Home Economy Higher NAIA charges seen to weigh on travel demand

Higher NAIA charges seen to weigh on travel demand

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REUTERS

By Ashley Erika O. Jose, Reporter

THE EXPECTED INCREASE in fees at the soon-to-be privatized Ninoy Aquino International Airport (NAIA) could alter travel demand dynamics, potentially impacting passenger volumes and operational margins for airlines operating at the airport, according to analysts.

“Higher charges ultimately end up in passengers’ wallets, and it may depress demand in the short term,” Rene S. Santiago, former president of the Transportation Science Society of the Philippines, said in a Viber message on Sunday.

“[This is] highly favorable to SMC (San Miguel Corp.) as it inherits these higher charges that cannot be attributed to it,” he added.

In June, the Department of Transportation announced that the proposed increase in passenger service fees at NAIA is intended to enhance operational efficiency.

The department said that the planned rate hike is within the approved parameters, terms, and conditions specified in the tender documents for the NAIA rehabilitation project.

Passenger service charges, also known as terminal fees, are imposed on departing passengers. Landing and take-off fees, on the other hand, are charges levied for the use of airport facilities and services during aircraft landings and takeoffs. Both fees contribute to the total cost of airfares paid by passengers.

Currently, domestic travelers pay a passenger service charge of P200, while foreign travelers pay P550. It is anticipated that these fees will rise to P390 and P950, respectively.

“The passenger service fees will be [implemented] in 2025, but other planned airport fees [are expected] before the end of the year; we have to finalize the amounts,” Transportation Secretary Jaime J. Bautista said, noting that the proposed hike will still require approval from Congress.

This means that landing and take-off fees levied on airlines will also increase by the end of the year.

“There will be an increase because the concessionaire needs to be compensated for their investments. The charges they will collect are expected to improve the airport’s efficiency,” Mr. Bautista said.

Enrico P. Villanueva, a senior lecturer at the University of the Philippines Los Baños Economics department, described the expected increase in airport fees as enhancing services but said, “It is just lamentable that fee increases appear to be sudden and pervasive, and mostly front-loaded.”

He said the new airport operator could phase in the proposed hike gradually or wait until services improve.

“Air travel is not a necessity for the majority, so demand for it is price sensitive or elastic. It is unfortunate that service fee increases come at a time when air travel is just beginning to surge again,” Mr. Villanueva said.

Nigel Paul C. Villarete, senior adviser on public-private partnership at the technical advisory group Libra Konsult, Inc., said the proposed hike is justified.

“This will result in better airport terminal services in NAIA, which seems to lag behind,” he said in a Viber message.

“Airlines may be tempted to increase airfares too, but let us hope they won’t… These [fees] are negligible in amount compared to the ticket sales revenues,” he added.

He also said  that travel demand might not be directly impacted by the proposed increases in passenger service charges or landing and take-off fees, as these costs are already included in the ticket price.

“It is just a small portion thereof. It is when airlines jack up their fares that may affect demand.”

For the first quarter, international passenger volume surged to 6.97 million from 3.8 million in the corresponding period last year, according to data from the Civil Aeronautics Board.

Domestic passenger numbers for the first quarter alone totaled 7.44 million, equivalent to 25.7% of last year’s total domestic passenger volume of 28.97 million.

This year, the Department of Tourism aims for 4.8 million international arrivals, up from 2.65 million last year.

In March, the New NAIA Infrastructure Corp. (formerly SMC SAP & Co. Consortium) signed a P170.6-billion contract to operate, maintain, and upgrade the country’s primary gateway for 25 years. It is scheduled to assume NAIA operations by September.

The New NAIA Infrastructure plans to construct a new passenger terminal building with a capacity of 35 million passengers annually, as part of efforts to alleviate airport congestion.

The government anticipates earning P900 billion from the project, equating to P36 billion per year. This figure is 20 times larger than the P1.17 billion annually remitted by the MIAA over the 13 years through 2023, according to the Department of Transportation.

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