Repubiic of the Philippines
HOUSE OF REPRES
Quezon Ci

Fifteenth Congress
Second Reguiar Session

COMMITTEE REPORT NO, 1756
Submited by the Commitee 09 Transportation on 25 JAN 2012
Re House BiITNo.

Recommending its appeoval ia ubstiiton of HB No. 1352, HB Ny, 1601, and pu:suant ro

KR No. 1143

Sponsors: Representatives Roger G. Mercado, Rex Gachaiian, Aurora Enerio-Cerilles and
Winston Castelo

Mr. Speaker:

The Comminte on Trarsporation to which were referred House Hill Ne. 1352.
introduced by Representative Aurcra Knerio-Cerilles, entited:

“AN ACT PROVIDING FOR THE GREATER LIBERALIZATION OF THE
COMMERCIAL AVIATION INDUSTRY OF THE PHILIPPINES BY
ALIGNING EXISTING RULES AND REGULATIONS TO ENCOURAGE
GROWTH AND DEVELOPMENT OF AIR TRAVEL AND TOURISM iN.
OLY AND WITHIN THE PHILIPPINE ARCHIPELAGO";

House Bill No, 1601 introduced by Representative Rex Gatchalian, entitled:

‘AN ACT TO PROMOVE A POCKET OPEN-SKIES POLICY OF THE
PHILIPPINES”;

House Resolution No. 1143 introduced by Representatives Winston T. Castelo. Lawia I
Olivarez, Emi G. Calixto-Rubiano. Amel Mi Cerafica, Ma. Carmen Zamora-Apsay. Jim
Hiuaman-Salliman, ter M. Lnabia, Mylene Garcia-Albano, Bemadetie Herrera-Dy and
Benjamin Asilo, entitled:

“RESOLUTION DIRECTING THE COMMITTEE ON
TRANSPORTATION TO CONDUCT AN IN ‘TIGATION 1N AID OF
LEGISLATION ON THE IMPLEMEN ION OF THE DEPARTMENT
OF TRANSPORTATION AND COMMUNICATIONS  (DOTC),
DEPARTMENT OF TOURISM (POT) AND OTHER CONCERNED
AGENCIES OF A “POCKET OPEN SKIES POLICY AND ITS
REPERC INS ON THE VARIOUS SECTORS PARTICULARLY ON
AVIATION, TOURISM AND THE GENERAL ECONOMY”



ius cansidered the same and ce

5745 cotitled

“AN ACT FURTHER LIBERALIZING THE COMMERCIAL AVIATION

INDUSTRY OF THE PHILIPPINES BY ALIGNING EXISTING POLICLES.
RULES AND REGULATIONS”

ends that the attached House Bill No.

be approved in sutstitution of HB No, 1352. HB No. 1601 and pursuant to “HR No, 1143
vith Representatives Aurora Enerin-Cerilles, Rex Gatchalian, Winston T, Castelo. Edwin

Olivarez, Emi G, Calixto-Rubiano, Ame} M, Cerafica, Ma, Carmen Zamora-Apsay. Jim
jataman-Salliman. Peter M, Unabia, Mylene Garcia-Albano, Bernadette Herrera-Dy und
Senjamin Asilo and Roger G, Mercado as authors thereof.

Respecrfully submitted,

. Committee on ‘Transportation

THE HONORABLE
The Speaker
House of Representatives


ne

2

Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City
FIFTEENTH CONGRESS
Second Regular Session

” 5745

House Bill No.

(In substitution of HB No. 1601, HB No. 1352 and pursuant to HR No. 1163)

Introduced by Hon. Rex Gatchalian, Aurora Enerio-Cerifles , Winston Castelo. Jim
Hataman-Salliman, Peter Unabia, Amel Cerafica, Benjamin Asilo, Edwin Ol:vares,
Maria Carmen Zamora-Apsay, Emi Calixto-Rubiano, Bernadette Herrera-Dy, Mylene
Garcia-Albano and Roger G. Mercado

. 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 the House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Title. - This Act shall be known ay the ~Civil Aviation
Liberalization Act of 2012"

SEC. 2, Declaration of Policies. — The State recognizes the indispensabie role
of a liberalized commercial civil aviation industry as @ catalyst for growth to waly
address public need, promote the development of tourism, trade and investments end
remove impediments to the growth and development of other industries reliant on air
uavel.

Wis theretore declared the policy of the State to:

a. Develop and maintain a sound regulatory system that is responsive t0
the needé of the public, especially the users of air services;

b. Develop maximum air access to alll secondary gateways, with the
exception of cabotage traffic rights:

¢, Ensure that the exchange of traffic rights shall uphold national in:

and promote international trade, foreign investments and tourism, among others;
d. Encourage entry into the air transportation market of new air cacriers

and promote fair competition and equal opportunity among existing playess:

Page 1 of 6


aw kw

. Afford the public viable aliematives for adequate, affordable, sate and
eflicient air transportation services
SEC. 3. Defin

mean as follows:

a of Terms. — The following terms as used in this Act shall

(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 {ASA) — 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 lbllowing matters and issues:

1. The implementation of certain provisions of the air service agreement;

2 The amendmeni 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;

Any matter relating to the civil aviation relationship of rwo or more

5.
States or their respective wuthorized agencies.

(©) Cubotage Traffic Right ~ refers 1o 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

terri

(d) Designated Carrier — refers to an air carrier which is authorized w operale

air transport services under the provisions of an Air Service Agreement or other
similar arrangements;

(©) Gateway — refers to any point of entry into the Philippines by air
wransportation;

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

investments and tourism;


i (g) Reciprac

= refers 10 the exchange of rights, freedoms and opportunities

2 of comparabte value with consideration of national interest;
th) Secondary Gateway refers to any gateway other than the Ninoy Aquino
4 International Airport;
5 ii) Traffic - refers io the quantity of air transportation, including passenger
6 and cargo transported by an aircraft;

(j) Traffic Kight refers to the market access right expressed as an agreed
& physical or geographic specification. of combination of specification of who or what
© way be (ranspurted over an authorized route or parts thereof in the aircraft authorized

10 under a particular AS?

u (k) P Freedom ~ cefers to the right or privilege, in respect of scheduled
international uir services, granted by one State to another State or States to fy across
13 its territory without landings

ins (t) 2" Freedom — refers to the right or privilege, in respect of scheduled

international air services, yranted by one State to another State or States to land in its

16 territory for non-iratiic purposes;

a

tm) 3° Freedom — refers to the right or privilege, in respect ef scheduled
the

imernational air services, granted by one State to another State to put down.

19 territory of the first State, traffic coming {rom the Home State of the carrier:

20 (n) ¢” Freedom - refers co the right or privilege, in respect of scheduled

21 inter

wional aiy services, granted by one State to another State to tuke on, in the
22 temvitory of the first State, traffic destined for the Home State of the carrier,
3 (0) 5 Freedom — relers te the right or privilege, in respect of scheduled

24 international air services,

ranted by one State to another State, to put down and take

23 on in the tervitory of the first State, traffic coming from or destined to a third State

26 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
28 the “Civil Aeronautics Act of the Philippines”. as amended, and other relevant staates
29 shall. in the interest of the public and consistent with public convenience and
30 necessity, process all applications for air transportation involving any gateway and
31 shall be guided by the following principtes

32 a. An air wanyportation system exists primarily for the benetit of its

330 consumer’


b. Reciprocity shall not be qualified on the basis of level of wallic righis,
ssequencies, freedoms and opportunities that the Philippine camiers can afford 10
operate.

&. Economic gain for the Philippines shall be the principal criterion tor
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

401 limited to, tourism, trade, ‘iments and those of overseas Filipino workers shal!
always be coasidered in assessing the uanue and extent of economic gain for the
Philippines:

d. The promotion of tourism, wade and investments, jobs growth and the
cahancement of opportunities for the same are the primary economic advocacy of
civil aviation poticy in the Philippines;

¢. All air carriers subject to regulation by the CAB shall be flexible and

innovative in providing adequate, dependable, efficient, comfortable and sate
transport at prices dhat correspond tw the demands of the consumers provided such air
carriers do not engage in unreasonable discrimination, unfair or deceptive practices or

predatory prici

ng in providing such services;

f The authority io operate air transport services, whether scheduled or
ton-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 tratfic rights
other than those that may be req

d by security and safety considerations, to any
epplicamt 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
ad legitimate carrier, shall suffice in heu of a designation, Any applicant who has

toen engaged i

ir commerce for at least eighteen (J8) months prior to the filing of
iis application shall be deemed prima facie as financially capable of operating the
services subject of the, application, Tre yrant by the CAB of the authority 10 operate
shall serve as @ waiver of any restriction on capacity, frequency, type of aircraft or

non-cabotage rights imposed by any ASA or other similar arrangements on the

applicant's right to operate air transport services to or from any secondary gateway:


+

5
6

g. The CAB muy, ailer due notice and hearing, revoke the authority granted
10 a foreign carricr, 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 fromm 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 enUllements within the said period, it shall forfeit the
unutilized portion and the same shall be allocated, upon application, to another
designated Philippine air cartier within the period prescribed by the CAB. Under no
ct the

circumstance shall the CAB allow a designated Philippine air carrier to assi

unutilized portion off its entitlement to any other carrier for any conside
whatsoever: and
1 The CAB shall encourage and promote operations to secondary und

unserved or underserved routes. The CAB and the Civil Aviation Authority of the

Philippines (CAAP) shall provide incentive programs to support viability operations
10 these routes,

SEC. 5.
the liberalized provisions of this Act sbali file with CAB an application for

‘Ainii

designation. — Philippine carriers intending to operate under

designation. An air cartier applying for a designation must be a holder of a valid and
existing Certificate of Public Conventence and Necessity (CPCN) issued by the CAB
and shall have been gramed 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. Implemeoting Rules and Regulations. — The Civil Acronauties
Board shail promulyate 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 resolutior
shatl 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 Intemational Civil Aviation Liberalization Policy”, Executive Order No. 28,
eutiiled: “Reorganizing the Philippine Air Negotiating Panel and the Philippine Air
Consutation Panel”, and Executive Order No. 29, entitled: “Authorizing the Civil
Aeronautics Board and the Philippine Air Panels to Pursue More Aguressively the
Intemational Civil Aviation Liberalization Policy”, and other rules and regulations or
parts thercof, inconsistent with any provision of this Act are hereby repealed.
amenced or modified accordingly.

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

Approved,


FACT SHEET

in substitution of House Bill Nos. 1601, 1352, and pursuant to HR. 1143
(As approved en 29 November 2011}

AN ACT FURTHER LIBERALIZING

THE COMMERCIAL AVIATION INDUSTRY OF THE PHILIPPINES BY ALIGNING

EXISTING POLICIES, RULES AND REGULATIONS

intoduced by: REPS. REX GATGHALIAN, AURORA ENERIO-CERILLES, WINSTON

CASTELO, HM HATAMAN-SALLIMAN, PETER UNABIA, ARNEL CERAFICA,

BENJAMIN ASILO, EDWIN OLIVARES, MARIA CARMEN ZAMORA-APSAY, EMI
CALIXTO-RUBIANO, BERNADETTE HERRERA-DY, MYLENE GARCIA-ALBANO AND

ROGER G MERCADO

Committee Referral: TRANSPORTATION
Committee Chairperson Hon. Roger G Mercado

OBJECTIVES:

To provide for a liberalized commercial aviation industry in the country that
promotes tourism, trade and invesiments and remove barriers to growth and
development of industries reliant on air travel services.

To provide a sound and responsive regulatory system for air transportation system.
To ensure maximum} access to ali secondary gateways while maintaining eciprocity
of traffic rights to protect national interest

Te encourage competition in the industry.

To afford the public with viable, safe and affordable air transportation aitematives.

KEY PROVISIONS:

* Directs the Civil Aeronautics Board (CAB) to process all applications for air

transportation involving any gateway in consonance with the following guidelines

2 Aconsumer-friendly air transportation system shail be established:

2 Reciprocity shalt 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 country shal! be the principal consideration in alll air
service negotiations and other similar exchange of rights;

2 Tourism, trade and investments, jobs growth and enhancement of

opportunities are the primary economic advocacies of civi! aviation in the

Philippines;

All carriers subject to regulation by the CAB shall be flexibie 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 predatory pricing in providing such services:

© Applicants with financiai capacity and technical capacity shall be given the
opportunity to operate without restrictions on capacity, frequency, type of
aircraft and aon-cabotage traffic rights other than those requiring security
and safety considerations;



< Operational and marketing restrictions on air transport and related services
shall be eliminated,

> Multiple designation of Philippine carriers for any route operated from the
Philippines shal be pravided for;

= At least two (2) domestic air carriers in any domestic route within the
Philippine territory shail be operated:

= A competitive and fair environment among air carriers operating in the
Philippines shall be provided for, and .

< Pperations to secondary and unserved or underserved routes shall be
encouraged and promoted.

«Mandates that airlines applying for designation must be holders of a valid and
existing Certificates of Public Convenience and Necessity (CPCN) issued by CAB
and holders of Air Operator Certificates (AOC) issued by CAAP, Carriers must have
operated domestically for not less than eighteen (18) months.

* Provides for incentive programs to support viability of operations to missionary
routes.

RELATED LAWS:

§RA 9497 — Civil Aviation Authority of the Philippines