Affordable air travel

It used to be that air travel was the domain of the rich. The emergence of so-called low-cost carriers (LCCs) changed the game by opening air travel to the burgeoning middle class. However, having LCCs is just half of the picture. These budget airlines must have their own airport terminals to keep their costs low.

The government announcement last week of a plan to build a P4-billion facility beside the Ninoy Aquino International Airport Terminal 3 to service the requirements of LCCs is welcome news. The Department of Transportation and Communications is doing a feasibility study on a new terminal that can handle 10 million passengers a year. The study may be completed before this year ends and, if proven viable, construction can start next year. The new facility should take two years to complete and will hopefully be ready before the end of President Aquino’s term in 2016. A 3.3-hectare lot beside the controversial Naia 3 is being considered for the budget terminal. The government, according to Jose Angel Honrado, general manager of the Manila International Airport Authority, also hopes to bring Naia 3 to full operational capacity by the first quarter of 2014, and the idea is to transfer all domestic budget flights to the new terminal so that Naia 3 can focus on international flights.

The government is also revising the master plan for the Clark international airport to now include facilities for LCCs. If plans push through, a P6-billion budget terminal will be built starting next year for completion also in 2016. It is estimated that LCC traffic accounts for 80 percent of all aircraft movements in the Clark airport, thus the need to build a budget terminal. The DOTC has allotted P3 billion in its 2014 budget for the construction of the 45,000-square-meter budget terminal, and another P3 billion will be released in 2015 to complete it. The budget terminal will have a capacity of 4.5 million passengers a year. The DOTC had said that the new budget terminal would be an entirely different structure to look more like the Changi Airport in Singapore but linked to the existing terminal that has a capacity of two million passengers a year.

An LCC terminal is specifically designed with the needs of low-cost airlines in mind. It has simple facilities to keep construction cost low and maintenance expenses at the minimum. The concept of an exclusive LCC terminal is believed to have been pioneered by Malaysian tycoon Tony Fernandes of leading budget airline AirAsia at the Kuala Lumpur International Airport in 2006. The Malaysian airport and another in Singapore are the two often cited examples of LCC terminals in Asia-Pacific.

With a stripped-down and inexpensive terminal, an airport can cut operating costs significantly, passing along the savings to budget airlines that, in turn, can extend these to passengers in the form of cheap ticket prices. Cost reductions compared to normal airports are usually in the physical building, forgoing expensive architectural design in favor of simple warehouse-like structures with low ceilings and without the moving walkways, fewer restaurants and duty-free stores, and simplified baggage handling. However, these terminals may have modern facilities such as free Internet access. Studies on LCC terminals show that costs to an airline were as little as two-thirds of the total cost of landing at the main terminal, providing a big competitive advantage to budget airlines insofar as pricing their tickets is concerned.

Supporting LCCs will definitely help the government’s big push for tourism—one of the economic sectors that public and private experts believe can sustain the country’s high-growth momentum. With two budget terminals coming up—one at the Naia and another in Clark—local and foreign low-cost airlines can look forward to expanding their operations to and from the Philippines. The government should also consider an LCC terminal in the Visayas and another in Mindanao to make the benefits of cheap air travel available to all people across the country.

But the government must always keep in mind that low cost should not mean poor service at the airport for passengers lured by the cheap fares of budget airlines.