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Future of Clark int’l airport dims with new EO

By NEWSBREAK

{mosimage}Despite the growing number of passengers in Clark’s international airport and ongoing expansion work, its future as an aviation hub hangs in the balance.

Industry sources told abs-cbnnews.com/Newsbreak that last April 2, 2008, President Gloria Arroyo signed a version of Executive Order (EO) 500-B that limits how the Diosdado Macapagal International Airport (DMIA) will be fast tracked as an aviation hub.

Intense lobbying of various interests have already produced two earlier versions, the 500 and 500-A. The former was pushed by individuals in government and private sector who wanted to expand the semi-liberalized aviation environment in Clark to attract more airlines and bring in more tourists and investors. The latter was lobbied mostly by domestic airlines that feared the increase in competition.

Now almost two years old, the row over the EO has yet to be put to rest. Malacanang has not yet made up its mind, even as the document said to signed by President Arroyo last April 2 removes the provision that would permit Clark’s airport authority to freely allow international airlines to operate in Clark.
That and other provisions that were reportedly removed shrunk what was originally a five-page document to only one page, the industry sources privy to the executive order said.

{mosimage}Brisk business

Talks about the fate of the EO 500-B dominated hushed conversations among those who attended the April 4 inauguration of the expanded Terminal 1 in Clark. In the crowd were businessmen involved in tourism-related businesses in the region, investors and locators in Clark’s export processing zone, and some local government officials.

Together with various Manila-based foreign chambers that are fed up with the perennially congested Manila airport terminals, these businessmen and local officials issued a statement in mid-2007 persuading President Arroyo to sign EO 500-B, citing how they have benefited from the influx of visitors, thanks to cheap regional flights. Business has never been as brisk since the budget flights commenced in 2004.

"All these seem ironic," said a Pampanga-based businessman, referring to that fact that, on the same occasion, President Arroyo was to grace not just the terminal expansion’s inauguration but also witness the ceremonial signing of two investments that bank on the potential of Clark as an aviation hub.

Representatives from Kuwait Gulf and Link were present to sign an agreement with Clark International Airport Authority (CIAC) to put up an aviation-related support services facility. Initial investments are about $25 million.

A bigger investment is from a 35-65 joint venture between Cebu Pacific and Singapore Airlines Engineering Company (SIAEC), the engineering arm of Singapore Airlines. Both are embarking on an estimated $81 million repair and overhaul facility that will take care of heavy and light maintenance checks of wide-bodied aircrafts. The facility will initially employ about 600 to 1,000 engineers and mechanics. This is SIAEC’s first overseas expansion.

7 million passengers

Other investors are lining up too, including Changi Airports International, which has expressed intention to further develop the airport. Another Middle Eastern group is also eyeing to bag the same job. The recently completed terminal 1 expansion has already increased capacity to two million from only 500,000 before. In 2007, about 533,000 overseas workers and tourists lured by cheap fares flew through DMIA.

Next year, when the planned construction of the second passenger terminal commences, DMIA can accommodate up to seven to eight million passengers by the end of President Arroyo’s term in 2010. Unlike the airport at the heart of Manila, which could not be physically expanded even if it is already bursting at the seams (not to mention the delayed opening of the third terminal), the 167,000-hectare DMIA stands on a spacious field of what used to be the biggest American air base outside the US.

By April 18, a 94-kilometer expressway that will reduce transfers between Clark and Subic to only about 20 minutes will be open to the public.
The Arroyo administration has envisioned Clark and nearby Subic, a former US naval base, to be the logistics and services hub for the Asia Pacific region.

The question is when.

Budget airlines

As far as Clark is concerned, the long way to do it is to wait for the foreign affairs, transportation, and tourism departments to hold bilateral air talks with countries where Philippine or other regional airlines fly. The aviation industry is heavily regulated where rights to fly to a country at a specified frequency and seat capacities depend on country-to-country negotiations held every so often.
 
The quicker way is to unilaterally open up Clark to whichever airline is interested to ferry tourists, businessmen, and overseas Filipino workers. In industry parlance, it’s called "pocket open skies," because this is applicable only to Clark. The first experimental years of allowing regional airlines like Aseana, Air Asia, Tiger Air, and recently, Hong Kong Express, proved to be a hit, that the additional 533,000 passengers who flew through Clark did not even make a dent on Manila airport’s about nine-million passenger market.

Initially, the EO 500 signed way back in late 2005 was just supposed to strengthen that further so these regional budget airlines are not caught in the middle of domestic politics, which have previously threatened the renewal of their usual three- or six-month flying permits.

Creating a "pocket open skies" in Clark, its supporters argued, is a way to rapidly develop Clark as a gateway and create economic activity so the potentials of Clark are not held up with the Philippines’ usual schedule and nitty-gritty of air talks negotiations. Other countries have done these, such as Bali in Indonesia, Phuket in Thailand, Penang and Sarawk in Malaysia, and recently Siem Riep in Cambodia.

Resistance from Cebu Pacific

Philippine Airlines (PAL), the biggest airline in the country, has been vocal about its opposition in opening up Clark. Cebu Pacific, the market leader in domestic flights, has also expressed resistance.

Cebu Pacific’s CEO Lance Gokongwei, who graced the Friday event together with his partners from the Singapore Airline Engineering Company, explained to abs-cbnnews.com/Newsbreak why he does not consider opening up Clark unilaterally to other airlines as fair: "Our position is that we always wanted reciprocity. I have no problem if you give all the rights to a foreigner, as long as you give the same rights to the Philippine carriers."

He was specifically referring to a recent experience. Two weeks ago, budget airline Hong Kong Express started flying to Clark. He wanted Cebu Pacific to also fly to Hong Kong from Clark but was rejected during the bilateral air talks. The Philippines’ current weekly frequency and capacity entitlements according to the bilateral air agreements with Hong Kong are already maxed out by PAL and Cebu Pacific, which are both originating flights from Manila and Cebu.

Luciano: cheerleader

Balancing the interests of local airlines with those in Central Luzon who want to further push the benefits of more flights into Clark partly rests on the shoulders of Victor Jose Luciano, the CEO of Clark’s airport authority. Luciano, a former Aseana Air executive, has been one of the cheerleaders of pocket open skies in Clark and has spearheaded attracting airport investors like the Singaporeans and those from the Middle East.

"If we want to make Clark an aviation hub in the region, we need to get things moving here fast," he told abs-cbnnews.com/Newsbreak. He explains why: "They might go to other countries which are more aggressive. We want investments, jobs, tourists, locators in Clark, Subic, the whole of Central Luzon."

Luciano said the air negotiations panel, which includes Clark representatives, is working to renegotiate with their counterparts in Hong Kong to make way for Cebu Pacific’s request to fly there.

Gokongwei said he’d like to base one Cebu Pacific plane in Clark to fly not only to Hong Kong, but also to Singapore, Taipei, Macau and Korea. Incidentally, there are air talks with Macau on April 24. Luciano said the air panel hopes to increase current air entitlements with Macau to accommodate Cebu Pacific flights there.

"It’s a lot of balancing act," described Luciano. This year, he hopes to increase flights in Clark from the current 60 a week to 80. The EO 500-B was going to help make that easier and quicker.

He’s crossing his fingers, though. Last he heard, the EO 500-B will be out by June this year.

But last Friday, he was in a jovial mood. After all, the newly expanded terminal is hosting foreign and local investors who are betting on his ultimate dream that Clark will indeed become an aviation hub soon. He then stood at the side of President Arroyo while she blew her birthday cake given by Cebu Pacific. (abs-cbnNEWS.com/Newsbreak)

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