Fernand Joseph D. Miranda | John Mark D. Cariño
To further encourage private enterprise, liberalize foreign equity restrictions, and expand the base of investments in the Philippines, the Civil Aeronautics Board (“CAB”), through Board Resolution No. 35, adopted the CAB Guidelines Implementing Republic Act No. 11659, otherwise known as the Public Service Act, as amended (“Guidelines”) on 20 May 2024.
The Guidelines provide for rules in the interpretation, application, and implementation of Republic Act No. 11659 (“R.A. No. 11659”), in relation to Philippine corporations or entities under the regulatory authority of the CAB.
The salient points of the Guidelines are as follows:
Nationality Requirements
Pertinent provisions of Republic Act No. 776, otherwise known as the Civil Aeronautics Act of the Philippines, as amended (“R.A. No. 776”), limiting foreign ownership and participation of foreign investors in the governing body of air carriers, general sales agents, cargo sales or breakbulk agents, and airfreight forwarders (“Entities Under the Regulatory Authority of the CAB”) no longer apply. Pursuant to R.A. No. 11659, all public services not classified as public utility, such as air carriers, may now be 100% foreign-owned.
Nevertheless, a public service not classified as a public utility shall be considered as a business affected with public interest for purposes of Sections 17 and 18 of Article XII of the 1987 Constitution. Accordingly, all Entities Under the Regulatory Authority of the CAB constituted and organized under Philippine laws, and registered with the Securities and Exchange Commission or the Department of Trade and Industry, are allowed to file petition/s for the issuance of a Certificate of Public Convenience and Necessity (“CPCN”) or Letter/s of Authority (“LOA”), as the case may be, before the CAB. However, it must be noted that such person shall establish and maintain its principal place of business in the Philippines in accordance with Section 13(c) of the Revised Corporation Code of the Philippines.
Section 5 of the Guidelines also provides that Capitalization Requirements for the foregoing businesses essentially remain the same, as they are currently provided under applicable laws/regulations and/or as prescribed by the relevant CAB Resolutions and Economic Regulations.
Performance Audit Requirements
Section 6 of the Guidelines requires the CAB to ensure that an annual performance audit is conducted by an independent evaluation entity to monitor the cost, quality of services provided to the public, and the ability of persons regulated by the CAB to immediately and adequately respond to emergency cases. Section 7 of the Guidelines provides that the CAB shall maintain (i) the power to regulate the economic aspects of air transportation, (ii) general supervision and regulation, and (iii) jurisdiction and control over the Entities Under the Regulatory Authority of the CAB.
Issuance of Certificate of Public Convenience and Necessity to Operate and Letters of Authority or Permits to Operate
Under Section 8 of the Guidelines, a valid certificate or authorization issued by the CAB is required for domestic Entities Under the Regulatory Authority of the CAB to operate in the Philippines, subject to the provisions of R.A. No. 776, Commonwealth Act No. 146, as amended by R.A. No. 11659, and other applicable laws and issuances.
Permits issued by the CAB shall be effective from the date specified therein and shall continue in effect unless sooner suspended, revoked, or until the CAB shall certify that operation thereunder has ceased. The CAB may, after due notice and hearing, suspend or revoke such permit if any service authorized thereunder is not inaugurated within a period as may be set by the Board. Further, permits issued by the CAB shall be effective for a period of not more than five (5) years, and may be renewed for successive five (5)-year periods, or such shorter periods as the CAB may deem proper and warranted.
Liberalized Rules on Fares, Rates and Charges
Under Section 9 of the Guidelines, passage rates are deregulated for routes/links operated by more than one (1) operator, while routes serviced by a single operator shall continue to be regulated. However, all freight rates, charges, and passage rates shall be monitored by the CAB.
The CAB shall also regulate the fares, rates and charges of foreign designated carriers in accordance with existing laws. Considerations for reciprocity and value for Philippine Official International Air Carriers shall be made by the CAB in granting applications for promotional fares and rates.
Penal Provisions
Penalties and fines arising from violation of orders, resolution, and rules and regulations issued by the CAB, including violations of the terms and conditions of the Certificates of Authority, were likewise amended in accordance with Section 11 of R.A. No. 11659.
The CAB, after due notice and hearing, may impose fines not lower than Five Thousand Pesos (PhP5,000.00) but not exceeding Two Million Pesos (PhP2,000,000.00) per violation. The CAB may even impose a fine of not lower that Five Thousand Pesos (PhP5,000.00) per violation, per day, in addition to the fine initially imposed, until such violation ceases or the fine assessed and imposed is settled.
Failure to pay the fine or comply with the CAB’s order to refund within the time specified in the Board’s order or decision shall be deemed good and sufficient reason for the suspension of the certificate of said public service until payment shall be made or the order is complied with.
The CAB may also enforce payment through appropriate action filed in a court of competent jurisdiction. The foregoing remedy shall not be a bar to, or affect any other remedy provided in R.A. No. 776 or R.A. No. 11659 but shall be cumulative and additional to such remedy or remedies.
Section 14 of the Guidelines provides that the same shall not impair vested rights or obligations of contracts, such that current and subsisting concession agreements and other similar contracts of juridical persons with government agencies or government-owned and controlled corporations shall remain valid and in force.
With these Guidelines established, the CAB expect enterprises operating in the aviation industry to be vigilant in complying with the law and its implementing rules and regulations.