PCC study urges action on poor air transport infrastructure

MANILA, Philippines — The government should address lack of infrastructure, review allocation of airport slots and amend the Public Service Act to lift restrictions in foreign investments in the air transport industry to promote competition, according to a study commissioned by the Philippine Competition Commission (PCC).

Gliberto Llanto, consultant and author of the study on the air transport industry commissioned by the PCC, said there is a need to address inadequacies in infrastructure in the air transport industry due to its impact on airline operations, as well as efficiency and competition in the market.

He said an issue affecting the growth and efficiency of the country’s air transport industry is the congestion at the main international gateway which has runways and terminals unable to cope with the rising demand for the airport’s facilities.

Last year, the Ninoy Aquino International Airport (NAIA) handled 42 million passengers, way above its rated capacity of 31.5 million passengers per year.

“The congestion in NAIA and poor infrastructure support in the provincial airports, i.e. the lack of night landing facilities that would allow airlines to spread some of their domestic flights in the early mornings and evenings, have constrained the operations of airlines, with undue inconvenience to passengers and business losses to firms…The poor state of airport infrastructure has been used as an excuse in not adopting a more liberal and open air transport policy,” the study said.

As congestion has impacted the efficient allocation of airport slots, the study also recommended a review of the guidelines on how slots are being assigned to carriers.

As a rule, the Manila International Airport Authority which manages the NAIA, follows the guidelines established by the International Air Transport Association on slot allocation where in a slot coordinator carries out the assignment of the use of airport infrastructure by carriers.

Slot allocation in NAIA is based on historical allocation and the capacity of the airport to handle aircraft movements, giving incumbents an advantage over new players as they have some history of operation.

“Limited airport capacity has prevented other airlines to get new or additional slots in NAIA. The grandfather rule favors incumbent carriers and puts new entrants at a disadvantage. In practice, the slot guidelines help bar new entrants and benefit the incumbents,” the study read.

Llanto said there is also need to amend the Public Service Act by removing the provision of air transport services from the definition of public services to allow foreign air carriers to engage in domestic air transport.

Based on the study, constitutional restrictions on ownership and control of airlines in addition to those under the Public Services Act have weakened competition in the domestic air transport market and acted as barriers to entry of potential foreign investments in the industry.

Llanto said the recommendations were made as the country needs financial muscle and expertise to develop the industry.

Other recommendations of the study are to develop rules for merger and consolidation; improve air traffic management with emphasis on ensuring passenger and aircraft safety; review of regulation of air fares in routes where only one carrier is operating; review of policy stance in negotiating bilateral air services agreements to foster competition in domestic air transport; review of air alliances and potential anti-competitive effects; and to continue to improve land transport, inter-island shipping and ferries for stronger inter-modal competition particularly in secondary and tertiary routes.

PCC commissioner Amabelle Asuncion said the antitrust body would consider the recommendations provided by the study which has identified slot allocation and code-sharing as potential competition issues.

“We can advise other regulatory agencies if certain regulations they have actually affect competition or the market in general,” she said.

Air transport is among the priority sectors the PCC wants to look into for anti-competitive practices.

Commenting on the recommendations of the study, Cebu Pacific president and chief executive officer Lance Gokongwei said the carrier supports the push to upgrade infrastructure in the country.

“I think the fundamental issue we have or biggest opportunity in terms of offering consumers more choices is really to improve the state of infrastructure within the Philippines,” he said.

On the slot allocation, he said the independent slotting regime is found to be best way to allocate as the slot coordinator has to justify choices to the entire aviation community, it is internationally accepted, and those assigned with slots have to use at least 80 percent of the assignments during the given season to maintain slots.

For his part, Philippines AirAsia Inc. chief executive officer Dexter Comendador said the government should consider safety in making a decision on which airports should be developed and kept to serve Luzon.

He said having five airports to cater to Luzon such as the Clark International Airport, NAIA, Sangley, Subic Airport and new airport in Bulacan could create havoc in terms of safety.

“At the moment, with the four airports operating, we have a lot of near misses in flight. You add a fifth one, I hope we don’t see planes hitting each other on top… You have to decide which one to keep. You can’t just say yes to everything. That is my concern as a pilot in terms of safety,” he said.