Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SEVENTEENTH CONGRESS
First Regular Session

House Bill No._ 5815

Introduced by Rep. Pantaleon D. Alvarez, Rep. Rodolfo C. Farinas and Fep. Danilo E.
Suarez

EXPLANATORY NOTE

Article XII Section 11 of the Philippine Constitution states that no franchise,
certificate, or any other form of authorization for the operation of a public utility shall be
granted, except under the condition that it shall be subject to amendment, alteration, or
repeal by the Congress when the common good so requires.

Article 1733 of the Civil Code on the other hand provides that common carriers are
bound to observe extraordinary diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all circumstances of each case.

Itis in this regard that Cebu Air, Inc. (presently known as Cebu Pacific) was granted
a legislative franchise by Congress through Republic Act No. 7151 on August 30, 1991, with
the express provision that it will charge just and reasonable rates and provide efficient
service to the riding public.

Unfortunately, mounting complaints from Cebu Pacific's passengers regarding its
poor service, specifically exorbitant fees charged during peak season, inordinate delays in
flights, overbooking, and worse, unilateral and unannounced cancellation of flights without
due notice, such as the unannounced cancellation of flights on December 24 to 26, 2014,
among others, causing severe inconvenience to the people. These unfair practices of Cebu
Pacific are detrimental to the common good and do not fall within the purview of
“extraordinary diligence.”

In fact, these are grounds for the amendment and alteration of the franchise of Cebu
Pacific, something that this bill seeks to achieve to make its franchise more beneficial to the
riding public,
In view of the foregoing,
a 7,
PANTALEON D. A

DANILO E. SUAREZ RODOLEFO C. FARINAS


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

Seventeenth Congress
First Regular Session

5815

House Bill No.

a —

Introduced by Honorable Pantaleon D. Alvarez, Honorable Rodolfo C. Farias and
Honorable Danilo E. Suarez

AN ACT.
AMENDING REPUBLIC ACT NO. 7151, OTHERWISE KNOWN AS “AN ACT.
GRANTING CEBU AIR, INC, A FRANCHISE TO ESTABLISH, OPERATE, AND
MAINTAIN TRANSPORT SERVICES FOR THE CARRIAGE OF PASSENGERS, MAIL,
GOODS AND PROPERTY BY AIR, BOTH DOMESTIC AND INTERNATIONAL, WITH
CEBU AS ITS BASE.”

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled.

SECTION 1. Section 4 of Republic Act No. 7151, otherwise known as “An Act Granting
Cebu Air, Inc. a Franchise to Establish, Operate and Maintain Transport Services for the
Carriage of Passengers, Mail, Goods and Property by air, both domestic and international,
with Cebu at its base” is hereby amended to read as follows:
“Section 4. RATES FOR SERVICES. - The grantee shall fix just and reasonable rates
for the transportation of passengers, mail, goods and freight, subject to the
regulations and approval of the Civil Aeronautics Board and other proper regulatory
agencies of the Government. PROVIDED HOWEVER, THAT ANY INCREASE IN
RATES THAT IS A NATURAL CONSEQUENCE OF THE INCREASE IN DEMAND
DURING PEAK-SEASON, SHALL BE SUBJECT TO A CAP OF 20% OVER THE
REGULAR OFF-PEAK RATES.

SECTION 2. Section 5 of Republic Act No. 7151

is hereby amended to read as follows:

Section 5. The grantee shall be for a term of forty (40) years from the date of the
approval of this Act, unless sooner revoked or cancelled. In the event that the grantee
fails to operate within two (2) years from the effectivity of this Act, this franchise

shall be deemed ipso facto revoked.


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THE REMAINING TERM OF THIS FRANCHISE SHALL BE SUBJECT TO REVIEW
BY CONGRESS EVERY FIVE YEARS FROM THE EFFECTIVITY OF THIS
AMENDATORY ACT.

SECTION 3. Section 11 of Republic Act No. 7151, is hereby amended to read as follows:

“Section 11. Tax Provisions ~ The grantee shall pay to the Philippine Government
during the life of this franchise.fa franchise tax of five percent (5%) of the gross

revenues derived by the grantee from transport operations, The grantee, its

successors or assigns, shall pay to the Philippine Government during the life of its
franchise,]THE VALUE-ADDED TAX UNDER REPUBLIC ACT NO 7716, AS
AMENDED, OR A FRANCHISE TAX OF FIVE PERCENT (5%) PER ANNUM OR
AT SUCH PERCENTAGE AS MAY BE PRESCRIBED BY LAW ON ALL GROSS
RECEIPTS OF ITS TRANSPORT BUSINESS TRANSCTED UNDER THIS
FRANCHISE, WHICHEVER IS HIGHER; PROVIDED THAT THE GRANTEE, ITS
SUCCESSORS OR ASSIGNS, SHALL CONTINUE TO BE LIABLE FOR INCOME
TAXES PAYABLE UNDER TITLE II OF THE NATIONAL INTERNAL REVENUE
CODE PURSUANT TO SEC. 2 OF EXECUTIVE ORDER NO. 72, UNLESS THE
LATTER ENACTMENT IS AMENDED OR REPEALED, IN WHICH CASE, THE
AMENDMENT OR REPEAL SHALL BE APPLICABLE THERETO.

[In the event that any competing individual, partnership or corporation receives and
enjoys tax privileges and other favorable terms which tend to place the herein

grantee at any disadvantage, then such provi

ions shall be deemed ipso facto part

hereof and shall operate equally in favor of the grantee.

The grantee shall, however, be subject to income tax levied under Title II of the
National Internal Revenue Code, as amended, and tax on its real property under
existing laws on revenues earned from activities other than air transportation.” ]

THE GRANTEE, ITS SUCCESSORS OR ASSIGNEES, SHALL BE LIABLE TO PAY
THE SAME TAXES ON THEIR REAL ESTATE, BUILDINGS AND PERSONAL
PROPERTY, EXCLUSIVE OF THIS FRANCHISE, AS OTHER PERSONS OR
CORPORATIONS ARE NOW OR HEREAFTER MAY BE REQUIRED BY LAW TO
PAY.


SECTION 4. A new Section 13 is hereby inserted in Republic Act No. 7151, to read as

follows:
“SECTION 13. COMPLIANCE WITH APPLICABLE LAWS. - THE GRANTEE
SHALL COMPLY WITH ALL APPLICABLE LAWS, RULES, AND REGULATIONS,
PARTICULARLY REPUBLIC ACT NO. 7432, AS AMENDED BY REPUBLIC ACT
NO. 9994, OTHERWISE KNOWN AS THE “EXPANDED SENIOR CITIZENS ACT
OF 2010” AND REPUBLIC ACT NO. 7277, AS AMENDED BY REPUBLIC ACT NO.
10754, OTHERWISE KNOWN AS “AN ACT EXPANDING THE BENEFITS AND
PRIVILEGES OF PERSONS WITH DISABILITY (PWD)”.

Allother sections are hereby renumbered accordingly.

SECTION 5. Repealability arid Non-exclusivity Clause. - This franchise shall be subject
to amendment, alteration, or repeal by the Congress of the Philippines when the
public interest so requires and shall not be interpreted as an exclusive grant of the

privileges herein provided for.

SECTION 6. Separability Clause. - If any of the sections or provisions of this Act is

held invalid, all other provisions not affected thereby shall remain valid.

SECTION 7. Repealing Clause. - All laws, decrees, orders, resolutions, instructions,
rules and regulations, and other issuances, or parts there of which are inconsistent
with the provisions of this Act are hereby repealed, amended, or modified

accordingly.

SECTION 8. Effectivity.- This Act shall take effect fifteen (15) days after its

publication in the Official Gazette or in a newspaper of general circulation.

Approved,