Kalibo connects Shanghai

As Zest Air expands to China

January 25, 2011

Zest Airways launch its newest international destination from Kalibo International Airport (KIA) to Shanghai, China Today for a twice a week A320 service.

The flight, which is scheduled to land at the KIA at 3:00 a,m. Tuesday, will be carrying 180 passengers who will go straight to Caticlan town, gateway to Boracay, and immediately cross over to the world-famous holiday island destination, according to Roselle Ruiz, Aklan’s Provincial Tourism Operations Officer (PTOO).

Ruiz said that this is not the first flight from China with Philippine Airlines taking the initial salvo on chartered flights, but these were stopped temporarily to give way for terminal development implemented at the airport.

Initially, such flights will arrive twice a week starting January 25, but by the end of March, these will be increased to four times weekly says a Zest Air representative.
Zest Air will also be introducing flights from Beijing soon when the airline receive its ordered aircraft.

To VOR or not to VOR

ATM what?

January 25, 2011

The Civil Aviation Authority of the Philippines (CAAP) and Manila International Airport Authority (MIAA) is in hot water again when it finally decided to buy a new VOR (very high frequency omnidirectional range) system in the face of an impending implementation of a multibillion-peso project dubbed as the Air Traffic Management/Communication Navigation System (ATM/CNS) being implemented by the Department of Transportation and Communications (DOTC).

The P4 Billion ATM/CNS project was awarded by the DOTC to Thales Australia, a French-based electronics company subsidiary that provides information systems for defense security, aerospace and transportation, in partnership with Japan’s Sumitomo Co., was given the contract for the installation and modernization of navigation surveillance and air traffic management (CNS/ATM) system across the country. The system relies on the networks of orbiting satellites and is now being used by countries in Asia-Pacific like China, Singapore, Taiwan, Vietnam, Indonesia, South Korea, Australia and Thailand.

The Philippines made a commitment to ICAO to install the system by 2010 but due to budgetary and bidding concern is expected to be completed only in 2013, after a loan grant from Japan.

The VOR [very high frequency omnidirectional range] is the international standard for short-range navigation providing the bearing information to the pilot from a reference point. It helps pilots determine their relative direction to or from the station, and would become a secondary means of aiding pilot once the ATM/CNS is in place.

The VOR station was damaged during tropical storm “Ondoy” in September last year and was kept operating through a power supply borrowed from Subic international Airport.

But CAAP personnel are asking why the Agency is giving priority to the purchase of a new navigational aids when refurbishment will do.

Andy Basallote, Chief of Air Navigation Service (ANS), says there are two ways to replace a navigational aid: restoration, which means replacing or renewing an existing one; or replacement, which meant buying an entirely new VOR.

A new VOR would cost from P80 million to P120 million based on UK's Marconi and France' Thales price tag, but Thales Australia has offered P50 million to lease its VOR for 5 years.

CAAP Director-General Ramon Gutierrez said that since their office doesn't have the money to fund the procurement, they would instead borrow P80-million from MIAA to fund the purchase of the new aviation equipment considering the price difference to the brand new unit.

He said since the CAAP has diminutive resources and cannot be able to procure such device, the Manila International Airport Authority (MIAA) will make the financial arrangement while the aviation agency takes care of the services. From its original P120-million funds they requested, the budget was slashed to P80-million by President Benigno Aquino III.

Both MIAA and CAAP are shopping for a new VOR to replace its aging equipment that has been giving airline operators headaches because its power supply frequently bogs down, due to incompatibility problems forcing them to fly to alternate airports in Clark particularly during bad weather.

Basallote said if restoration is resorted to, the cost to the government would be about P45 million to P50 million as offered by Thales, since the “old” Distance Measuring Equipment, a separate but integral part of the DVOR, and the “counterpoise” or the steel bracing supporting the whole structure would be retained. But adding P30 million will give you a brand new equipment. So the choice isn't that difficult.

“Malaki ang matitipid, sa open bidding, but, we are inclined to buy a new one because its life span is approximately 10 to 12 years.”

However, the P80-million is P2-million short of the VOR’s original price in the foreign market. Gutierrez disclosed that he was considering a Korean company that was offering a VOR that is worth P80-million.

“But we could not grab it until we know that it is the same brand that we are currently using,” Gutierrez said.

Currently they are evaluating the offer of a Korean company to install a new navigational aid at concessional rate of 1/10 of 1-percent interest per annum for five years, and a warranty of 10 to 12 years.

Gutierrez says he favors using the same brand of VOR made by Thales now in use at the NAIA because training would not be that expensive anymore considering their previous experience with the equipment. Training in Australia is part of the contract and is included in the cost of the equipment assuming they would win.

PAL to start Cagayan de Oro-Zamboanga flights

January 23, 2011

DAVAO CITY - Philippine Airlines (PAL) will start Cagayan de Oro-Zamboanga City flights starting April 1. Domingo T. Duerme, PAL vice president for Mindanao, said the route would benefit businessmen who regularly travel between Northern Mindanao and the Zamboanga Peninsula as well those in the island provinces of Western Mindanao.

The new service will cut travel time between Cagayan de Oro and Zamboanga to less than an hour from eight to 10 hours by land. PAL is still ironing out the details of the Cagayan de Oro-Zamboanga service such as frequency and fare.

PAL will also be also taking over from its sister firm, Air Philippines Express, the Davao-Zamboanga and the Davao-Cagayan de Oro routes.

Mr. Duerme did not state the reason for PAL’s takeover of the two routes but travel agencies here said the plan indicates that the Davao-Zamboanga and Davao-Cagayan de Oro routes will soon be graduating from the list of so-called "missionary routes" or those with few passengers.

The Davao-Zamboanga and Davao-Cagayan de Oro routes are also covered by rival Cebu Pacific. PAL’s new routes in Mindanao will use 80-seater Q400 aircraft, Mr. Duerme said.

20 new busses to ply the Philippine Skies in 2011

4 A320 for Seair
5 A320 for Cebu Pacific
6 A320 for Air Philippines Express
3 A320 for Zest Air
2 A320 for AirAsia Philippines

January 23, 2011

Manila - Twenty brand new airbus aircraft is set to join different airlines in the country this year as it embarks on a major expansion mode in anticipation of booming domestic air traffic which is expected to more than double to over 40 million passengers in less than 10 years.

SEAir president Avelino Zapanta said that at least four brand new Airbuses will join their fleet this year to be deployed to more regional flights as the carrier continue to enter into aircraft lease agreements with Tiger Airways despite massive opposition from other local carriers.

“Definitely, we’re leasing more and entering to more agreements with Tiger Airways. Within this year, we will have more than what we have leased last year,” Zapanta said.

Only one of the two planes is currently in use. By next month, Zapanta said the airline would likely start flights to Macau and Hong Kong.

“We will launch flights to Macau and Hong Kong next month using the other Airbus we leased from Tiger. We are also looking at Bangkok, Taipei and Seoul,” Zapanta said.

Alex B. Reyes, Cebu Air vice-president for commercial planning, said in a speech at the annual aviation summit at Villamor Airbase in Pasay, that they will take delivery of five more brand-new Airbus A320 aircraft in 2011. The airline’s 25th Airbus aircraft, and the first for this year is set to arrive in the last week of January 2011, he said.

“By the end of 2011, Cebu Pacific will be operating a fleet of 37 aircraft, from 32 today. Between 2012 and 2014, it will take additional 16 Airbus A320 aircraft,” Alex Reyes said.

Air Philippines, a sister company of flag carrier Philippine Airlines, said they are expecting 6 aircraft to join their fleet this year.

Air Philippines chief executive Cesar Chiong said they will increase the airline’s Airbus A320 aircraft from just three to 18 by 2012 and add more domestic and regional routes.

Chiong said the company expects six new A320s to arrive this year while six more will be delivered in 2012. Air Philippines' first two A320s were given to it by sister company Philippine Airlines (PAL) while six arrived last year.

“We will be flying Hong Kong from Cebu, and Seoul from Manila and Cebu and some routes in China this year. We have pending applications with CAB,” Chiong said.

Meanwhile, Niche carrier Zest Air will expand its flight operations to countries around the region in the coming weeks in line with the expected arrival of up to three more single-aisle Airbus jets this year.

Zest Air chairman and CEO Alfred Yao said the airline would begin a five-times-a-week service from Manila to Shanghai on January 22 and increase the frequency of its flights to Incheon and Pusan in South Korea from Kalibo and Cebu to 12 times a week.

“Sometime in February, we also intend to start flying to Singapore daily,” he said. The airline operates 6 Airbus A320s and 4 Chinese-made Xian MA60 turboprop aircraft, which it uses for its short-haul domestic flights.

Zest Air flew a total of 1.5 million passengers last year and was aiming to fly as many as 2.2 million to its various destinations this year.

The airline has a utilization rate of up to 88 percent for its current complement of 10 aircraft, which, on average, fly at 80 percent of passenger capacity, he said.

Rival budget carrier AirAsia, a Malaysian-based airline, has also announced plans to set up a Philippine unit based in Manila- Clark and start flying in September with two Airbus 320's.

"We're looking at Southeast Asian region plus China to be the first five or six hubs by September 1," Michael Romero, vice-chairman of Air Asia Philippines (AAP)said.

AirAsia Philippines is a joint venture among AirAsia Berhad (40% stake), and Filipino business personalities, including Antonio Cojuangco, Marianne Hontiveros, and Michael Romero.

Romero said the airline will fly in Singapore, Kuala Lumpur, Jakarta, Hongkong, Bangkok and China by September.

AirAsia Philippines is the third cross-border joint venture of the airline, next to Indonesia AirAsia and AirAsia Thailand.

"Having a local airline means AirAsia could participate in flying passengers from one domestic destination to another, a right not afforded to foreign airlines." says co-owner Mike Romero.

PAL flies New Delhi service

Begins 6x a week service in March 27

January 19, 2011

MANILA, Philippines - The Indian government has relaxed visa rules to attract more Filipino visitors, said flag carrier Philippine Airlines (PAL), which will launch its Manila-New Delhi service in March.

"I am happy to announce that we will extend our visa-on-arrival facility to nationals of…the Philippines…with effect from January 1, 2011," Indian Prime Minister Manmohan Singh was quoted as saying.

PAL will start flights between Manila and New Delhi on March 27. This new route expands PAL's international network to 26 points in 15 countries.

"This will give PAL a presence in South Asia for the first time since 1994," the Lucio Tan-led airline said.

PAL's New Delhi service will operate 6 times weekly, with 3 non-stop flights from Manila and 3 flights routed via Bangkok.

The direct service (PR758) departs Manila every Tuesday, Thursday and Sunday at 9:10 p.m. Arrival at the new Terminal 3 of Indira Gandhi International Airport is at 1:10 a.m. the following day.

The return flight, PR 759, departs Delhi every Monday, Wednesday and Friday at 3 a.m. and arrives in Manila at 12 noon.

The one-stop service via Bangkok (PR752) meanwhile, departs Manila every Monday, Wednesday and Friday at 6:45 p.m. Arrival in the Thai capital is at 9:05 p.m. the same day, while arrival in New Delhi is at 1:10 a.m. the following day.

The return flight, PR753, departs Delhi every Tuesday, Thursday and Saturday at 2:45 a.m., reaching Bangkok at 8:25 a.m. and Manila at 1:50 p.m. the same day. abs-cbn

Airlines buck ‘onerous’ taxes

January 13, 2011

Max V. de Leon

THE European Chamber of Commerce of the Philippines (ECCP) is pushing the government to let go of the estimated $70 million in revenues it is getting from the “unfriendly and onerous” tax regime on foreign carriers, and to look at the benefits that a more liberal policy on international airlines can bring to the economy.

“The tradeoff between loss in tax revenue and competitiveness of the air-transport sector should be viewed as an investment of the government on the economy and its various sectors,” said Henry Schumacher, ECCP executive vice president.

While the government earns P3.2 billion (approximately $70 million) on the common carriers tax (CCT) of 3 percent gross receipts and gross Philippine billings (GPB) tax of 2.5 percent, Schumacher said these levies are also causing the erosion of foreign, and perhaps Philippine, carrier flights that support Philippine trade and economic growth.

Schumacher cited a study of the International Air Transport Association (Iata), an international trade body representing 230 airlines, showing the positive effect of eliminating the GPB and CCT.

These are the lower total cost of international passenger travel in the Philippine market by 2 percent, increase in the number of international arrivals and departures by 230,000 passengers representing growth of 1.9 percent, and increase in the number of international visitors by 70,000; and potential gains of between $38 billion and $78 million for the wider Philippine economy from increased tourism activity.

The increase in tourism arrivals will, in turn, create an additional 70,000 jobs, $214 million in employee compensation, and $5.4 million in tourism tax revenues. The resulting lower cargo-transport costs will boost export earnings in the order of $1 billion.

Over the years, Schumacher noted the number of international airlines doing business in the Philippines has dwindled even while the international aviation business in the neighboring countries, the same countries with which the Philippines needs to compete for international tourists, saw significant growth. 

The list, he said, includes Alitalia, Air France, British Airways, Egypt Air, Lufthansa, Swissair, United Airlines and Vietnam Airlines.  Some foreign carriers have also significantly reduced capacity.

“It has to be understood that the international aviation industry is the most crucial partner of Philippine tourism, recognized as a primary engine of socioeconomic growth and development.  It is undisputable that the success of Philippine tourism will greatly depend on the country’s international connectivity which is, in turn, a function of the state of international aviation industry in the Philippines,” he said.

To this end, Schumacher said the ECCP welcomes the pocket “open skies” policy of the Aquino administration. “Tourism, being recognized in Arangkada as one of the sunrise industries, has the chance to become one of the big contributors to foreign-exchange earnings and employment. However, the industry’s success will not be delivered on a silver platter. The open-skies policy which will hopefully be confirmed in an executive order soon, will not succeed if the international aviation industry will be burdened with excessive and unfair taxes.”  Businessmirror

Cebu Pac plane plows thru Palawan airport

Stalls more than 300 passengers

January 12, 2011

A Cebu Pacific A319-100, registration RP-C3190 and performign flight 5J-645 burst a nose gear tyre upon landing on a grassy area along the tarmac of Puerto Princesa airport in Palawan Tuesday at about 7 p.m.

Repairmen work on the crippled Cebu Pacific plane at the Puerto Princesa tarmac on Wednesday morning. The plane's front tire burst upon landing on Tuesday night. GMANews.TV

The accident damaged about half of the lights on the runway, although there were no reports of injuries, said local Air Transportation Office official Rafael Servando .

Due to the runway damage, a Philippine Airlines plane was unable to take off for a scheduled flight to Manila, and is reportedly parked at the tarmac’s apron together with the Cebu Pacific plane.

According to the ATO official, firemen immediately hosed off soil and other debris from the runway to clear the landing area.

Servando said they will repair the damaged runway lights by Wednesday morning, and estimate that incoming and outgoing flights will return to normal by around noontime.

Over 100 passengers of a Manila-bound Cebu Pacific flight remain stranded in Palawan airport and will have to wait until Wednesday evening before they could resume their travel.

Philippine Airlines was able to leave in the morning Wednesday after the airport was re-opened for traffic.—With Paterno Esmaquel/JV, GMANews.TV

The way forward

On NAIA Terminal

By Mar Roxas

January 12, 2011

GERMANY’S AMBASSADOR to Manila was recently quoted in the press as urging the government to bring the parties involved in the NAIA Terminal 3 dispute to the negotiating table “to facilitate a legal, fair and timely solution for an inherited problem.”

My take: What is there to negotiate? We face a clear-cut situation. The ambassador may have the best intentions, but there is nothing left to negotiate in this sordid controversy.

What is left to do? We need to properly and quickly implement the judgments and findings of various bodies.

Fraport ran to two international arbitration bodies to seek assistance and relief. Both have ruled in favor of the Philippine government: the International Court of Arbitration in Singapore (ICA) and the World Bank’s International Center for Settlement of Investment Disputes (ICSID).

The ICSID ruled that Fraport violated Philippine anti-dummy laws, but has reportedly modified its previous decision on account of procedural lapses, though the substance of its findings have not changed.

These are on top of the Supreme Court ruling with finality that in view of various infirmities and anomalies, the government has the power to take over and operate the facility provided it pays just compensation. Moreover an official investigation by the Senate blue ribbon committee received testimony of blatant violations of the anti-dummy law and possible payoffs.

All these proceedings, to which the government openly and willingly submitted, are more than enough proof of the Philippines’ adherence to the highest standards of legality and fairness, under any domestic or international standard.

Fears about alleged loss of investment confidence in the Philippine by European businessmen owing to this controversy are imaginary. The best way to maintain trade and investment confidence is clean governance and transparency, and these are what President Aquino stands for.

The way forward is to establish the value of Terminal 3 soonest, so that the government can pay just compensation and proceed to finish the project. Payment of just compensation has never been disputed by the Philippine government. The question has always been what amount to pay. And this is the crux of the matter.

The only remaining issue is as clear as day: Fraport and PIATCo, the consortium to which Fraport belongs, both as owner and lender, has demanded a whopping $565 million to $575 million in compensation! However, the turn-key contract, all in, of Takenaka, the principal contractor, is only about $350 million. That’s $350 million, all in!

The underlying problem is that Fraport and its partners in PIATCo are trying to recover more than this—about $175 to $225 million (P8 billion-P10 billion), including possibly improper “soft, facilitation” costs they claim to have expended.

There is no way that we, as taxpayers and as users of the facility, should pay for these invisible accounts. The principle involved is that the government, in the public interest, must not pay a centavo more than what is correct, while recognizing that Fraport/PIATCo is entitled to proper compensation.

So, what to do? There is an established procedure adopted by international agencies like the United Nations to determine value whenever there is a dispute like the one we are facing. They enlist third-party appraisers. In this case, we can hire two or three internationally accredited and reputable engineering firms to render an actual, materials-based appraisal audit. This means calculating the actual amount and cost of the cement, re-bars, equipment, etc. that went into the building. Then we can take the midpoint as the value.

It makes no sense beating around the bush when a fair and straightforward solution is right before us. We all want the simplest solution to any problem that will redound to the public interest.

We have endured no end the inordinate expense and inconvenience arising from this dispute. The imperative is to finally resolve the matter by finding a quick and fair mechanism for valuation, so that we can complete the project and move on to more aggressively attracting tourists, investors and others who will create jobs and livelihood opportunities here.

Perhaps the German ambassador would be kind enough to take this up with Fraport, so we can get to a transparent, rational process rather than go into another murky, lengthy and tedious negotiation that leads nowhere.

(Mar Roxas worked on the NAIA Terminal 3 issue as trade and industry secretary several years back and wrote this article based on notes he had taken.)

5J to fly Manila-Busan

Flight starts June 15

January 10, 2011

Budget carrier Cebu Pacific would add Busan, South Korea to its schedule in June 15 says the airline over the weekend.

"We believe this added connectivity to the Philippines will further strengthen Cebu Pacific's role in the nation's tourism agenda. This is our 24th international route, and we hope to continue providing more access for foreign tourists to explore the Philippines," said vice president for marketing and distribution Candice Iyog.

Busan is the second largest city in South Korea after Seoul. Currently, Cebu Pacific operates 4 times weekly flights to Busan from Cebu.

Open Skies to focus on Secondary Routes

By Recto L. Mercene

January 6, 2011

NEWLY installed Civil Aviation Authority of the Philippines (Caap) head Ramon Gutierrez said pocket open- skies policy mandated by Malacañang would focus on the secondary routes, giving airlines the capability to offer better service in an open competition among carriers.

“I welcome this new development as the Caap expects better revenues for these routes,” he said.

Gutierrez was reacting to an announcement from Malacañang that President Aquino would soon issue an executive order granting a pocket open-skies policy on all secondary international airports in the country.

The President first formally announced his preference for a pocket open-skies policy at the public-private partnership (PPP) conference at the Marriott Hotel Manila on November 18, 2010. He promised to “put teeth” to EO 219 through its full implementation in international aviation.

Pocket open skies means that all international airports in the country, excluding the Ninoy Aquino International Airport (Naia), are expected to attract foreign-based airlines and low-cost carriers (LCC).

Industry records show that there are 47.4 million seats available to foreign and local carriers, but only 10.97 million seats, or 23 percent, are being utilized, a situation being touted as an “overcapacity.”

The new EO would center initially on “four international secondary hubs”—Mactan-Cebu International Airport (Mcia) in Lapu-Lapu City; Francisco Bangoy International Airport in Davao City; Laoag International Airport in Laoag City; and Zamboanga International Airport in Zamboanga City.

The Diosdado Macapagal International Airport (DMIA) in Clark had already been earlier declared a pocket open-skies gateway in 2006, when then President Gloria Arroyo issued Executive Orders 500 and 500-A.

There are three more international airports considered as “secondary hubs”—Bacolod-Silay City International Airport in Silay City; General Santos International Airport in General Santos City; and Subic Bay International Airport in Olongapo City. Businessmirror

Continental strands Passengers at NAIA

As flight delays lasted 3 days

January 6, 2011

A Boeing 767-300 Continental Airlines plane failed to leave Manila at 11 p.m. on January 3, stranding at least 300 Guam-bound passengers for nearly two days due to a malfunction of the aircraft.

The passengers of Continental Airlines Flight 934 waited until 4 a.m. of January 4 at the boarding gate 5 of the Ninoy Aquino International Airport Terminal 1 for their departure while the aircraft was being repaired before they were told by the airline that the repair would take some time prompting the airline to booked them to a hotel but without providing for their food other than water, soup and a corned beef sandwich.

On the early morning of January 5, passengers were told to return to NAIA Terminal 1 at 1 a.m. for their supposed 3:30 a.m. departure but no take-off was made by the airline until later in the afternoon.

Manila International Airport general manager Angel Honrado said that since the airline is not Philippine-based, it has no spare aircraft to use.

According to Country Manager Maxima Cabantog, the next Continental Airlines flight brought the spare parts for the defective aircraft which arrived Tuesday night but finished repairing the aircraft only in the afternoon.

ICSID did not say pay Fraport

By Tetch Torres

January 5, 2011

MANILA, Philippines— Solicitor General Anselmo Cadiz on Tuesday said the decision of an international arbitration body on the construction and operation of the Ninoy Aquino International Airport Terminal 3 was based on a procedural ground and did not say that the Philippine government should compensate Fraport AG Frankfurt Worldwide Services.

Cadiz said that the ad hoc committee’s decision did not say that Philippine government should compensate Fraport.

“Rather the decision merely provides Fraport the opportunity to commence a new arbitration and to present its claims again. Likewise, the Philippine government is entitled to present the evidence against Fraport again,” the chief state lawyer said.

An ad hoc committee of the US-based International Centre for Settlement of Investment Disputes (ICSID) annulled on December 23 the ICSID Award of August 2007 based on the Committee’s conclusion that the ICSID Tribunal failed to provide enough opportunity for the parties to comment upon the evidentiary record before the DOJ Special Prosecutor in the Anti-Dummy Law criminal proceedings.

Fraport is the primary investor in PIATCO, which bagged the contract to construct and operate the NAIA Terminal 3.

“With the annulment decision, the parties are brought to the situation prior to the filing of Fraport’s request for arbitration,” Cadiz clarified.

Since 2002, the construction and operation of the NAIA Terminal 3 have been the subject of a string of civil and criminal investigations due to allegations of violations of Philippine laws by PIATCO and Fraport.

The Senate Blue Ribbon Committee issued a report in December 2002 concluding that the Terminal 3 concession was void because PIATCO violated the Build-Operate-Transfer (BOT) Law and attempted to buy government approvals through a consultant.

Then, in 2003, the Supreme Court ruled that the Terminal 3 concessions were null and void ab initio due to PIATCO’s violations of the Constitution, BOT Law, banking laws and public policy.

Palace unfazed by NAIA-3 setback

Decision not Unfavorable to the Gov't

By Aurea Calica

January 04, 2011

MANILA, Philippines - Malacañang is unfazed by a recent decision of a Washington-based international arbitration body, which gave German firm Fraport AG a legal victory in the dispute over the Ninoy Aquino International Airport Terminal 3 (NAIA-3).

The ruling of the International Center for Settlement of Investment Disputes (ICSID) allows Fraport AG to initiate another case against the government because it was not given a chance to review a Department of Justice (DOJ) decision on the anti-dummy case filed against the company.

Presidential spokesman Edwin Lacierda said the decision would not affect the government’s possession and operation of the NAIA-3.

Malacañang has not yet been furnished a copy of what Lacierda said appeared to be a “procedural” rather than “substantive” decision.

Lacierda emphasized that the government had earlier won its case against the Philippine International Air Terminals Co. (Piatco) before the Singapore-based International Chamber of Commerce.

“The decision in Washington… first of all, we don’t have a copy yet but our understanding (is) it was more procedural than substantive,” he said.

“So it will not affect our right of possession of NAIA 3. Remember that the Singapore decision has not been reversed. We received a legal victory in Singapore so it does not affect our right to possess and operate NAIA 3.”

Lacierda said the government would not stop the operations of NAIA 3 because of the ICSID decision.

“There’s a Singapore decision and Piatco was the complainant in that Singapore decision,” he said.

Lacierda said the government was still studying the full operations of the terminal because of problems in maintenance.

“In fact, we’re in the process of repairing some of the areas which were found to be defective so we’re working on that,” he said.

Lacierda said Transportation Secretary Jose de Jesus would have to discuss the timetable as regards NAIA 3’s full operations.

“What we have right now in the Pasay court is only the issue of fair value, of just compensation,” he said.

“That’s the only issue that we are aware of, so it does not affect our right, in fact, that’s part and parcel of expropriation.”

Sources privy to the ICSID decision said the German firm Fraport AG could be allowed to initiate another case against the government because it was not given a chance to review a Department of Justice decision on the anti-dummy case filed against the builder of NAIA 3.

“So the ICSID decision is not necessarily unfavorable to the government,” a source said.

“The ball is now in the court of Fraport. It can file another case, file the necessary fees and the government can present stronger evidence against it, that it conducted business here not in accordance with law.”

Fraport and Piatco are seeking payment of expenses incurred in the construction of NAIA Terminal 3.

The ICC decision is final and executory and should pave the way for the full operation and grant of legal right by the government to airport terminal concessionaires.

Three foreign airlines are currently building their business lounges at the international wing of Terminal 3.

Presidential Communications Secretary Ricky Carandang said the NAIA 3 case has different aspects and these were not “directly related.”

“So those are rulings on three different aspects of the case, which don’t necessarily contradict each other,” he said. “We want to see it opened this year but it’s difficult to pin down the exact dates because there are many things that need to be ironed out.

“But with the major rulings in our favor, then we can express some confidence. And again, as Secretary Lacierda said, we’re hopeful that it can be opened within this year. Whether it’s the beginning of the year, middle of the year, or end of the year is difficult to say.”

The ICSID had ruled in favor of the Fraport in a case involving NAIA 3.

Sources privy to the ICSID decision said its was voided, but it was not yet known if in whole or in part since a copy was not yet available.

Then Justice Secretary Raul Gonzalez had ruled that Fraport was not covered by the anti-dummy law but this decision remained under review.

Last Aug. 16, 2007, the ICSID dismissed the claim for compensation over the NAIA 3 project, clearing the way for the eventual operation of the facility. The ICSID decided it lacked the jurisdiction to hear Fraport’s claim brought against the Philippines in 2003.

But this was annulled in a Dec. 23, 2010 decision, the sources said.

Fraport, principal investor in the Piatco consortium that built NAIA 3, went to the World Bank-ICSID to recover the $425 million that it said it had invested in the project after the Philippine government seized the terminal in December 2004 following the Supreme Court’s voiding of the Piatco contract to build and operate the terminal.

The German firm also claimed protection for its investment under a bilateral investment treaty between Germany and the Philippines.

ICSID is an arbitration body set up by the World Bank to facilitate the settlement of investment disputes among member countries.

Then Solicitor General Agnes Devanadera said the moral victory which the government won in the eyes of the world was “the bigger victory” as Fraport had made the allegation that it was the Philippine government, its institutions and officials that had committed fraud.

“But in this case, the allegations of the Philippine government were actually affirmed and upheld by the ICSID, saying that the case filed by Fraport must be dismissed because in the first place, Fraport made a lot of violations of the laws of the Philippines,” she said.

German envoy wants to revive negotiations on NAIA 3

Negotiation the best option

January 4, 2010

MANILA, Philippines - Germany's ambassador on Tuesday urged the Aquino administration to put an end to the ownership dispute over the Ninoy Aquino International Airport Terminal 3 (NAIA 3) by reviving negotiations among the parties involved in the case.

In a statement, German Ambassador Christian-Ludwig Weber-Lortsch said the legal battle over the Manila airport terminal could run for years, "leaving the infrastructure project shelved by lawyers instead of being finished by engineers."

"As a way out of this impasse, I am still optimistic that the new administration, in line with its investment priorities, will bring the parties involved to the negotiating table in order to facilitate a legal, fair and timely solution for an inherited problem," he said.

An ad hoc committee of Washington-based International Centre for Settlement of Investment Disputes (ICSID) recently overturned an August 2007 decision which dismissed German firm Fraport AG's $425 million claim over NAIA 3.

Fraport filed a case with ICSID in September 2003 to seek protection for its investments in NAIA 3 after the Philippine government unilaterally cancelled the contract awarded to airport builder Philippine International Airport Terminal Co. (Piatco), the consortium where Fraport has a 30% stake. Piatco and Fraport officials have been accused of violations of the Anti-Dummy Law and the Anti-Graft and Corrupt Practices Act.

The ad hoc committee of the ICSID said Fraport was not given a chance to review a Department of Justice decision on the Anti-Dummy case filed against the company.

With the recent ICSID ruling, Fraport may again sue the Philippine government.

Malacañang said, however, it was unfazed by the legal setback, and that it was still eyeing NAIA 3's full operation this year.

NAIA 3 operations illegal

The German ambassador said current operations and tenant agreements on NAIA 3 are "illegal" as Piatco, Fraport and the German government, as guarantor, reserve all rights over the airport terminal.

"The Philippine Supreme Court clearly stated that no acts of ownership are allowed until full payment of just compensation by the government to PIATCO and its investors," Weber-Lortsch said.

However, the government said ongoing expropriation proceedings grant it the right to take over NAIA 3.

"Ang rule sa expropriation, once the government files its expropriation proceedings, entitled na siya to possession. Meron nang deposit of so much amount. 'Yun ang ginawa even before our time kaya na-operate ang NAIA 3 partially," Executive Secretary Paquito Ochoa told reporters.

Ochoa added that the recent ICSID ad hoc committee's decision has no impact on NAIA 3 operations.

"It has no effect as far as we are concerned. That decision has no effect on the operations of NAIA 3," Ochoa noted.

Ochoa said the Palace is still studying whether the government would file an appeal.

In a separate statement, Solicitor General Joel Cadiz said the ICSID decision was based on a procedural ground and does not validate Fraport's claim for compensation.

"The decision merely provides Fraport the opportunity to commence a new arbitration and to present its claims again."

"The Philippines therefore retains the right to reassert all of its defenses against Fraport's claims, including its arguments relating to Fraport's violation of the Anti-Dummy Law and anti-corruption laws."

NAIA 3's was opened in July 2008, and is currently operating at only half capacity. Only Philippine Airlines and Cebu Pacific are using the terminal.

The opening was supposed to have been held in March 2006, but a 100-square meter part of NAIA 3's arrival area collapsed.

Fraport wins NAIA 3 appeal

As Saga Continues

By Lala Rimando and Willard Cheng

January 3, 2010

MANILA, Philippines – An international tribunal has favored German firm Fraport AG in a case involving its reimbursement claim for its $425-million investment in NAIA-3, an international airport terminal facility in Manila.

According to the website of Washington-based International Center for the Settlement of Investment Disputes (ICSID), the decision was handed out last December 23, 2010.

According to abs-cbnNEWS.com sources intimately familiar with the case, the new decision favored Fraport which asked for the annulment of a previous ICSID decision that set aside Fraport’s $425 million claim from the Philippine government.

This brings the case back to square one.

This could also mean another legal setback to the Aquino government, which has been raring to fully operate the airport terminal to improve airport services in the country’s main gateway.

Solving NAIA 3’s many problems was one of the priorities of President Benigno Aquino III and his economic team who have vowed to show they can get their act together as they woo foreign investors to participate in funding and building key infrastructure projects.

Square one

Fraport AG Frankfurt Services Worldwide may opt to sue the Philippine government one more time at ICSID, a World Bank arm based in Washington DC that serves as an impartial forum for disputes between foreign investors and their host countries.

Fraport, a leading airport operator from Germany, filed a case with ICSID in September 2003 to seek protection for its investments in NAIA-3 citing the bilateral investment treaty between Germany and the Philippines. It said it had already spent $425 million in equity and shareholder loans.

The Philippine government unilaterally cancelled the contract it awarded in 1997 to Philippine International Airport Terminal Co. (Piatco), the consortium where Fraport, the foreign partner, has a 30% stake. A month after, in May 2003, the Supreme Court upheld the contract cancellation, citing irregularities in the contract amendments, among others.

The latest ICSID decision overturns the August 2007 decision by another set of arbitrators who had favored the Philippine government then.

The original set of arbitrators – composed of 3 individuals from Canada, Spain and US – had ruled that ICSID has no jurisdiction over the case since Fraport was found to have violated Philippine laws that limit foreign ownership and control of a facility like an airport terminal.

In a strongly worded decision, the arbitrators then wrote, “An investor that contravenes the law of the Host State of the investment must expect to suffer the consequences prescribed by law."

However, Fraport questioned that 2007 decision and asked the tribunal for a second set of arbitrators – an ad hoc committee – to review and annul the 2007 decision.

The ad hoc committee – composed of 3 individuals from Slovakia, France and New Zealand – reportedly found that there was a procedural lapse when the first set of arbitrators allegedly failed to allow Fraport to produce documents pertaining to agreements among Piatco shareholders.

These secret agreements between the Filipino shareholders (the Cheng family) and the foreign partner (Fraport) discussed how the German firm, which took care of most of the financing requirements during the building phase, would eventually assert financial and managerial control of the airport facility.

The Philippine Constitution and the Anti-Dummy Law require that only Filipinos could control a public facility such as an airport terminal.

Gov't to continue operating NAIA 3

Meanwhile, the government will continue to operate NAIA 3 despite the nullification of the ICSID decision that Fraport and Piatco violated the Anti-Dummy Law, presidential spokesperson Edwin Lacierda said Monday.

“We maintain and continue to possess NAIA 3. The decision in Washington— first of all, we do not have a copy yet—but our understanding, it was more procedure than substantive. So it will not affect our right of possession on NAIA 3."

Lacierda said Malacañang is hoping that NAIA 3 will be fully operational within this year.

Costly battle

The legal cases that have hounded NAIA-3 have made this terminal facility one of the government’s most expensive – if not the most expensive – legal battle.

The Arroyo government has hired individuals and a foreign law firm with expertise in international arbitration proceedings. Aside from Fraport’s $425 million suit (est. P18 billion) at ICSID, Piatco also made a $565 million compensation claim (est. P25 billion) before the International Chamber of Commerce (ICC) in Singapore.

Last July, barely a month after the Aquino government took over, ICC handed a decision in favor of the Philippine government.

Based on several accounts, the Philippine government, through different agencies, has spent about P2 billion since the local and international cases commenced in 2003.

Bolstered by the ICC decision in July 2010 and ICSID’s in 2007, the Aquino government has been proceeding with efforts to settle the “just compensation” issue with Piatco and Fraport. Talks between the government, Piatco and Fraport are part of the local court-supervised valuation of the terminal building.

The Aquino government hopes to complete the repair of some parts of the facility that are not strong enough to withstand tremors, and to fully operate the terminal by end-2011.

After repairs have been completed, the transportation department plans to bid out the operation and management of NAIA-3 to a private firm.

But as legal and compensation issues remain pending, Piatco continues to assert itself. It has asked the tenants, including Cebu Pacific, one of the two local airlines operating at NAIA-3, to remit lease payments to Piatco or face eviction.