FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
) 
7 
J J - ?  
OF THE PHILIPPINES 
First Regular Session 
) 
S E N A T E  
/ 
Senate Bill No. 3 8 5 
' \  
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 instead 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 policies. 
98% of the visitors to the Philippines arrive by air. The aviation industry 
links our country to the world and facilities our participation in the mainstream of 
tourism, trade and investments. Unless we change the 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 foundation 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 violation 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 airlines industry would be reduced. 
The passage of this bill is thus earnestly sought. 
ESTRADA 
Senator 


FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
7 Ai’ -? 
, 
First Regular Session 
) 
S E N A T E  
Senate Bill No. 3 8 5 
I ‘  
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
LIBERALIZING THE CIVIL AVIATION INDUSTRY, AMENDING FOR THIS 
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: 
SECTION 1. Title. This Act shall be known as the “Civil Aviation 
Liberalization Act of the Philippines”. 
SEC. 2. Declaration 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: 
(a) 
An air transportation system exists primarily for the benefit of 
its principal users, Le., passengers and shippers; 
(b) 
The promotion of tourism, trade ad investments and the 
enhancement of opportunities for increasing the level thereof 
are the primary objectives of civil aviation policy on the 
Philippines; 
All air carriers subjects 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 correspond 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; 
Operation and marketing restriction on air transport and related 
service hall be eliminated to the greatest extent possible; 


(9 
Charter air transport shall be encourage 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 changes will not undermine the 
financial and technical viability of such operations; 
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; 
Opportunities for foreign air carriers to increase their access to 
place 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 resewed 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 
designation routes for an indefinite period of time due to 
problems such as but not limited to financial and\or labor 
disputes. 
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 o change of gauge and 
other restrictive practices shall be a continuing responsibility of 
the Board; 
Since air transport is one of several modes of transporting 
people, goods and mail, the Board, in the exercise of its 
regulatory authority, shall encourage and encourage and 
contribute to the development of an integrated 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; 
All Air Service Agreements or similar arrangements granting 
traffic rights and routes to which the Philippines is party should, 
as far as practicable, provide for multiple designation of 
Philippine carriers for any route which under the terms of such 
Agreement 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 carrier designed under an Air Service 
Agreement or similar arrangement shall utilize in total capacity 
and/or frequency entitlement allocated to them by the Board 
within the period prescribed by the Board. 
Should any 
designated Philippine air carrier fail to utilize its entitlements 
within the period prescribed 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 prescribed 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 equal or equivalent value. The interest 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 II 
THE CIVIL AERONAUTICS BOARD 
SEC 3. Composition ofthe 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 (DOTC) as ex-officio Chairperson; 
(b) 
The Secretary of Department of Tourism (DOT) as ex-officio Vice 
Chairperson; 
The Assistant Secretary for Air Transportation of the Department of 
Transportation and Communication (DOTC) as ex-officio Member; 
(c) 


(d) A representative from the Department of Trade and Industry (DTI) as 
ex-officio Member; 
(e) ,A 
representative from the Department of Foreign Affairs (DFA) as ex- 
officio Member; 
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 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. 
(9 
SEC 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 refer to the full membership of the Board for resolution. 
The Board shall meet regularly at least 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 
prescribed by the Board. 
SEC 5. Compensation. Board members shall receive for every meeting 
where they are personally present, a per diem of Five Thousand Pesos 
(PS,OOO.OO), Provided, That the total per diem that each receives every month 
shall not exceed Fifteen Thousand Pesos (PI 5,000.00). 
ARTICLE 111 
EXECUTIVE DIRECTOR 
SEC 6. Appointment and Term. -The Office of the Executive Director of 
the Board is hereby created. The President of the Republic of the Philippines 
shall appoint the Executive Director of the Board for a term of six (6) years. In 
case said position becomes vacant due to 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. 


SEC 7. Powers and Functions. - 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 
prescribed 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; 
To represent the Board in all dealings and transactions with 
officers, agencies and instrumentalities of the government 
and/or with all persons, firms and institutions, 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 orhtificatjon 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 
SEC 8. Penalties. - Paragraph (A), Section 42 of Republic Act No. 776 
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 (PI ,000,000.00) nor more than 
Five Million Pesos (P5,000,000.00) andlor by imprisonment for 
not less than two (2) 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 prescribed. 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 permit 
of such air carrier until such payment shall be made. 
is hereby amended to read as follows: 
A. 
SEC 9. Disposition of Receipts. All money collected by the Board shall 
constitute a revolving fund for the operation and maintenance of the CAB and 
employees benefits allowable by law and the same shall be disbursed in 
accordance with auditing rules and regulations. 


ARTICLE V 
FINAL PROVISIONS 
SEC I O .  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. 
SEC 11. Repeahg Clause. - The provisions of Republic Act No. 776 as 
well as all laws and rules and regulations inconsistent with any provision of this 
Act are hereby repealed or modified accordingly. 
SEC 12. Effectivity. - 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,