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NEWS Last modified on October 11, 2016

Philippine government finally settles Manila airport compensation dispute with PIATCO

One of the longest running disputes in aviation is over after the Philippine government finally made a compensation payment to PIATCO over its decision to rip up its operating contract for Manila-Ninoy Aquino International Airport's Terminal 3 in 2004.

According to Fraport, which spearheaded the PIATCO consortium, the settlement is in keeping with the $510 million the country's Supreme Court awarded it in September 2015 and reaffirmed in April 2016.

The amount takes into account a previous advance payment of about $59 million made in 2006 by the Philippine government to PIATCO (including interest as of December 31, 2014) in connection with the Terminal 3 project at the Manila gateway.

Fraport – through subsidiary, Fraport AG Frankfurt Airport Services Worldwide – had a 30% stake in PIATCO which signed a 25 year operating contract for the terminal under the terms of a Build Operate Transfer (BOT) with the Philippine government, only for the deal to be terminated overnight in December 2004 when a new government seized control of the terminal and kicked out PIATCO months before T3 was due to open.

A statement issued by the German airport operator this morning, reads: "Fraport AG Frankfurt Airport Services Worldwide welcomes the Philippine government's compensation payment made to PIATCO for the  expropriated terminal project at Manila airport.

"This payment is in keeping with the Philippine Supreme Court's decision of September 8, 2015, which was again reaffirmed in April of 2016. The Supreme Court stipulated that the government of the Philippines must pay compensation because it declared the concession contract with PIATCO null and void and, in 2004, expropriated PIATCO's newly built airport terminal in the capital city of Manila.

"Following the decision of the Philippine Supreme Court, PIATCO has received compensation payments for the expropriated terminal project  in Manila. Based on this compensation, PIATCO has already made a partial payment to Fraport AG.

"Furthermore, Fraport AG intends to sell its shareholdings in companies in the Philippines and will no longer pursue claims in connection with the expropriation of the terminal project at Manila airport."

Fraport's share of the total transaction amounts to about $270 million, although it will not pocket this amount as it has to repay the German government €40 million for funds received in 2008 under Germany's GKA (Bundesgarantie für Kapitalanlagen im Ausland) foreign-investment guarantee programme.

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