Al Kharafi wants all LCC transferred to Clark for $1.2 Billion Deal

Low Cost Operators in danger of losing NAIA entitlements

May 4, 2009

Kuwait City - The Philippine government is walking on thin red line similar to the path of PIATCO on the NAIA Terminal 3 project, as it seeks to finalize a deal with Kuwaiti construction giant Al Kharafi and Sons Group to build and develop a new $1.2-billion airport terminal Complex at the Clark Freeport Zone in Pampanga north of Manila.

In Exchange for the deal, Ex-Kuwaiti Prime Minister and Billionaire Sheikh Nasser Al Kharafi, disclosed that it wants the closure of Low Cost Airline Operations in Manila out to Clark airport to make their project more viable, according to a senior officer of Al Kharafi group who doesnt want to be named pending approval of the agreement.

CIAC President Benigno N. Ricafort said that under the proposed joint venture deal with Clark International Airport Corporation [CIAC], whoever gets the contract must design, build, finance and operate the new airport.

According to Trade Secretary Peter B. Favila, the project will involve an initial investment of about $100 million-$300 million which is enough to finance the new terminal which will add 3 million capacity to the airport.

The request if approved by the Philippine government, will automatically add an instant 3 million capacity of the proposed terminal project to make it more financially viable, the officer said, stating further that with the present 1 million capacity, they will have 5 million capacity by 2012, the proposed project date of completion.

CIAC is targeting to open the new airport facility by the middle of 2010 with a capacity of at least three million passengers a year, but the unnamed officer disclosed that its not possible even if they have to start constructing now. The reason on the need for 2010 opening is not even a justifiable necessity yet to call it as such considering that the present terminal accommodates 60% only of its design capacity. Clark airport accommodated close to 1.1 million passengers in 2008 and based on statistical data will breach the 2 million mark in 2014 at the earliest.

The officer further disclosed that the proposed Phase 3 plan will also start construction in 2012 to accommodate transfer of legacy airlines to the airport around 2018 but calls for the closure of NAIA airport similar to what was done at Don Muang Airport in Bangkok Thailand.

The agreement however infringed on various bilateral Air Service Agreements with different Countries as NAIA-Manila and Clark-Manila are two different airports in the IATA registry. Likewise, Low Cost Airlines are expected to protest such move and will likely challenged the agreement to the highest court in the Philippines.

The proposed investment is being considered under a Build-Operate-Transfer (BOT) agreement
following a failed bidding of this project in September last year.

The DMIA is a 2,367-hectare aviation complex inside the former American military facility known as Clark Air Base in Pampanga north of Manila which was turned into and developed by the government as Clark Freeport Zone.

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