Annoyed by Anti-Monopoly Policy, PAL Puts Airport Plans on Hold

cover312 smallIn a press briefing last week, Philippine Airlines (PAL) President and CEO Ramon S. Ang announced that the airline’s plans to construct a $6 billion airport as an alternative to the outdated and overcrowded Ninoy Aquino International Airport were being put on hold. According to the Philippine Star (which still insists on calling the privately-owned PAL the nation’s “flag carrier”) headline, the reasons are described as “unclear government policy”, but from Ang’s comments the “indefinite’ postponement of the project is evidently the result of deep unhappiness with the surprising unwillingness of the Aquino Administration to endorse PAL’s efforts to create a monopoly in the local air industry.

The sticking point as far as PAL is concerned arose with the issuance of the terms of reference for the planned P17.5 billion Mactan-Cebu International Airport project, which would presumably also be applied to PAL’s proposed airport or any other future projects. The original terms issued last December by the DOTC prohibited any airlines or airline-related businesses from bidding on the Mactan-Cebu project, which instantly eliminated PAL, PAL’s major owner San Miguel Corporation, and Cebu Pacific’s parent company Cebu Air Inc. from the contest to win the project. After strong criticism from these three and others, the DOTC revised the terms last month to limit airlines and related businesses to 33% ownership of the project. Significantly, however, the 33% ceiling was extended to ownership in bidding consortiums; in other words, such consortiums would be excluded if more than 33% of their equity was held by airlines or airline-related businesses.

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About BenK

I write a column for The Manila Times on Tuesdays, Thursdays, and Saturdays. Most of the energy sector and the heads of several government agencies probably wish I didn't.

15 Comments on “Annoyed by Anti-Monopoly Policy, PAL Puts Airport Plans on Hold”

    1. My sentiments exactly. This airline is only functioning because of a big cash bonanza from SMC, they better hope that money never runs out.

  1. suspect this has something to do with international regulatiins/pressures.

    shame no change in isolationist/protectionist stance when it cimes to trans pacific partnership. a huge strategic mistake by philippines to ignore, and be left out in the economic cold.

        1. Well, my horse is Greg Domingo. And he is certainly not ignoring it, though is limited in what he can actually do about it.

        2. i learnt a long time ago
          you don’t just listen to the racehorse owner but more so to the stable lads, and you watch your horse on the morning gallops rather than read the pundits
          consultantcy 101

        3. I see. Well, protectionism is indeed a big sticking point, and the President’s (or more to the point, the vested interests he takes his orders from) stubbornness on that by itself would be sufficient to keep the invitation to the TPP that Sec. Domingo is scrambling to find a way to get from ever happening. But that is far from the only thing; labor laws are a big issue, as well as issues with customs regulation, governance & reporting, non-tariff barriers, business certification & registration, and probably some others I haven’t even been read in on.

          It is dangerous to over-simplify complex problems for the sake of highlighting – though it is certainly understandable why some are encouraged to do so – what uselessly corrupt boobs the current leaders of this country are. It leads to false expectations, and undermines the credibility of solutions when they don’t have instant results.

  2. @benk
    I agree
    And pleased that you are one of the few who highlight and understand the issues – complex as they may be.
    But you have to be in it to win it and the decisions currently being taken/framework agreement, as we speak, will mean that the philippines has no negotiation leverage, even in the near future,once the train has left the station.

    And once japan and south korea join then it becomes a significant economic and political bloc. I can assure you of one thing – the americans are very disappointed by the administrations stance/lack of concrete action. That will spill over in a number of ways.

    The complexities may well be used as a reason not to join further down the road. Status quo maintained.

    1. Well, that was the serious point that worries me that I highlighted in my column a while back — the longer the TPP negotiations go on, the narrower the specifications become for any country that wants to sign on later. So the chances for the Philippines are getting away from us. This will be particularly disadvantageous once the AFTA kicks in come 2015, because AFTA and TPP are going to be synched.

      1. agree
        fortunately my client is not the philippines, so only academic interest in their position, or lack thereof

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