Features

Alternative Gateway

31 Aug 2014 by Clement Huang

Clark International Airport Corporation (CIAC) has been ramping up its expansion plans over the past few years, building terminal facilities and welcoming new airlines as it prepares to take on traffic from the beleaguered main hub of Manila: Ninoy Aquino International Airport (NAIA). 

As Clark International Airport (CRK) asserts its position on the international map, investments around it have been pouring in and the area is turning into a mini metropolis outside Manila. 

Clark is the country’s fastest growing airport. In 2012, it posted a record 1.3 million passengers, a rise of 71 per cent for both international and domestic flights compared to the same period last year. 

CIAC chief executive Victor Luciano said the number of domestic passengers surged when Air Asia, PAL Express and Seair-Tiger commenced domestic flights in April last year to prime tourist destinations such as Kalibo, Cebu, Puerto Princesa and Davao.

The airport, 80km from Metro Manila, is set to be the second of a dual airport system for the capital and complement the increasingly burdened NAIA.

“We need Clark to absorb some of the traffic at NAIA,” said Secretary of the Department of Transportation and Communications (DOTC) Joseph Emilio Aguinaldo Abaya.  “Even if, initially, it seems more cost efficient to have a single main gateway, there are dual airport systems existing around the world that actually perform well commercially.” 

Although most airlines currently fly out of NAIA – with the Philippines targeting 10 million tourist arrivals by 2016 and NAIA expected to reach full capacity by 2018 – all this is about to change. 

Shared burden

Two years ago, the Japan International Cooperation Agency (JICA) confirmed it would grant the Philippines an official development assistance (ODA) loan of PHP20 billion (US$455 million) for a decade-long programme to upgrade the country’s major roads – after investigating the best practical solutions to improve Manila’s infrastructure problems. 

It also conducted feasibility studies on a number of possible sites that could act as the new, or spill over, airport. In June, JICA formally recommended Sangley Point, a former United States Naval Station in Cavite, be developed into the country’s long-term international gateway. 

“JICA’s recommendation means that in effect the new Sangley airport will be NAIA’s third runway until further expansion can be made in the long term,” Abaya said. “Upgrading Sangley’s existing airport may be achieved faster and at a lower cost since initial reclamation will be needed for only one to two runways instead of three to four.”   

While still subject to approval from the National Economic Development Authority (NEDA), the plan is to get Sangley set up as NAIA’s extension and turn Clark into the main budget carrier terminal by year 2025.

“In the meantime we will continue upgrading NAIA and encourage the rapid growth of Clark International Airport, which we still see as developing into a major international gateway in the long term alongside our plans for NAIA and Sangley,” Abaya added. 

“We’re encouraging Clark to be a budget airport. The trajectory shows that it is more suited to being a low cost carrier hub,” explained DOTC spokesperson Atty Migs Sagcal.

Clark is currently the home of three legacy airlines (Asiana Airlines, Dragonair and Qatar Airways) and five LCCs (Cebu Pacific, Jinair, Seair, Tigerair Singapore and Tigerair Philippines).

While the airport will keep its legacy carriers, there will be a major shift towards low cost carriers. Based on the most recent traffic forecasts (outlined in the Feasibility Study for the Extension of Clark International Airport by Aeroports de Paris) 81 per cent of Clark passengers will board low-cost carrier aircraft by 2038. 

Furthermore, the evolution of Clark’s domestic passenger traffic is projected to drastically shift from its current share of 19 per cent to 57 per cent of the total figures.  

“Businesses within the region would prefer CRK to operate for both legacy airlines and LCCs due to the increase of passenger traffic generated that will benefit businesses within Clark and its immediate vicinity,” said Arnel San Pedro, from the corporate communications department at the Clark airport.

With expansion programmes in place, Clark aims to capture 40 per cent of NAIA flyers who come from Central and North Luzon in the next five years or so. 

“Based on passenger traffic projections, CRK will be the airport of choice for North and Central Luzon, evolving from a secondary airport to a major airport servicing several millions of passengers annually,” said Kathrina Deang, planning officer at Clark’s corporate planning department.

Incoming traffic

Over the past eight years, the DOTC and CIAC have invested in Clark’s development to prepare it as an international hub. 

“We see CIAC as a premier gateway alongside NAIA and Sangley, especially in view of its rapid growth over the past few years, as well as the government’s development plans for the entire economic zone and the rest of the region,” said the DOTC’s Abaya.

In 2008, the airport completed a PHP130 million (US$3 million) terminal expansion, which increased capacity to 2 million passengers. In 2010, a PHP550 million (US$12.6 million) expansion added a second storey, arrival and departure lounges and two aerobridges to the terminal building, boosting Clark’s capacity to five million.

A new Terminal 2 dedicated to international traffic with a seven-million-passenger capacity was completed in December 2013, offering a total floor area of 35,000 sqm after a total investment estimated at US$150 million. 

On December 16, 2013, the Philippines and France’s Aéroports de Paris signed a memorandum of agreement (MOA) for the planning and design of another terminal worth PHP7.2 million (US$165,000), which is expected to be completed in the second quarter of 2016 and boost the airport’s capacity to 16 million passengers per year.

DOTC spokesperson Sagcal said CIAC’s next step is to present the plans to NEDA next month. Once they are approved, construction can begin, with bidding expected to take between six months and a year.

“The existence of interconnected and dedicated aircraft terminals has the aim of not only attracting Clark’s target customers, but also to further facilitate seamless funnelling of (full-service carrier) international passengers to the LCC’s domestic network and vice versa, cementing Clark’s position as an alternative gateway to and from the country,” Deang said. 

Building links

CIAC is currently connected to Manila by the Subic-Clark-Tarlac Expressway and the journey takes one to two hours. With the airport expected to take on more airline traffic, the DOTC is, not surprisingly, eyeing alternatives to make Clark more accessible.

A rapid train system, modelled on Japan’s bullet trains, was mooted but budget constraints have forced the government to shelve these ideas for now.  

“We considered having a high-speed train but it costs too much. Unfortunately the Philippines isn’t quite there yet. What we also considered is having a bus shuttle service with a check-in point in the city,” Sagcal said.

At the moment, the 900km Integrated Luzon Railway is the preferred option. Abaya says there is an option of building a connecting rail link to Clark. “Instead of building a high-speed rail, you use the same rail to have an airport link,” said Abaya. “At least you have a decent rail system that could serve the airport.”

The DOTC is still awaiting clearance from NEDA to pursue the Integrated Luzon Railway project. Once it has been green-lit the project could take up to six years to complete. Feasibility studies for the project are expected to be completed early next year.  

“If we get NEDA’s clearance for both the integrated Luzon railway and the commuter railway, we can bid that out early next year,” said Abaya. “So at least from our end, we will get this going and hopefully the people who replace us at DOTC will determine this is a viable project that will serve the people.”

The new powerhouse

The planned expansion of Clark and improved North Luzon Expressway combined with the the thriving deep seaport in Subic means the Central Luzon region is becoming an investment destination with
high potential.

“The development of infrastructure has fuelled the strengthening of Central Luzon’s economic fundamentals. This has largely been brought about by infrastructure developments that paved the way to increased economic activity in Central Luzon as businesses started expanding from Metro Manila to its peripheries,” said property consultant, CB Richard Ellis, in its 2013 market update. 

According to the CBRE report, Central Luzon is now the third biggest contributor to the national economy with a 9.1 per cent share of GDP in 2010. In 2011, the region posted the highest gross regional domestic product growth in the whole country at 11.9 per cent, higher than the National Capital Region, also known as Metro Manila (7.5 per cent).

Local property giants have been staking their claims to land surrounding the area. Robinsons Land Corporation are investing US$300 million in a new branch of their Go-Hotels chain at Clark. Megaworld Corporation is reported to have made a deal with Clark Development Corporation to develop 550 hectares of the former US military property into a mixed-use complex. SM Prime Holdings is adding 89,000 sqm of floor area to its regional mall, SM Clark Mall.

Meanwhile, South Korean firm Donggwan Clark Corp has started construction on its 304-hectare leisure tourism estate. Its three-tower condominium complex was turned over in 2012 and a 36-hole golf course and clubhouse have commenced construction. Other projects to be developed include a waterpark, spa, gymnasium, eco park, business centre, specialty stores and function rooms, an international school, golf academy and driving range, clinic and drugstore, a hotel casino and a 500-unit villa complex and shopping arcade. 

Also in the pipeline for the region is the Global Gateway Logistics City, a 177-hectare mixed-use development comprising a logistics park, aero park, business park and town centre. It will also have a 150-bed tertiary hospital that will be leased, equipped and operated by local healthcare conglomerate The Medical City, starting this year. 

Property consultant CB Richard Ellis said investors have also focused on the Clark and Subic Freeport Zones because 100 per cent foreign ownership is allowed – as compared to the 60/40 ratio usually required with a local partner. 

“Apart from the infrastructure and improving regional economy, the fiscal and non-fiscal incentives offered to manufacturing locators in the Freeport Zones of Clark and Subic are deal clinchers for investors,” says the CBRE report.

The expansion of Clark will also boost development of the new metropolis, Clark Green City, a Bases Conversion and Development Authority (BCDA) project. The city will be 4,000 hectares to start with, but has the potential to expand to 60,000 hectares and attract significant investment.

The agency has so far invested PHP33.8 billion (US$774 million), in line with its statutory mandate to convert the former US military facility Clark Air Base into a productive zone that creates a number of employment and investment opportunities. 

BCDA president and chief executive Arnel Paciano Casanova said Clark Green City is a sterling opportunity for a 100 per cent foreign-owned company to invest in urban development, since the entire area is a special economic zone designed to offer business friendly incentives. 

In line with its name, the city is designed to be environmentally friendly and have public mass transport options such as rail, biking and hiking lanes, in addition to having urban forest zones, clean energy and a ban on any polluting activity. It is envisioned that it will become the country’s first technologically integrated city with the potential to generate billions in investments and create thousands of jobs by 2015. 

In a bid to further improve the tourism industry at Clark and in Pampanga Province, the CIAC and the Hotels and Restaurants Association of Pampanga (HARP) signed an MOA in May 2014 to grant discounts and incentives to arriving passengers at Clark. 

Tying up loose ends

This vision of the future has evolved. Clark was initially mooted to become the main international gateway after NAIA reached capacity and many companies banked on this outcome by investing in Clark. 

For example, in 2008 Singapore Airlines teamed up with SIA Engineering and Gokongwei-led Cebu Pacific to build a hangar and maintenance, repair and operations (MRO) facility, and spent PHP1 billion (about US$23 million) in 2010 to establish a second hangar. Metrojet also constructed a US$40 million MRO facility to cater for corporate jets.

“In 2011 and 2012 the aim was to close NAIA and move everyone to Clark. In 2013 we did a study and came up with the idea of a dual gateway. Many people had already set up near Clark. There was a bit of confusion,” admitted Sagcal.

Various sites were studied and eventually JICA settled on Sangley. However, there were delays and many investors who set up shop inside Clark Freeport and the special Economic Zone in February have suffered.  

“It comes down to lost opportunities. (Investors) want to see further improvement from the government rather than a constant changing of minds,” Jeff Pradhan, former president of Clark Investors and Locators Association said at a media briefing in 2013.

While JICA has put forward its recommendation of Sangley, it is still subject to approval from NEDA so there is a small chance that plans could change again. 

Clark’s strategic location, however, next to an economic free zone and busy seaport plus its ramped up expansion plans to become Manila’s main budget airport means nearby businesses have begun to thrive regardless. 

With the construction of a new environmentally friendly Clark Green City and the lure of 100 per cent ownership by foreign businesses, it is only a matter of time before Clark becomes the foundation stone for a new and booming metropolis.

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