landings hourly by air carriers operating at the Naia.

All requested

BUT PAL is not the only carrier that has been asked to transfer flights.

Tugade has told reporters that his agency plans to ask all airlines to transfer their turbo-prop flights to CRK, as the government works to decongest the Naia.

PAL is currently eyeing to acquire new turbo-prop aircraft next year to replace its existing fleet of aging regional aircraft. The company plans to make a purchase between 2017 and 2018. The flag carrier currently operates a fleet of nine Bombardier turbo-prop aircraft.

According to the Japan International Cooperation Agency, the Naia in Manila is expected to exceed its maximum handling capacity this year, when the airport is estimated to serve 37.78 million passengers.

However, the airport was only built to handle a capacity of 35 million passengers annually.

In response to Bautista’s call for additional infrastructure at CRK prior to transferring flights, President Duterte added that the government will study the possibility of enhancing road or rail access to the airport in Pampanga to help facilitate the transfer of domestic flights.

The President indicated that the use of CRK for domestic flights is only intended as a short-term measure, while the government studies construction of a brand-new airport near the Naia.

“I don’t know if we have the money to build an airport in Sangley,” Mr. Duterte said. “If investors will come in, then go, but for the meantime, we have to remedy the overcrowded sky of the Naia.”

General Aviation

THE government also plans to act on a previous recommendation to remove all cargo and private aircraft from the Naia in a further effort to decongest the airport.

Tugade said they plan to transfer the General Aviation (GenAv) to either Clark, Sangley Point in Cavite or Fernando Air Base. He said the Department of Transportation (DoTr) plans to issue notice to GenAv operators within his first 100 days in office.

Manila International Airport Authority (Miaa) General Manager Ed Monreal said the main impediment to transferring to CRK is the inadequacy of the current fuel supplier to meet the demands of increased number of airplanes at CRK.

“The current fuel supplier has a monopoly of aviation gas and he does not want any outsider to come into CRK because he has a contract with the authorities,” said Monreal, former country manager for Cathay Pacific.

He said Ramiro Villavicencio and some Australian partners put up a company to be the main aviation gas supplier at CRK at a time when there were very few airlines flying out of CRK sometime in the 1990s.

Fuel concerns

WHEN the Australian partners withdrew, Villavicencio bought all of the remaining shares, making him sole owner of Lubwell Corp., Monreal explained. He added that this happened when he was still Cathay Pacific country manager and chairman of the Airline Operators Council (AOC).

Monreal said he does not know whether Lubwell has a 20- or 50-year contract with the CIAC.

“That is why the 28 airplanes had to wait during the diversion,” Monreal said. “The fuel supplier was unable to meet the demand of so many airplanes at once.”

He was referring to an incident in July 2016, when 28 local and international aircraft with more than 3,000 passengers were not allowed to land at the Naia because of a large crack on the runway. They were all diverted to CRK and the airplanes had to wait several hours because the system takes hours to refuel each aircraft.

According to its web site, Q8 Aviation provides the fuel supplied by Lubwell to all airplanes operating in CRK, while the ground-handling services are provided by CRK Airport Support Services Corp. (CASSC) and Miascor, which also operates out of the Naia.

Lubwell, on the other hand, does not have a hydrant system where fuel in bulk are stored in huge depots and piped underground into the tarmac and come out beside parked airplanes.

The company provides aviation gas by means of tankers, vehicles loaded with tons of fuel, which drive directly toward parked airplanes and pump fuel into the plane’s fuel tanks. This takes hours to accomplish.

Meeting demands

ASIDE from adequate fuel supply, Monreal said CRK should have enough ground-handling facilities, such as tow tugs or trucks, cargo loaders, conveyor loaders, food suppliers and many more.

Online reports said about 50 associated machines and equipment comprise a complete ground-handling equipment for an international-category airport and these provide more than triple the number of workers to operate these machines because an international airport does not close its operations.

Monreal said he would be glad if CRK would eventually operate as a full international airport because that would be complementary to the Naia in case of emergencies.

“If the Naia is closed for whatever reason, we could rely on CRK to take care of the airlines while the problem in Manila is being solved. On the other hand, if CRK closes because of accidents, bad weather or, God forbid, Mount Pinatubo erupts again, then the Naia would be more than happy to accommodate all the carriers.”

Presently, Lubwell can more than sufficiently meet the demands of the airline locators in CRK, according to Onie Nakpil, chairman of the 40-member Association of Southeast Asian Nations-AOC.

Nakpil said some members of the group visited CRK recently on the invitation of CIAC President Alex Cauguiran, wanting to know their inputs, since all of the members are current managers of international air carriers flying out of the Naia or had been heads of the AOC before.

Cauguiran reportedly wanted to know from the group their valuable inputs because of their expertise.

Huge potential

TRANSPORTATION Undersecretary for Air and Airports Roberto C. Lim said the CRK has a huge potential as an airport, given that the area is being developed as an economic center in Central Luzon.

“Clark is developing as an economic regional center, a logistics center, with road and rail connectivity to Subic,” Lim said. “Clark airport will develop on its own.”

He added the DoTr is coordinating with the Department of Tourism to make Clark a tourism hub in the north.

The government is in the midst of developing a 9,450-hectare idle land within the Clark Freeport and Special Economic Zone as a green city, Lim explained.

When completed, the multibillion-peso green metropolis would be a mix of industrial, institutional and commercial areas. Documents from the DoTr said the CIAC would apply “green technologies,” using renewable energy from sustainable sources by all facilities and buildings in the proposed city, “a place where one’s home, place of work and places of recreation are within walking or biking distances from each other.”

The Clark Green City project is expected to generate as much as P1.57 trillion in revenues every year, contribute at least a 4-percent share to the GDP and employ as many as 925,000, upon full completion of the development.

Lim said they expect this project would boost demand for air connectivity to CRK. Hence, the DoTr wants to develop the said hub in anticipation of an expected surge in passenger volume in the coming years.

Never materialized

THE CRK is currently underutilized with about 870,000 passengers accommodated annually, way below its rated capacity of 4 million passengers per year, according to Lim.

“The general term design is there for 3 million passengers,” he said. “But we want to bring it to the original plan of 5-million passenger throughput.”

The airport in the north, formerly known as the Diosdado Macapagal International Airport, has two 3,200-meter parallel runways equipped with various navigational aids and lighting facilities, rated the highest for precision approach by the Federal Aviation Authority of the United States.

CRK is being envisioned to be the future primary international gateway of the Philippines once the Naia reaches its full capacity and when the main airport can no longer expand. It is being envisioned to be an aerotropolis—an aviation city—with businesses and industries moving in to the former US airfield.

Former President Fidel V. Ramos ordered the development of Clark to be a premier gateway to the Philippines, with capacity expansions envisioned to reach 14 million passengers by 1998.

The Bases Conversion and Development Authority crafted a master plan for the development of the airport, but unfortunately, the plan remained on paper and never materialized.

PPP strategy

LIM declined to give specifics on CRK’s second terminal, but said the airport will be expanded through the Public-Private Partnership (PPP) Program.

“The target for CRK is to place it under the PPP Program by next year,” he said.

The official added that CRK is the easiest means to decongest the Naia.

Just recently, the government had asked local carriers to move some of their flights to CRK in a bid to decongest the Naia.

“The department is asking local carriers to move domestic flights to CRK. Cebu Pacific is now selling more Cebu-Clark and Clark-Incheon flights. Philippine Airlines will also start Cebu and Davao flights out of Clark,” Lim said.

Furthermore, the government is also courting foreign carriers to fly to and out of CRK.

“We are asking foreign airlines to fly to CRK. A one-stop shop for overseas Filipino workers has been deployed to support more flights by Qatar and Emirates,” he said.

The Aquino administration initially planned to build a railway line to CRK from Metro Manila.

Asked for updates, an undersecretary and a transportation spokesman were unresponsive to the BusinessMirror’s queries.

The plan was to integrate the said line to the planned North-South Railway Project, which, according to a tentative timeline, will materialize by 2020.

With additional reports by Dennis D. Estopace and Lorenz S. Marasigan


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