Turbulent Times at Manila's International Airport

August 14, 2012

Philippine President Has Vowed to Upgrade Capital's Much-Loathed Air Hub, but Challenges Could Keep Some Overhauls on Standby

By JAMES HOOKWAY

Travelers wait for flights at Manila's Ninoy Aquino International Airport. The run-down and underfunded air hub is routinely mired in delays and is overly congested. The government is working on an array of overhauls.

 Reuters

MANILA—The airport code "MNL"—for Manila's Ninoy Aquino International Airport—can strike fear into the hearts of even the most hardened business travelers.

With its long snaking lines, tatty departure lounges and congested, overlapping runways, Terminal One at Ninoy Aquino is regularly voted as one of the world's worst airport terminals in online polls. It didn't help that two people were injured when part of the terminal's ceiling collapsed last year.

Now, sorting out the problems at Manila's international gateway—along with many of the Philippines' other notorious infrastructure problems—is emerging as a top policy priority for President Benigno Aquino III as he tries to propel his country onto a faster growth track to compete with better-equipped rivals such as China, Thailand and Malaysia.

The congestion crisis at NAIA partly reflects a boom in air travel across Asia. Budget carriers such as AirAsia and Cebu Pacific have opened up foreign travel to legions of first-time passengers.

Bumpy Ride

Manila's airport has a rocky past and an uncertain future.

• 1981: Terminal One opens.
• 1983: Activist Benigno "Ninoy" Aquino Jr. is shot and killed after arriving at the airport.
• 1991: Terminal One reaches full capacity. Passenger levels continue to grow.
• 1995: Construction begins on Terminal Two.
• 1997: Construction begins on Terminal Three, but is soon bogged down by corruption allegations and legal disputes.
• 1999: Terminal Two opens but is used exclusively by Philippine Airlines.
• 2003: The former air-transport chief seizes the control tower in a protest. He is killed by police.
• 2008: Terminal Three opens for some flights but most international carriers remain at Terminal One as congestion worsens.
• 2012: President Benigno Aquino III announces plans for a fund to help finance improvements at the airport and elsewhere.

Source: WSJ research

But the delays—around a third of flights leave behind schedule—also expose chronic underinvestment in the Philippines economy, which analysts say Mr. Aquino and his government will have to fix in order to build on the country's strong performance in recent months. Gross domestic product grew 6.4% in the first quarter from the year-earlier period and the benchmark stock-exchange index breached records.

For years the Philippines lagged behind China and most of the rest of Southeast Asia in posting rapid growth. Corruption, bureaucratic red-tape and poor infrastructure deterred local and foreign investment, economists say.

Over the past several months, though, Mr. Aquino's efforts to trim out graft and waste from government spending have helped secure a series of credit-rating upgrades. Those efforts have reduced borrowing costs and freed up more government cash to improve rundown infrastructure, much of which was built during earlier eras of growth in the 1960s and 1970s.

In May, Mr. Aquino announced plans for a new government-backed fund to help finance infrastructure projects. The Philippines' state-run pension fund this week said it is ready to pump 50 billion pesos, or $1.2 billion, into the fund to help build rail links, expressways and new airports. Another pension fund for state workers aims to contribute another $300 million to the fund, which will be managed by a unit of Australia's Macquarie Group. The idea is to select projects that deserve investment and then use the government funds as a starting point to attract more private cash, with Macquarie helping spur the projects along.

Earlier efforts by Mr. Aquino to promote infrastructure—including other public-private partnerships—have moved slowly. Just one project for 2 ½-mile road has been bid out since Mr. Aquino was elected in 2010. The government aims to get the ball rolling on eight other projects this year, however.

That Manila is even in a position to contemplate accelerating construction of flyovers and train networks is a sign of fresh confidence, analysts say. "Our usual limits to growth in the past have revolved around the government's budget deficit," says Luz Lorenzo, a Manila-based economist with Maybank Investment Bank. "Now it's the speed of implementation."

Sorting out the Philippines' air links—especially its international terminals—is one of the biggest challenges.

Its main international airport has been the setting for some of the most dramatic events in the country's recent history. Mr. Aquino's father was shot and killed at Terminal One of the international airport—built three decades ago—in 1983 in still-unexplained circumstances when he returned to the country to challenge late dictator Ferdinand Marcos. The airport was later renamed in his honor. Last year, airport authorities refused to let former President Gloria Macapagal Arroyo board a plane here. She is now facing trial on corruption charges, which she denies.

In 2003, the Philippines' former air-transport chief seized the airport's air-traffic control to support a failed coup attempt, and was shot dead by a SWAT team. That fiasco contributed to Manila airport losing its Category 1 status with the U.S. Federal Aviation Administration, effectively preventing new routes from opening between the Philippines and the U.S. Other international agencies quickly followed suit, limiting the Philippines' direct air links with the rest of the world. 

The airport's physical appearance and amenities, meanwhile, have continued to deteriorate. The website "The Guide to Sleeping in Airports" (sleepinginairports.net) listed Terminal One as the worst airport terminal in the world for long transits in 2011. According to the site, passengers complained about long lines and a vendor who reportedly was selling water out of used containers and pretending to break fake seals on the bottles when opening them. "The current administration should hire a bulldozer and a ramming team and start tearing it apart," said one reviewer on the site. 

Airport officials note that refurbishments have begun and that they are doing the best they can with the funds they have at their disposal. 

There are two other terminals. One is reserved solely for use by unprofitable Philippine Airlines, while the other is only partially completed after a long-running corruption scandal and is mostly used for domestic flights.

"It's all so disorganized," said Brian Miller, who was hoping to make a Thai Airways flight at Terminal One recently after waiting to check in for more than an hour. "It's like nobody thinks we have planes to catch."

Aviation authorities are now improving computer systems to handle tasks such as tracking the number of hours pilots have flown and stepping up security to help regain coveted Category 1 status at MNL. The government is also encouraging airlines to stagger flights where possible to reduce congestion on Manila's runways, which unlike the runways at most airports, intersect. That prevents planes from landing and taking off at the same time, even as demand for air travel surges.

Transport Secretary Mar Roxas says the government has given the go-ahead to construct two new rapid-exit taxiways to help quickly clear aircraft from the runway at a cost of about $14 million. Longer term, though, both the government and Philippine-based carriers are looking at clearing out from Ninoy Aquino International Airport. Already under way: A $1 billion expansion of Clark International Airport in the site of an old U.S. Air Force base.

"The airport sits on a 2,000-hectare area compared with NAIA's 440 hectares and already has two existing parallel runways. Clark would be able to handle more passengers and aircraft at any given time," Mr. Roxas wrote in a recent primer on Manila's airport dilemma. Already, budget carrier AirAsia's Philippines unit and other smaller airlines are flying from Clark.

To help get passengers out to the airport at Clark, which is about 50 miles from Manila's Makati financial district, a journey that can easily take over two hours, the government is laying plans for a high-speed rail system. But some analysts say that project could take years to complete given the difficulty of executing the necessary land appropriations. Philippine Airlines, meanwhile, is looking at another alternative: building its own dedicated air hub.Now half-owned by industrial conglomerate San Miguel Corp., Asia's oldest airline is looking at investing in an entirely new airport complex on some of San Miguel's land just south of Manila's city center.

A version of this article appeared August 13, 2012, on page A9 in the U.S. edition of The Wall Street Journal, with the headline: Turbulent Times at Manila's International Airport.