Airport Services

Will plans to upgrade world's worst airport take off?

San Miguel proposes a $10 billion airport in Manila

The Philippines' largest conglomerate claims its plan to upgrade Manila airport - ranked as one of the world's worst - won't cost the government a single peso, its president told CNBC on Tuesday.

The Ninoy Aquino International Airport was rated the world's worst airport in 2013 by a number of online traveler surveys, including Travelers criticized its dilapidated facilities, long waiting times and rude officials.

But things could be looking up for the airport, which struggles to handle 32 million passengers a year despite having the capacity for only six million, amid a number of proposals in response to government plans to renovate the airport, most recently from San Miguel Corporation.

Read MoreExpect your coconut water to get more expensive

The company took the government by surprise when it unveiled an unsolicited proposal to build a new airport for $10 billion in May and claimed it could be up and running in five years.

"Our proposal is much cheaper [than the others put forward] at the cost of private investors rather than government money... we can recover this ourselves without one peso coming from the government," said Roman Ang president and chief operating officer of San Miguel Corporation.

"This will be a magnet to attract foreign investment into tourism and manufacturing and I think this will be really good for our country," he added.

Ang said the company would recover the $10 billion it invests from passenger terminal fees, aircraft landing and takeoff fees, and from commercial shopping center and hotel charges.

Read More

Aside from the San Miguel proposal, two other plans have been put forward, including a proposal from the Japan International Cooperation Agency to turn a former U.S. Air Force base - Sangley Point - which is located south of the city, into a new airport capable of handling 66 million passengers by 2025 and 100 million by 2040.

Another is the expansion of Clark International Airport - another former U.S. Air Force base 60 miles north of Manila. This proposal would only cost $166 million and the facility would be able to manage 14.5 million passengers. However, the expansion of Clark would likely be a complement to one of the other proposals.

Workers pass by an advertisement at the dilapidated Ninoy Aquino international airport which has been named one of the world's worst airports on May 23, 2014 in Manila, Philippines.
Dondi Tawatao | Getty Images News

Michael Daniel, managing director of Singapore-based consultancy firm Aviation Insight told CNBC he saw San Miguel's proposal as the most appealing.

"They seem to have a better understanding of the challenges not only from a capacity issue but they also talk about some of the economic benefits for the general population as well. When you look at it holistically what could be better for the country I would gravitate towards San Miguel," said Daniel.

Aviation Insight's Daniel added that Manila airport was in "dire need" of improving their operations.

Read MoreCities, taxis pump ride share's brakes

"Because of the added capacity, it adds more stress to the safety measures that you have to have for the airport in terms of air traffic management too," he said.

Other analysts also told CNBC that the airport's shortcomings were holding back the Philippines economic growth potential.

"From a regional perspective, we believe Manila is at a significant disadvantage as a result of the constrained airport and failed/delayed infrastructure initiatives meant alleviate bottlenecks...In contrast to Manila, Hong Kong and Singapore each have world-class international airports, meanwhile Malaysia and Thailand continue to invest heavily into their chief international gateways," said Michael Beer, vice president of Asia Pacific Transportation and Infrastructure at Citi Equity Research.

"Significant capacity additions will be required if the government has any hope of achieving its lofty tourism growth targets, particularly with the new casinos being build there by Melco Crown and others likely to further stimulate demand," he added.

Read MoreThisactivity is reshapingthe Philippines economy

San Miguel has a vested interest in improving Manila's airport as it owns 49 percent of Philippines Airlines and improved facilities in the airport would benefit the airline.

The company plans to fund the airport's construction in exchange for a 35-year operations contract that would generate a 7-8 percent return on investment, the Wall Street Journal reported.

Philippines President Benigno Aquino III and senior officials will ultimately decide which proposal to accept and a public tender will be launched in 2016.

Official estimates expect passenger traffic at Ninoy Aquino International Airport to hit 101 million by 2040.