THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S.B. No. 103 
Introduced by Sen. Jinggoy Ejercito Estrada 
EXPLANATORY NOTE 
The role of the airline industry in promoting economic growth in the 
Philippines can never be underestimated. However, it is ironic that ins,aad of 
responding to the rapid growth of technology by taking advantage of the 
opportunities for economic progress our country has chosen a more restrictive 
stance. Our policies cry for liberalization yet we seem to have neglected the 
urgent changes needed in our aviation policies. 
98 % of the visitors to the Philippines arrive by air. The aviation industry 
links our country to the world and facilitates our participation in the mainstream 
of 
tourism, trade 
and 
investments. Unless 
we 
change our 
stance 
of 
protectionism in the airline industry, we are faced with the prospect of economic 
stagnation. 
This is especially true in the tourism industry in our country. Tourism is 
the world's biggest service industry. More than 100 countries are actively 
engaged in converting and promoting their cities and rural areas as attractive 
destinations since there is no longer any dispute that tourism is a prime mover 
for economic development, especially in the countryside. A case in point is 
Thailand. They have demonstrated that a tourism- propelled economy can 
generate employment, attract investments and contribute to the general welfare. 
The liberalization of the policy foundations of the Civil Aeronautics Board 
is desperately needed if we are to catch up with our neighbors. This bill seeks 
to amend, inter alia, Republic Act No. 776, by introducing the following changes: 
(I) 
the composition of the Board shall now include representatives from the 
Department of Tourism and the Department of Foreign Affairs, (2) creating the 


office of the Executive Director, (3) increase of penalties for violations of the 
provisions of R.A. 776, and (4) the imposition of policy guidelines and directions 
for 
the Board to observe and 
implement in the exercise of its regulatory 
functions. The passage of this bill would give a major boost to our economy 
and protectionism in the airline industry would be reduced. 
The passage of this bill is thus earnestly sought. 
F G G O y  EJERCITO ESTRADA 
< J Senator 


< I  
1 .: 
THIRTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
1 
*
d
 
til 
1. 
J 
S.B. No. 103 
Introduced by Sen. Jinggoy Ejercito Estrada 
AN ACT 
LIBERALIZING THE CIVIL AVIATION INDUSTRY AMENDING FOR THE 
PURPOSE REPUBLIC ACT NUMBERED 776 OTHERWISE KNOWN AS 
“THE CIVIL AERONAUTICS ACT OF THE PHILIPPINES’ 
AND FOR OTHER PURPOSES” 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
ARTICLE I 
GENERAL PROVISIONS 
SECTION 1. Title. - This act shall be known as the “Civil Aviation 
Liberalization Act of the Philippines.” 
SECTION 2.Deciarafion of Policy, - In the exercise and performance of 
its powers and duties under R.A. 776, the Civil Aeronautics Board shall consider 
the following, as being in the public interest, and in accordance with the public 
convenience and necessity: 
An air transportation system exists primarily for the benefit of its 
principal users, i.e., passengers and shippers; 
The promotion of tourism, trade and investments and the enhancement 
of opportunities for increasing the level thereof 
are the primary 
objectives of civil aviation policy in the Philippines; 
All air carriers subject to regulation by the Board shall have maximum 
flexibility in offering a variety of adequate, dependable, efficient, 
comfortable, fast safe transport 
and 
related services at fares that 
carrespond to the demands of the users of such services; Provided, 


such 
air carriers do not engage in unreasonable discriminations, 
unfair or deceptive practices or predatory pricing in providing such 
services; 
(d) Operation and marketing restriction on air transport and related service 
shall be eliminated to the greatest extent possible; 
(e) Charter air transportation shall be encouraged to the greatest extent 
possible by placing the least number of restrictions on its operation 
and marketing, and 
by ensuring that the amounts imposed by the 
way fees or charges will not undermine the financial and technical 
viability of 
such operations; 
(f) The exercise by the board of its regulatory 
authority should hinder 
or impede in a significant manner the ability of air carriers subject to 
such authority to respond in a timely manner to shifts in either market 
demand or business opportunities; 
(9) Opportunities for foreign 
air carriers to increase their 
access to 
places in the Philippines 
shall be allowed, provided such increase in 
access will result in opportunities for the 
development of tourism, 
trade, investment and more services to the users; Provided, further, that 
domestic civil aviation (cabotage) shall be reserved exclusively for local 
airlines unless the Board declares otherwise in cases of extreme 
emergencies involving the sudden inability of said 
local airline to 
service their designated routes for an indefinite period of time due to 
problems such as but not limited to financial and/or labor disputes. 
(h) The prevention and elimination of discrimination and unfair practices 
faced 
by domestic air carriers in foreign air transportation including 
but not limited to excessive landing and users fees, unreasonable 
ground 
handling 
requirement 
and 
restrictions on 
operations, 
prohibitions on change of gauge and other restrictive practices shall 
be a continuing responsibility of the Board; 
(i) Since air transpor? is one of several modes of transporting people, 
goods and mail, the Board, in the exercise of its regulatory authority, 
shall encourage and contribute to the development of an integrated 
transport system that relies on competitive market forces to determine 
the extent, variety, quality and price of the services provided by such 
systems: 
(j) All Air Service Agreements or similar arrangements granting traffic 
rights and routes to which the Philippines is a party should, as far as 
practicable, provide for multiple designation of Philippine carriers for 


any route which under the terms of such Agreements or arrangements 
shall be operated from the Philippines; 
Any domestic route within the territory of the Philippines may, as far 
as practicable be operated at least two (2) domestic air carriers 
offering schedule services; 
Upon certification from the Executive Director of the board that the 
demand for passenger seats and/or cargo space, as determined by 
the Implementing Rules and Regulations, are not being adequately 
serviced by the designated carriers on a particular route, special flights 
on such route may be authorized to remedy such service deficiencies; 
All unilateral grants of frequencies or capacity or of any increase in 
such frequency or capacity, or the unilateral grant of new routes or 
traffic rights to any foreign carrier on a provisional basis shall be the 
sole prerogative of the Board with the affirmative vote at least five (5) 
members of the Board. These grants can likewise be rescinded or 
withdrawn only by the Board with five (5) members voting affirmatively; 
All Philippine air carriers designated under an Air Service Agreement 
or similar arrangement shall utilize in toto 
the capacity and/or 
frequency entitlement allocated to them by the Board within the period 
prescribe by the Board. Should any designated Philippine air carrier 
fail to utilize its total entitlements within the period prescribe by the 
by the Board , it shall forfeit the unutilized portion of such entitlement 
and such portion shall be allocated to another designated Philippine 
air carrier which utilize such portion within the period prescribe by the 
Board. Under no circumstances shall the Board allow a designated 
Philippine air carrier to assign, lease or in any other manner transfer 
the utilized portion of its entitlement to any other air carrier for any 
consideration whatsoever. In the absence of any designated Philippine 
air carrier that can utilize the entitlements or any portion thereof for 
such air carrier an Air Service Agreement or similar arrangement, the 
Board 
may 
allow 
a 
non-Philippine air 
carrier 
to 
utilize 
such 
entitlements or portions thereof for valuable consideration: Provided, 
That such consideration shall inure to 
the 
exclusive benefit of the 
Philippine government; 
Economic gain for the Philippines shall be the principal criterion for 
determining 
whether 
the 
exchange 
of 
rights, 
freedoms 
and 
opportunities under an Air Service Agreement or similar arrangement 
are of eaual or eauivalent value. The interests of the various sectors 


affected by civil aviation including but not limited to tourism, trade, 
investments and overseas Filipino workers shall always be considered 
in assessing the nature and extent of 
economic gain for the 
Philippines. 
ARTICLE ll 
THE CIVIL AERONAUTICS BOARD 
SECTION 3. Composifion of the Board. - Notwithstanding any provision of 
the law to the contrary, the Civil Aeronautics Board shall be composed of seven 
(7) members as follows; 
(a) The Secretary of the Department of Transportation and Communication 
(b) The Secretary of Department of Tourism (DOT) as ex-officio vice- 
(c) The Assistant Secretary for Air Transportation of the Department of 
(d)A representative from the Department of Trade and Industry (DTI) as 
(e) A representative from the Department of Foreign Affairs (DFA) as ex- 
officio member; 
(f) Two (2) members from the private sector who shall be appointed by 
the President of the Philippines for a term of three (3) years, one of 
whom shall come from the tourism industry and the other from the 
business and investment sector. In the event of vacancy by reason of 
expiration of term, resignation, incapacity or removal from office or for 
any of the causes specified by law, the successor to the position shall 
be appointed for a term of three (3) years. Any person who has been 
appointed as non ex-officio member of the Board may be re-appointed 
to the same position but the total term of such re-appointee shall not 
exceed six (6) years. 
At least one member of the Board shall be lawyer. 
(DOTC) as ex-officio chairperson; 
chairperson; 
Transportation and Communication (DOTG) as ex-officio member; 
ex-officio member; 
SECTION 4. Meetings. - The chairperson or vice-chairperson and three (3) 
Members shall 
constitute a quorum. A majority vote of those constituting a 
quorum shall be necessary for a valid and enforceable decision of the Board. A 
tie vote shall referred to the full membership of the Board for resolution. 


The Board shall meet regularly at least one once a month and may hold 
special meeting to consider urgent matters upon call of any of the following: 
(a) The DOTC Secretary 
(b) The DOT Secretary 
(c) Any three (3) Board members 
Internal rules of procedure in the conduct of board meetings shall be 
prescribe by the Board. 
SECTION 5. Compensation. - Board members shall receive for 
every 
meeting where they are personally present a per diem of five thousand pesos 
(PHP 5,000.00); Provided, That the total per diem that each receives every month 
shall not exceed fifteen thousand pesos (PHP 15,000.00). 
ARTICLE 111 
EXECUTIVE DIRECTOR 
SECTION 6. Appoinfmenf and Term. - The Office of the Executive Director 
of the Board is hereby created. The President of the Philippines shall appoint 
the Executive Director of the Board for a term six (6) years. In case said 
position becomes vacant due to the expiration of term, resignation, incapacity or 
removal from office for causes specified by law, the successor to the said 
position shall be appointed for a term of six (6) years. Any person who has 
served as Executive Director of the Board can no longer be re-appointed to said 
position but the total term of such re-appointee shall not exceed twelve (12) 
years. 
SECTION 7. Powers and Funcfions. - The Executive Director shall be the 
Chief executive and operating officer of the 
Board with the following powers, 
duties and responsibilities: 
(a) 
To execute, administer and implement the objectives, policies and 
programs 
approved by the Board and enforce the resolutions, 
orders, rules and regulations approved or prescribe by the Board; 
To direct and supervise the personnel of the Board with the power 
to appoint , transfer, discipline or dismiss administrative officers and 
members composing the staff of the Board in accordance with the 
Civil Service Rules and Regulations; 
To administer the funds, records, equipment, facilities and other assets 
of the Board; 
(b) 
(c) 


. 
To represent the Board in all dealings and transactions with offices, 
Agencies and instrumentalities of the government and/or with all 
persons, firms and institution, public and private, domestic and 
foreign, including the International Civil Aviation Organization and 
other international agencies and institutions in all matter relating to 
civil aviation subject to final approval and/or ratification by the Board; 
and 
To exercise such other powers and perform such other functions as 
may be directed by the Board. 
ARTICLE IV 
VIOLATIONS AND PENALTIES 
SECTION 8. Penalfies. - Paragraph (A), Section 42 of Republic Act Numbered 
Any person engaging in air commerce without a permit issued by the 
board as provided in this act shall be punished by a fine of not less 
than one million pesos (PHP 1,000,000.00) nor more than five million 
pesos (PHP 5,000,000.00) and/or by imprisonment for not less than 
two years nor more than five (5) years or both in the discretion of 
the court. In the case of a corporation, the director or officer who 
was 
responsible 
for the violation 
shall suffer 
the 
penalty 
of 
imprisonment 
prescribe. Failure to pay the fine in any case within 
the time specified in the order or decision of the board shall be a 
ground for the suspension of the permlt of such air carrier until such 
payment shall be made. 
Seven Hundred and Seventy-Six is hereby further amended to read as follows: 
A. 
SECTION 9. Disposition of Receipfs. - All money collected by the Board 
shall constitute a revolving fund for the operatior) and maintenance of the CAB 
and employees benefits allowable by law and the same shall be disbursed in 
’ accordance with the auditing rules and regulations. 
ARTICLE V 
FINAL PROVISIONS 
SECTION IO. Separability Clause. - If any section or provision of this Act 
shall be declared unconstitutional or invalid, the other sections or provisions 
thereof shall continue in full force and effect. 


SECTION 1 I. Repeahg Clause, - The provisions of Republic Act No. 776 
as well all laws and rules and regulations inconsistent with any provision of this 
Act are hereby repealed or modified accordingly. 
SECTION 12. BTecfivify. - This Act shall take effect fifteen days after its 
publication in the Official Gazette or in at least one (1) newspaper of general 
circulation. 
Approved.