NINOY AQUINO INTERNATIONAL AIRPORT — Not content with just having acquired a bank recently and running his various other business interests Guam’s ambassador-at-large Lucio Tan aims to fly even higher with an international airport passenger terminal.
Tan who owns a mall a telecommunications company and a myriad of other businesses on Guam is claiming the right to operate the mothballed Ninoy Aquino International Airport passenger terminal 3 after his rival publisher and hotelier Emilio Yap on Aug. 26 bought a major stake in the company which won the right to build and operate the terminal in 1997.
The government meanwhile denied having a hand in Yap’s investment even though a state pension fund has a stake in his hotel company. It also said it was considering to rebid the NAIA 3 contract.
Tan’s spokesman lawyer Perfecto Yasay Jr. said the taipan had the “legal right” to operate NAIA 3 after the Philippine Supreme Court declared the contract between Philippine Airport Cargo Terminals Co. null and void in early 2003.
The Supreme Court ruled that the contract deviated from its original terms leaving the government at a disadvantage in terms of earnings. The high court also ruled that the contract violated BOT rules and was inimical to public interest virtually charging Piatco — composed of German airport operator Fraport AG and Philippine Airport General Services owned by the Chengs a Filipino-Chinese family — with corrupt practices. Fraport one of the largest airport operators in the world is 70% owned by the German government.
Yap through his Manila Hotel Corp. purchased Fraport’s direct 30% stake in PIATCO and the 20% stake the latter owned through smaller shareholders for a total of $200 million. The Chengs own the rest of the 40% interest in PIATCO. Yap’s MHC is owner and operator of the Philippines’ historic Manila Hotel along Roxas Blvd. where Gen. Douglas McArthur stayed before Manila fell into the hands of Japanese forces. Yap also owns Manila Bulletin Publishing Corp. which sells the largest-circulated daily in the Philippines.
In a letter to Transportation and Communication Secretary Leandro Mendoza on Sept. 1 Yasay said “Any claim of Manila Hotel to operate NAIA 3 was invalid because the law requires a bidding.” He added “At best what Manila Hotel got for buying Fraport’s stake was a share in the just compensation PIATCO may be entitled to.”
If allowed to operate NAIA 3 analysts said Tan will earn millions of dollars in revenue from spaces to be rented out to store concessionaires aside from fees to be paid by passengers as well as rental to be paid by other international airlines for use of counters and other spaces inside the terminal. The contract does not include the operation of the runways and earnings from landing/parking fees of airlines which traditionally goes to the government through the Manila International Airport Authority. Tan also owns flag carrier Philippine Airlines.
For his part MIAA general manager Alfonso Cusi said the government will rebid the NAIA 3 contract since the original deal was declared null and void.
“Since the Supreme Court nullified the contract with PIATCO the government has to bid out the operation of NAIA 3. The government cannot just assign to anybody the right to operate it ” he said.
Meanwhile the government claimed it had no part in Yap’s purchase of Fraport’s stake in PIATCO. MHC is partly owned by the Government Service Insurance System the state pension fund for government employees.
According to Executive Secretary Eduardo Ermita the deal between MHC and PIATCO’s foreign shareholders is between private parties “where the government has no participation.”
Manila Hotel President Jose Lina Jr. said “We bought 30% of Fraport’s direct equity another 20% of the two other foreign shareholders plus the stake of Fraport in all other companies that own PIATCO.” He added that “this is entirely for our own account ” and denied fronting for the government.
The hotel company is looking at tapping foreign loans to finance the acquisition of the foreign stakeholders’ shares in PIATCO said Lina a former interior and local government secretary.
If it is allowed to operate NAIA 3 PIATCO will drop its cases against the government. In turn Lina said government should drop its countersuits.
NAIA 3 was earlier eyed to replace the NAIA 1 terminal used by other international airlines. Tan’s PAL has its own passenger terminal (NAIA 2) servicing its domestic and international passengers.
Under PIATCO’s own financial estimates however NAIA 3 will not be profitable unless PAL moves its international services there. PAL has been refusing because it claimed among others that the new terminal didn’t have enough access to NAIA 2 where its domestic passengers will supposedly remain. International airlines were also bucking the supposedly high rental rates being charged by PIATCO.
Tan along with five other Filipino-Chinese tycoons formed Asia’s Emerging Dragons Corp. in 1996 after then President Fidel V. Ramos asked them to invest in a new airport passenger terminal.
In 1997 AEDC submitted an unsolicited bid to build operate and transfer the terminal to the government after 25 years. Under the so-called Swiss challenge governing the government’s BOT rules unsolicited bids could be challenged. PairCargo forerunner of PIATCO and owned by the Cheng family submitted a better offer. AEDC however did not submit a counter offer forfeiting its right to the project. Disgusted by the way things turned out the other taipans sold their shares to Tan leaving him to run AEDC and press its claim over NAIA-3.
PIATCO’s Jeffrey Cheng told the Journal that his group’s alliance with Yap will enable PIATCO to move closer to operating NAIA-3. “We have no deal with the government yet but we think that together we have a better chance (to operate the terminal) than just me fighting alone.” He dispelled rumors that Tan and Yap may have already buried the hatchet. “Tan and Yap are not okay. Tan is still blocking (our project) using all connections to the Palace and media.”
And despite PIATCO’s earlier financial projections Cheng said the company no longer needed PAL to make NAIA-3 profitable. “We don’t need PAL. They can stay in T2 (Naia 2). To each his own. We will survive.”
He added that PIATCO will still look to Fraport for advice on how to run the airport terminal if finally allowed to operate it.
Insiders said there has been an effort to persuade PIATCO to fork over millions of dollars for the right to operate the terminal despite its contract. A presidential adviser then tried to force Fraport to sell its stake in PIATCO with a plan to turn around and sell the same stake at a higher price to interested parties. Fraport which had entirely financed the construction of the terminal scheduled to have opened in December 2002 refused to sell. The issue has been a thorn in Arroyo’s side preventing her from visiting Germany despite several trips to Europe.
NAIA 3 was expropriated by the Arroyo government last year after the Philippine Supreme Court issued its ruling on the PIATCO contract with the government signed during the administration of President Joseph Estrada. Since then PIATCO especially Fraport has been pressing payment by the Arroyo government.
PIATCO filed a case with the International Court of Commerce in Singapore last year demanding that the Philippine government pay it $525 million for taking over NAIA 3. Shortly after Fraport also filed a claim against the Philippine government with a World Bank arbitration panel asking for $425 million in compensation aside from a $900 million suit.
On. Feb. 3 the German government through Ambassador to Manila Axel Weishaupt denounced the forced takeover of NAIA 3 saying that it “is concerned about the expropriation of this international passenger terminal — also with respect to the particular manner of expropriation — and the political signal it may send to future investors in the Philippines.” The ambassador pressed that Fraport be justly compensated for the project as per its contract with the government.
Despite several announcements since it took over NAIA 3 the Aquino government failed to open the passenger terminal as the Japanese contractor which built it refused to turn over blueprints and international airlines didn’t want to transfer unless the government came up with legal documents recognized by international authorities that it could operate the facility.
The government believes that the operation of NAIA 3 will boost the tourism industry of the Philippines at a time when its economy continues to falter. Its operation is estimated to bring in 15 million tourists to the country earning much-needed revenue for the cash-strapped government. MBJ