Manila—San Miguel Corporation, a company known worldwide for its beer, is risking it all by building an airport worth S$20 billion, reported to be the second biggest airport in the world.
However, Nikkei Asian Review reports that there are skeptics who doubt the profitability of such an endeavor, which is spearheaded by none other than the president of San Miguel himself, Ramon S Ang, an expensive folly that may cause the company tremendous debt.
At a signing ceremony last September, Mr Ang said, “I think this is the most meaningful project of our country. I believe we will be able to do groundbreaking before end of the year. We started the engineering work on the project about two years ago. So now that we’ve been given the green light …this will roll out quickly.”
The Philippines’ Transportation Secretary Arturo Tugade said, “It’s a game changer because we can come up with a facility that will compete with the world-class airports all over Asia and all over the world,”
However, proponents for the initiative have claimed that the new airport will solve the horrendous traffic problems that beset the main airport in the Philippines, Ninoy Aquino International Airport, or NAIA, since it will be able to move as many as 100 million passengers a year. Additionally, the new airport will add more than one million jobs, contribute almost S$ 11 billion to the economy, and become the center of an ambitious infrastructure plan that includes industrial, residential and commercial areas.
In June of this year, Mr Ang told San Miguel stockholders, “From the beginning, we were fully aware of the difficulties of a project such as this. Nothing of this magnitude has ever been completed.”
Mr Ang is no stranger to causing his brand to grow. In the last 10 years, the company has diversified and seen its revenues grow from S$3.8 billion to around S$ 27 billion, with share prices increasing from S$ .91 to S$ 4.01.
But the new airport, planned for Taliptip, Bulacan, may be too big even for the far-reaching Mr Ang. The new facility was supposed to have opened in 2023. By 2024, NAIA was supposed to have closed down. But now, the government is actually having NAIA, along with the two other airports in Manila, expand, and all three airports have sizable funders backing them, including the government itself.
At present, the new airport is scheduled to open in 2026.
What the Philippines would do with four airports, one of which can handle 100 million passengers, is anyone’s guess. Nikkei Asian Review’s report quotes David Bentley, chief airport analyst at the Centre for Asia-Pacific Aviation, as saying, “You certainly don’t want to have a situation where you have, in one city, four airports.”
Other concerns include San Miguel’s ability to manage an initiative of this magnitude, since it built much of its success on managing its brewery, and has no background in this sector.
San Miguel said it would fund the new airport with 30% equity and 70% debt, which Nikkei Asian Review reports as the gross amount being equal to its current net debt, and twice its market capitalization, making its lenders wonder if the company is able to succeed in this endeavor.
A third problem lies with the Philippines’ main carriers, Philippine Airlines and Cebu Pacific, which are helping expand NAIA, which in turn may make them reluctant to use the new airport in Bulacan.
The assistant secretary for procurement at the Department of Transportation, Giovanni Lopez, has said, “If no airlines want to move, that’s not the government’s problem.”
But San Miguel’s Mr Ang remains unfazed. His projections say that if fully utilized, the new airport can bring in S$3.2 billion a year, which would make it profitable within a short six years.
Mr Ang has gotten a number of investors from the US and China onboard, as well as Japan’s Sumitomo Mitsui Banking Corp., as financial adviser, and South Korea’s Incheon International Airport Corp as a possible operating partner. But he does have a track record of beating a hasty retreat from business ventures that have proven difficult.
The new airport’s ground-breaking ceremonies, scheduled for this month, have been delayed due to regulatory speed bumps. There is still a possibility that Mr Ang and San Miguel may not see this particular dream realized after all. -/TISG
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