San Miguel Corp’s bid to modernize Manila’s Ninoy Aquino International Airport (NAIA) offers both exciting opportunities and concerning financial implications, CreditSights, a Fitch Solutions company said Monday.
“We expect NAIA to complement SMC’s greenfield international Bulacan Airport that is slated to be completed in 2027, thereby driving revenue and cost synergies,” CreditSights said in a report.
“Despite mild cannibalization concerns, we believe both airports serve the Metro Manila catchment area that faces heavy runway congestion amid growing travel demand and poor regional interconnectivity,” it said.
NAIA and Clark International Airport now serve the Metro Manila area, with two new greenfield airports―Bulacan and Sangley―set to meaningfully ease the congestion after they come online in 2027 and 2028 respectively.
“As such, we view the addition of NAIA as complementary that could open more connecting routes, improve operational synergies and capture a larger air passenger traffic share at Manila for SMC,” CreditSights said.
The unit Fitch Group said the presence of Incheon International Airport Corp. as a project partner would also improve operational expertise and corporate governance.
The Department of Transportation (DOTr) last week issued a notice of award to SMC SAP Group the P171-billion contract to rehabilitate, operate and maintain NAIA.
The SMC SAP Group, formed by San Miguel Holdings Corp., RMM Asian Logistics Inc., RLW Aviation Development Inc. and Incheon International Airport Corp., won the bidding for NAIA after offering the highest bid of 82.16-percent revenue share to the government.
CreditSights also said it was surprised at the huge, proposed revenue share of 82.16 percent, which could result in modestly negative annual EBITDA generation from the airport even post the expansion works.
“We are alarmed that the revenue share that SMCC bid for and is willing to pay to the government is much higher than the bids placed by its competing bidders – MIAC’s 25.91 percent and GMRAC’s 33.3 percent,”’it said.
“We are also unclear about the background/capabilities of two of SMCC’s other partners, RMM Asian Logistics and RLW Aviation,” CreditSights said, adding that they were unable to find publicly available information on the nature, shareholding and financials of these companies.
“The potential corporate governance issues could result in increased debt/equity investor caution with the SMC name,” it said.
CreditSights said it expects a continued aggressive capital expenditures appetite for SMC that could further strain its credit profile.
“We expect SMC’s capex to remain at or above P200 billion per annum over the next two to three years amid its ongoing airport, infrastructure and power capex, resulting in a persisting deep free cash burn,” it said.