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

First Regular

5816

House Bill No, _©

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

EXPLANATORY NOTE

Article XI Section 11 of the Philippine Constitution states thet 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 Philippine Airlines (PAL) was granted a legislative franchise
through Presidential Decree 1590 on June 11, 1978, with the express provision that it will
charge just and reasonable rates and provide efficient service to the riding public.

Unfortunately, numerous complaints have been made by PAL passengers regarding,
its poor service, specifically exorbitant fees charged during peak season, inordinate delays in
flights, overbooking, and worse, unilateral cancellation of flights, causing severe
inconvenience to the people, These practices of PAL 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 PAL,
something that this bill secks to achieve to make its franchise more advantageous to the
riding public

In view of the fore; vine rome bill

PANTALEON D. Al

earnestly sought.

DANILO E. SUAREZ RODOLFO C. FARINAS



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

Seventeenth Congress
ilar Session

5816

House Bill No.

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

AN ACT
FURTHER AMENDING PRESIDENTIAL DECREE NO, 1590, OTHERWISE KNOWN AS
“AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO.
ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THE
PHILIPPNES AND OTHER COUNTRIES", AS AMENDED.

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:
SECTION 1. Section 3 of Presidential Decree No. 1590, otherwise known as “An Act

Granting a new Franchise to Philippine Airlines, Inc. to Establish, Operate and Maintain Air

y amended to read as

Transport Services in the Philippines and other Countries” is here
follows:
“Section 3. The grantee shall fix just and reasonable rates for the transportation of
passengers, mail, and freight, subject to the regulations and approval of the Civil
Aeronautics Board or such other regulatory agency as the Government may
designate for this purpose. Any order of the Civil Aeronautics Boerd made under
HOWEVER, THAT
UENCE OF THE
UBJECT TO A

thi

Sections shall be subject to review by the courts, PROVIL
ANY INCREASE IN RATES THAT IS A NATURAL CON‘
INCREASE IN DEMAND DURING PEAK-
CAP OF 20% OVER THE REGULAR OFF-PEAK RATES.”

IN, SHALL B

SECTION 2. Section 13 of P.D. 159 is hereby amended to read as follows:


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“Section 13. [In consideration of the franchise and rights hereby granted, the grantee

er of

shall pay to the Philippine Government during the life of this franchise whiche'
subsections (a) and (b) hereunder will result in a lower tax:
(a) The basic corporate income tax based on the grantee’s annual net taxable

ms of the National Internal

income computed in accordance with the prov
Revenue Code; or

(b) A franchise tax of two per cent (2%) of the gross revenues derived by the
grantee from all sources, without distinction as to transport or non-transport
operations; provided, that with respect to international air-transport service,
only the gross passenger, mail, and freight revenues from its outgoing flights

shall be subject to this tax.

The tax paid by the grantee under either of the above alternatives shall be in

lieu of all other taxes, duties, royal and

s, registration, license, and other fees
charges of any kind, nature, or description, imposed, levied, established, assessed, or
collected by any municipal, city, provincial, or national authority or government
agency, now or in the future, including but not limited to the following:

1. Alll taxes, duties, charges, royalties, or fees due on local purchases
by the grantee of aviation gas, fuel, and oil, whether refined or in crude form,
and whether such taxes, duties, charges, royalties, or fees are directly due
from or imposable upon the purchaser or the seller, producer, manufacturer,
or importer of said petroleum products but are billed or passed on the
grantee cither as part of the price or cost thereof or by mutual agreement or

other arrangement; provided, that all such purchases by, sales or deliveries of

aviation gas, fuel, and oil to the grantee shall be for exclusive use in its

transport and non-transport operations and other activities incidental thereto;
2. All taxes, including compensating taxes, duties, charges, royalties,

or fees due on all importations by the grantee of aircraft, engines, eq

pment,

machine

y, Spare parts, accessories, commissary and catering supplies,

crude form and other articles,

mn gas, fuel, and oil, whether refined o
supplies, or materials; provided, that such articles or supplies or materials are
imported for the use of the grantee in its transport and transport operations
and other activities incidental thereto and are not locally available in

reasonable quantity, quality, or price;


3. All taxes on lease rentals, interest, fees, and other charges payable to
lessors, whether foreign or domestic, of aircraft, engines, equipment,
machinery, spare parts, and other property rented, leased, or chartered by the
grantee where the payment of such taxes is assumed by the grantee;

4. All taxes on interest, fees, and other charges on foreign loans
obtained and other obligations incurred by the grantee where the payment of
such taxes is assumed by the grantee;

5. All taxes, fees, and other charges on the regis!

ation, licensing,

acquisition, and transfer of aircraft, equipment, motor vehicles, and all other
personal and real property of the grantee; and
6. The corporate development tax under Presidential Decree No, 1158
A
The grantee, shall, however, pay the lax on its real property in conformity with
existing law.
For purposes of computing the basic corporate income tax as provided herein, the
grantee is authorized:
(a) To depreciate its assets to the extent of not more than twice as fast the
normal rate of depreciation; and
(b) To carry over as a deduction from taxable income any net loss incurred in

any

‘ar up to five vears following the year of such loss.]

TAX PROVISIONS. - THE GRANTEE, ITS SUCCESSORS OR ASSIGNEES, 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 GRANT!
SUCCESSORS OR ASSIGNEES, SHALL CONTINUE TO BE LIABL
TAXES PAYABLE UNDER TITLE Il 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.



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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 3. Section 17 of Presidential Decree No. 1590, PAL Franchise is hereby amended
to read as follows:
“Section 17. The term of this franchise shall be fifty (50) years from. the date of the
acceptance of this franchise by the grantee. THE REMAINING TERM OF THIS
FRANCHISE SHALL BE SUBJECT TO REVIEW BY CONGRESS EVERY FIVE
YEARS FROM THE EFFECTIVITY OF THIS AMENDATORY ACT.

SECTION 4. A new Section 18 is hereby inserted in P.D. 1590, to read as follows:
“SECTION 18. 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)’.

All other sections are hereby renumbered accordingly.

SECTION 5. Repealability and 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. - Any portion or provisions of this Act that may be
declared unconstitutional or invalid shall not have the effect of nullifying other portions or
provisions hereof as long as such remaining portions or provisions can still subsist and be

given effect in their entirety.


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SECTION 7. Repealing Clause. - All laws, ordinances, rules, regulations, and other

issuances or parts thereof, which are inconsistent with th

is Act are hereby repealed or

modified accordingly.

SECTION 8. Effectivity Clause.

This Act shall take effect fifteen (15) days from the date of

its publication in at least two (2) newspapers of general circulation.

Approved,