Operational Requirements and Service Maintenance
- The grantee must maintain scheduled or non-scheduled services except in cases of force majeure or adverse weather conditions.
- Service frequencies should meet traffic demands.
Regulation of Rates and Aircraft Standards
- Rates for passengers and freight must be just, reasonable, and uniform, subject to Civil Aeronautics Board (CAB) approval.
- CAB decisions are reviewable by courts.
- Aircraft and crew must be licensed and comply with technical, safety, and equipment standards as prescribed by governmental aviation authorities.
- Regular inspection and compliance with Republic Act No. 776 and current regulations are mandatory.
Use of Government Facilities and Reciprocal Rights
- The grantee may use government-owned landing and replenishment facilities under prescribed conditions, excluding those restricted for military or naval reasons.
- The government may also use the grantee’s facilities reciprocally.
Authority to Operate Radio and Communication Equipment
- The grantee may establish and operate wireless telegraphy, direction-finding stations, and other radio navigation aids.
- Communication facilities are to be used solely for operational and weather-related transmissions.
Contracts with Government and Foreign Airlines
- The grantee is authorized to enter into transport contracts with the Philippine government, including mail carriage, with preferential consideration.
- It can also contract with foreign airlines for maintenance and services.
Government Takeover During Emergencies
- The government may take over and operate the grantee’s equipment during war, insurrection, or national emergencies, compensating for use or damages.
Compliance with Philippine Laws
- The grantee is subject to all existing and future Philippine laws.
Eminent Domain Rights
- The grantee may exercise eminent domain for necessary facilities with Presidential approval, subject to legal procedures and just compensation.
- No property can be taken without condemnation proceedings.
Prohibition on Involuntary Servitude
- It is unlawful for the grantee to employ or contract labor involving involuntary servitude.
Indemnification Clause
- The grantee must hold government entities harmless from claims arising out of accidents or damages caused by operations.
Franchise Tax and Fiscal Obligations
- A 2% quarterly tax on gross revenues must be paid to the National Government in lieu of other local or national taxes.
- If tax deficiencies are found after audit, payment is required within ten days.
- Real property taxes are separate and must be paid according to law.
Accounting and Reporting Requirements
- The grantee must maintain detailed accounts and submit quarterly gross revenue reports to the Commissioner of Internal Revenue.
- All financial records must be kept in the Philippines and are subject to inspection.
- The Commissioner’s audit is final, with court appeal rights preserved.
- "Gross receipts," "revenue," and "earnings" are defined broadly to cover all related income.
National Capital Ownership Requirement
- At least 60% of the company’s capital stock must be owned by Philippine citizens at all times.
- Failure to maintain this ownership threshold can lead to franchise cancellation.
Non-Exclusivity of Franchise
- The franchise does not grant exclusive rights to the grantee.
Congressional Control
- The franchise is subject to amendment, alteration, or repeal by the Philippine Congress.
Term of Franchise
- The franchise validity is for 50 years from acceptance by the grantee.
Acceptance of Franchise
- The franchise must be accepted in writing and filed with the Civil Aeronautics Board within two years of approval.
Bond Requirement
- The grantee must post a bond of 20,000 pesos guaranteeing establishment and operation of chosen lines within one year of acceptance.
- Failure to comply leads to automatic cancellation of the franchise.
- Bond is cancellable after one year of satisfactory operation.
Restrictions on Transfer and Assignment
- Lease, transfer, sale, assignment, usufruct grants, or mergers require prior Congressional approval.
- New owners or merged entities must comply with all franchise conditions.
- Abandonment of any line for one year can cause franchise cancellation through judicial proceedings.
Forfeiture and Penalties for Violations
- Substantial violations of the Act lead to forfeiture of franchise and business privileges after due proceedings.
- Penalties include fines up to 20,000 pesos.
National Flag Carrier Status
- Aircraft used for international flights by the grantee are considered Philippine national flag carriers.
Reversion of Property upon Termination
- Public lands and properties used by the grantee revert to the government upon franchise termination.
- Undisposed real property must revert to the government within two years after termination.
Effectivity of the Act
- The provisions take effect upon approval.