To keep Lufthansa in NAIA, DOTr open to flexible lease

MANILA, Philippines — The government is willing to offer aviation support firm Lufthansa Technik Philippines (LTP) several lease options to compel it to stay in Manila given its importance in investment attraction and job creation.

Transportation Secretary Vince Dizon is leading talks with LTP, one of the biggest locators in the Ninoy Aquino International Airport (NAIA), to ensure the resolution of its lease concerns.

Dizon underscored the valuable role that LTP plays in Philippine aviation – employing more than 3,000 Filipinos who can do aircraft maintenance, repair and overhaul (MRO) – so the direction is to prevent it from exiting NAIA.

“We are in the process of talking and working with Lufthansa, but suffice it to say we are trying to find a solution. Lufthansa is important for the Philippine aviation sector, so we are going to do everything that we can to make sure Lufthansa stays in the Philippines,” Dizon told The STAR.

There are worries that LTP may pack up its operations at NAIA if it fails to secure a preferential rate. NAIA was turned over to a private operator last year, and the concession led to price hikes.

Under the Manila International Airport Authority’s Administrative Order (AO) 1, Series of 2024, land lease at NAIA was increased to P710 per square meter per month.

LTP currently pays a monthly lease of just P14 million as provided in its 25-year deal with the government, but that agreement is set to expire this year.

Since LTP manages a 226,000-sqm base at the MacroAsia Special Economic Zone in NAIA, its lease will go up by 11 times to over P160 million per month if AO 1 is applied.

LTP’s parent MacroAsia Corp. said it can pass on the additional costs to its clients, but this may force airlines to move MRO requirements elsewhere. This is painful for LTP’s 3,112 employees, all of whom are experts in maintaining Airbus and Boeing aircraft.

Although nothing is final yet, Department of Transportation Undersecretary Jim Sydiongco said the DOTr is trying to find a way to address LTP’s issues on lease. But the DOTr wants to honor the contract signed with NAIA operator New NAIA Infrastructure Corp. (NNIC).

One of the options being explored by the DOTr is spreading out the lease hike in such a manner that LTP can keep up financially and NNIC still recovers its investments in NAIA.

“There could be other creative ways of implementing [the lease increase]. It could be staggered, it could be different things. All of this will undergo proper consultation with NNIC and be subject to the approval of the (DOTr) secretary,” Sydiongco said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the DOTr may have to find a workaround in the concession to balance the interests of NAIA stakeholders.

“If there are undue/unfair/onerous provisions, they must be arbitrated and settled properly. There are many transacting parties in the past, under different administrations, so contracts could not really be perfect depending on the circumstances and situations,” Ricafort told The STAR.

The DOTr awarded the P170.6-billion concession to operate and maintain NAIA in 2024, when the agency was still led by former transport chief Jaime Bautista. Since then, the DOTr has gone through a massive shakeup, leading to Dizon’s appointment as secretary.

The NNIC is authorized to jack up service fees at NAIA to fund projects that will improve the airport’s passenger capacity to 62 million a year and aircraft movement to 48 an hour.

Although the NNIC’s goal is to upgrade NAIA, it still has to earn enough yields from the project, especially as it promised to remit 82.16 percent of its revenue to the government.

LTP attracts foreign carriers to go to the Philippines for MRO needs, serving 44 aircraft fleet for line maintenance and 1.3 million engineering hours for base maintenance last year.