Indonesia’s state airport operator Angkasa Pura II looks to manage Philippines’ Clark Airport

Indonesia’s state airport operator PT Angkasa Pura II (AP II) has revealed it plans to participate in a competitive tender process to manage the Philippines’ Clark International Airport. AP II commercial director Daan Achmad said the bid to enter the Philippines market is part of the group’s ambition to become a global company.


Summary:

  • Indonesia’s state airport operator PT Angkasa Pura II (AP II) is looking to establish management contracts abroad and to become a global player;
  • The first target is a contract to manage Clark International Airport in the Philippines;
  • It will face tough competition in its attempts and an international tie-up might perhaps be considered a better option;

Established in 1984, AP II is, as its name suggests, one of two state airport operators in Indonesia, with 13 airports in its portfolio, and anchored on the nation’s largest, Jakarta’s Soekarno-Hatta, which handled over 60 million passengers in 2017, making it the 17th busiest in the world in 2017 and the seventh in Asia. All the airports are in central and western Indonesia.

CHART – PT Angkasa Pura II has a portfolio of 13 airports across Indonesia, all in central and western parts of the countrySource: PT Angkasa Pura II

Both PT Angkasa Pura I and II are expanding within Indonesia itself, have taken over, sought permission to operate, been offered, or have “seen potential” in airports across the country that are under the control of the Ministry of Transportation, which wants to be free of them so it can be more focused in carrying out its role as an authority, not as an operator. AP II assumed control of the Banyuwangi Airport in Feb-2018 and it will operate the USD150 million New Bintan Airport upon completion in 2019.

AP II also seeks partially to privatise many of its homeland airports under public-private partnership (P3) arrangements, and possibly jointly operated to allow for military service to continue, which would be an unwanted complication for any external investors. At the same time the Transport Minister has said that the government might consider easing foreign ownership regulations for airport operations to encourage more investment, for example by lifting the 49% maximum foreign ownership regulation for airports.

One airport that will probably not be made available for sale is Jakarta Soekarno-Hatta, the one that would be the main prize for foreign investors, although the government seems unable to make up its mind. Separately, the proposed IPO on AP II itself looks set to take place in 2019.

CHART – Jakarta Soekarno-Hatta International is the largest airport in Indonesia and has seen passenger numbers double over the past ten yearsSource: CAPA – Centre for Aviation and Ministry of Transportation Republic of Indonesia

Mr Achmad’s statement about AP II becoming a “global company” is surprising. It has said little about that in the past and has its hands full integrating municipal airports into its command structure and at the same time attracting foreign investors into P3s.

The Clark Airport, once famously a US military base which had to be evacuated on account of the eruption of Mount Pinatubo in 1991 and situated 80 km/50 miles northwest of the capital, Manila, was resurrected primarily as a low-cost facility in 1996 until the control of the Clark International Airport Corporation (CIAC), a government-owned enterprise while the southern part of the facility is still used by the Philippine Air Force as Clark Air Base. Gradually, full-service airlines started to use it and the traffic split is now roughly 50:50.

In Feb-2017 President Rodrigo Duterte signed an executive order to revert CIAC from the Philippines Department of Transportation (DOTr) to the Bases Conversion and Development Authority (BCDA) in order to ensure the development of the Clark Civil Aviation Complex remains parallel with that of the Clark Freeport Zone as a premier investment and promotion destination.

In Dec-2017 GMR Infrastructure and its partner, the Manila-based Megawide was awarded a separate USD 250 million Clark International Airport Engineering, Procurement, Construction contract involving the design, construction, testing and commissioning of a new terminal with a capacity of eight million passengers per annum.

The terminal is intended to help “decongest” Manila’s Ninoy Aquino International Airport (NAIA) and the wider Metro Manila region. The DOTr led by example by relocating its main office to Clark City in Jul-2017. As it stands, Clark is much smaller than NAIA and there is the further complication of an entirely new airport for Manila being built.

CHART – Passenger levels at Manila Ninoy Aquino International (top) and Clark International (bottom) show varied patterns but highlight a general growth trend Source: CAPA – Centre for Aviation and Manila Ninoy Aquino International Airport and Clark International Airport reports

Now AP II is in a race with major Indian infrastructure players like GMR and GVK amongst others firms for the Operations and Maintenance (O&M) contract of the Clark airport. GMR already operates Mactan Cebu International Airport in the Philippines while the GVK Group has signed a Management Services Agreement with PT Angkasa Pura I for Commercial and Operations Development of I Gusti Ngurah Rai International Airport, Bali in Indonesia.

It looks to be a tough call for AP II to go it alone on the Clark project. Co-operation is the name of the game in this part of the world and an international consortium would look to perhaps be the way forward.