Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Philippines

SIXTEENTH CONGRESS
First Regular Session

HOUSE BILLNo. 451

INTRODUCED BY REP. MARCELINO “MARCY” R. TEODORO

EXPLANATORY NOTE

Tourism propelled the development of many countries in the recent years
Contributory to this is the policy deflection towards air service liberalization or what is
commonly known as the “open skies” policy substituting the restrictive and arcane
features of many air services agreements (ASAs) that continue to govern airline links
between territories

The Philippines benefited from a liberalized air transport arrangement when it
granted unilateral air rights to foreign carriers to operate in the Diosdado Macapagal
International Airport (DMIA) in Pampanga and the Subic Bay International Airport
(SBIA) in Zambales through Executive Order No. 500. The shift in air policies brought
back to life the sluggish business activity in Clark and Subic. In Clark alone, a sharp
increase in passenger traffic and foreign tourist arrival were observed; the same trend was
manifested in the growth in investments, exports by air and direct employment growth
Moreover, the low budget airlines operating in Clark benefited much the OFWs working
in the East Asian Region

This bill aims to institutionalize a pocket open skies policy in the Philippines by
fully opening the country’s secondary gateways (excluding the NAIA) to foreign airline
operations. It seeks to replicate the economic gains in terms of tourism, exports,
investments and jobs growth across the country. A rational air transport liberalization
strategy would support the vision of the government to promote the country as a tourism,
investments and logistics hub.

‘The proposed measure also underscores the foundation of the country's aviation
policies which is anchored on its impact on national interest. This is clearly provided in
Executive Order 219, Section 1.2, which states that the exchange of traffic rights and
routes with other countries shall be based on (a) “national interest, xxxx and on (b)
reciprocity. The Civil Aviation Board (CAB) shall determine “national interest” with
considerationof the larger interest of the country, especially the users of air services.

It is very significant to provide a safety net in this proposed legislation that will
limit foreign airlines only to international operations. Cabotage rights or the right of an
airline to operate flights between points within the territory of another country should not
be allowed in order to protect the interest of the local aviation industry in the domestic
‘operations.

With the aforementioned, the immediatg approval of this bill is earnestly sought.

OLS Ames
MARCELINO “MARCY” R. TEODORO
Representative
Ist District, City of Marikina



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Philippines

SIXTEENTH CONGRESS
First Regular Session

2
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phy

HOUSE BILL NO.

INTRODUCED BY REP. MARCELINO “MARCY” R. TEODORO

AN ACT FURTHER LIBERALIZING THE COMMERCIAL AVIATION
INDUSTRY OF THE PHILIPPINES BY ALIGNING EXISTING POLICIES,
RULES AND REGULATIONS

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

SECTION 1. Short Title
Liberalization Act of 2013

— This Act shall be known as the “

Civil Aviation

C. 2. Declaration of Policies. ~ The State recognizes the indispensable role of a
liberalized commercial civil aviation industry as a catalyst for growth to truly address
public need, promote the development of tourism, trade and investments and remove
impediments to the growth and development of other industries reliant on air travel

Itis therefore declared the policy of the State to
a) Develop and maintain a sound regulatory system that is responsive to the needs of
the public, especially the users of air services;

b) Develop maximum air access to all secondary gateways, with the exception of
cabotage traffic rights;

©) Ensure that the exchange of traffic rights shall uphold national interest and
promote international trade, foreign investments and tourism, among others;

d) Encourage entry into the air transportation market of new air carriers and promote
fair competition and equal opportunity among existing players;

e) Afford the public viable alternatives for adequate, affordable, safe and efficient
air transportation services.

SEC. 3. Definition of Terms. — The following terms as used in this Act shall mean as
follows:

(a) Air carrier — refers to an enterprise that engages in the provision of transportation
services by aircraft for remuneration or hire,

(b) Air Service Agreement — refers to an agreement entered into between and amongst
states to govern their international air services relations. It includes other similar
arrangements such as, but not limited to, Exchange of Notes, Exchange of Letters,
Agreed Minutes, Memorandum of Understanding, Memorandum of Consultations
or other documents that govern or relate to any of, but not limited to, the
following matters and issues


1) The implementation of certain provisions of the air service agreement,
2) The amendment of certain provisions of the air service agreement;
3) Elaboration or clarification of certain provisions of the air service agreement;

4) The establishment and operation of air transportation and related services
pending the conclusion or execution of an air service agreement;

5) Any matter relating to the civil aviation relationship of two or more States or
their respective authorized agencies

(c) Cabotage Traffic Right — refers to a privilege granted by a State to an airline of
another State to take on in the territory of the former state, passengers, mail and
cargo carried for remuneration or hire and destined for another point within its
territory;

(d) Designated Carrier ~ refers to an air carrier which is authorized to operate air
transport services under the provisions of an Air Service Agreement or other
similar agreements;

(c) Gateway ~ refers to any point of entry into the Philippines by air transportation;

(1) National Interest — shall include value for the Philippines in terms of promoting
international trade, foreign investments and tourism, among others. The term
national interest should be interpreted to prioritize and promote trade, foreign
investments and tourism,

(g) Reciprocity ~ refers to the exchange of rights, freedoms and opportunities of
comparable value with consideration of national interest,

(h) Secondary Gateway — refers to any gateway other than the Ninoy Aquino
Intemational Airport

(i) Traffic — refers to the quantity of air transportation, including passenger and cargo
transported by an aircraft,

(i) Traffic Right ~ refers to the market access right expressed as an agreed physical or
geographic specification or combination of specification of who or what may be
transported over an authorized route or parts thereof in the aircraft authorized
under a particular ASA;

(k) 1 Freedom ~ refers to the right or privilege, in respect of scheduled international
air services, granted by one State to another State or States to fly across its
territory without landing:

(1) 2"! Freedom — refers to the right or privilege, in respect of scheduled international
air services, granted by one State to another State or States to land in its territory
for non-traffic purposes;

(m)3 Freedom ~ refers to the right or privilege, in respect of scheduled international
air services, granted by one State to another State to put down, in the territory of
the first State, traffic coming from the Home State of the carrier,


(n) #* Freedom — refers to the right or privilege, in respect of scheduled international
air services, granted by one State to another State to take on, in the territory of the
first State, traffic destined for the Home State of the carrier,

(0) 5® Freedom ~ refers to the right or privilege, in respect of scheduled international
air services, granted by one State to another State, to put down and taken on in the
territory of the first State, traffic coming from or destined to a third State

SEC. 4. Grant of Rights. — The Civil Aeronautics Board (CAB) in the exercise of its
powers and functions under Republic Act No. 776 otherwise known as the “Civil
Aeronautics Act of the Philippines,” as amended, and other relevant statutes shall, in the
interest of the public and consistent with public convenience and necessity, process all
applications for air transportation involving any gateway and shall be guided by the
following principles:

a) An air transportation system exists primarily for the benefit of its consumers;

b) Reciprocity shall not be qualified on the basis of level of traffic rights,
frequencies, freedoms and opportunities that the Philippine carriers can afford to
operate.

©) Economic gain for the Philippines shall be the principle criterion for determining
whether the exchange of rights, freedoms and opportunities under an air service
agreement or similar arrangement shall promote the larger interest of the country
The interests of the various sectors affected by civil aviation including, but not
limited to, tourism, trade, investments and those of overseas Filipino workers
shall always be considered in assessing the nature and extent of economic gain for
the Philippines;

d) The promotion of tourism, trade and investments, jobs growth and the
enhancement of opportunities for the same are the primary economic advocacy of
civil aviation policy in the Philippines;

e) All air carriers subject to regulation by the CAB shall be flexible and innovative
in providing adequate, dependable, efficient, comfortable and safe transport at
prices that correspond to the demands of the consumers provided such air carriers
do not engage in unreasonable discrimination, unfair or deceptive practices or
predatory pricing in providing such services;

f) The authority to operate air transport services, whether scheduled or non-
scheduled, to or from any secondary gateway may be granted over and above
capacity entitlements under an existing ASA. Said authority may be granted
without restrictions on capacity, frequency, type of aircraft and non-cabotage
traffic rights other than those that may be required by security and safety
considerations, to any applicant with the financial capacity and technical
capability to operate such services: Provided, That, where an ASA or another
similar arrangement provides for limited designation, an official letter
endorsement by its Home State that such is an existing and legitimate carrier,
shall suffice in lieu of a designation. Any applicant who has been engaged in air
commerce for at least eighteen (18) months prior to the filing of its application
shall be deemed prima facie as financially capable of operating the services
subject of the application. The grant by the CAB of the authority to operate shall
serve as a waiver of any restriction on capacity, frequency, type of aircraft or non-
cabotage rights imposed by an ASA or other similar arrangements on the
applicant's right to operate air transport services to or from any secondary
gateway;


g) The CAB may, after due notice and hearing, revoke the authority granted to a
foreign carrier, if a Philippine carrier applying for the same rights to operate to or
from the Home State of the foreign carrier is not granted equal opportunity to
operate the route;

h) Operational and marketing restrictions on air transport and related service shall be
eliminated to the greatest extent possible;

i) 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
the agreement shall be operated from the Philippines,

j) Any domestic route within the territory of the Philippines shall, as far as
practicable, be operated by at least two (2) domestic air carriers. offering
scheduled services. The CAB may authorize chartered flights and non-scheduled
services to promote the expansion of domestic air traffic,

k) All Philippine air carriers designated under an air service agreement or similar
arrangement shall strictly utilize the capacity or frequency entitlements allocated
to them within the period prescribed. Should any designated Philippine air carrier
fail to utilize its total entitlements within the said period, it shall forfeit the
unutilized portion and the same shall be allocated, upon application, to another
designated Philippine air carrier within the period prescribed by the CAB. Under
no circumstance shall the CAB allow a designated Philippine air carrier to assign
the unutilized portion of its entitlement to any other carrier for any consideration
whatsoever, and

1) The CAB shall encourage and promote operations to secondary and unserved or
underserved routes. The CAB and the Civil Aviation Authority of the Philippines
(CAAP) shall provide incentive programs to support viability operations to these
routes.

SEC. 5. Airline Designation. — Philippine carriers intending to operate under the
liberalized provisions of this Act shall file with the CAB an application for designation.
An air carrier applying for a designation must be a holder of a valid and existing
legislative franchise before a Certificate of Public Convenience and Necessity (CPCN)
can be issued by the CAB and shall have been granted an Air Operator Certificate (AOC)
by the CAAP. Such air carrier shall have operated domestic operations for a period of not
less than eighteen (18) months,

SEC. 6, Implementing Rules and Regulations. - The Civil Aeronautics Board shall
promulgate the Implementing Rules and Regulations (IRR) of this Act within sixty (60)
days from its effectivity

SEC. 7. Supplementary Clause. — In case of insufficiency of any provision of this Act,
the rules and regulations implemented by the CAB and its resolutions, shall apply in a
suppletory manner to the provisions of this Act

SEC. 8. Separability Clause. — If for any reason, any section or provision of this Act
shall be held to be unconstitutional or invalid, the other sections or provisions shall not be
affected thereby

SEC. 9. Repealing Clause. — Any provision of Republic Act No. 776, Presidential
Decree No. 1462, a decree entitled: “Amending Certain Sections of Republic Act 776,”
Executive Order No. 219, entitled: “Establishing the Domestic and International Civil
Aviation Liberalization Policy,” Executive Order No. 28, entitled: “Reorganizing the


Philippine Air Negotiating Panel and the Philippine Air Consultation Panel,” and
Executive Order No. 29, entitled: “Authorizing the Civil Aeronautics Board and the
Philippine Air Panels to Purse More Aggressively the International Civil Aviation
Liberalization Policy,” and other rules and regulations or parts thereof, inconsistent with
any provision of this Act are hereby repealed, amended or modified accordingly

SEC. 10. Effectivity. — This Act shall take effect fifteen (15) days following its
publication in two (2) newspapers of general circulation

Approved,