Definition of “rural air transport”
- Section 2 defines “rural air transport” as providing air transport in and between municipalities, cities or provinces and all points and places throughout the Philippines.
- Section 2 limits “rural air transport” to short-haul carriers.
- Section 2 requires that the service be an essential part of the national transportation network.
Service obligation, routes, and rates
- Section 3 requires the grantee, excepting cases of force majeure and whenever weather conditions permit, to maintain scheduled or non-scheduled air transport services.
- Section 3 requires service in and between any and all points and places throughout the Philippines.
- Section 3 requires frequencies that traffic needs may require.
- Section 4 requires the grantee to secure prior approval of the Civil Aeronautics Board when determining its routes and rates for both scheduled and non-scheduled passenger and/or freight services.
Use of government landing and facilities
- Section 5 allows the grantee, subject to terms and conditions the Philippine government may prescribe, to use landing and replenishment facilities on land or water maintained or owned by the government.
- Section 5 excludes facilities that the government, in its opinion, may not be used for military or naval considerations.
- Section 5 gives reciprocal rights: the Philippine government may use the grantee’s landing and replenishment facilities it maintains and owns in the Philippines, and the grantee’s use remains subject to the same governmental framework.
- Section 5 limits the use to what is permitted under the government’s prescribed terms and conditions.
Radio aids and limits on wireless use
- Section 6 authorizes the grantee to construct, operate, and maintain stations or transmitting sets for wireless telegraphy and direction findings and other radio aids to air navigation.
- Section 6 authorizes these facilities at the grantee’s terminals and landing fields allowed under Section 5 and also in its aircraft.
- Section 6 requires compliance with rules and regulations made by the National Telecommunications Commission on wavelengths or frequencies.
- Section 6 limits wireless communications solely to receiving and transmitting weather forecasts and messages relating to the grantee’s aircraft and matters connected with the grantee’s services.
Air Force “service credits” system
- Section 7 authorizes the grantee to establish a responsive system with the Philippine Air Force.
- Section 7 permits the system through agreement of service credits that allow the Philippine Air Force to provide the grantee aircraft parts and fuel to meet needs.
- Section 7 requires repayment through future goods and services drawn by the Philippine Air Force, under the authorized credit arrangement.
Transportation and servicing contracts
- Section 8 authorizes the grantee to enter into transportation contracts with the Philippine government.
- Section 8 expressly includes the carrying of mail under terms and conditions mutually agreed upon.
- Section 8 authorizes the grantee to enter into transportation and/or servicing contracts and other contracts relating to air transport.
- Section 8 specifically includes contracts with other foreign-owned airlines, particularly those with international routes.
Deputization for air safety enforcement
- Section 9 allows the grantee to be deputized by the Air Transportation Office.
- Section 9 limits deputization to matters especially in areas relating to the enforcement of air safety standards.
Eminent domain and condemnation rules
- Section 10 authorizes the grantee, subject to limitations and procedures prescribed by law, to exercise the right of eminent domain as reasonably necessary for landing fields, hangars, docks, ramps, wireless stations, and other structures used in connection with its activities.
- Section 10 bars taking private property without proper condemnation proceedings and just compensation paid or tendered.
- Section 10 limits authority: the grantee’s eminent domain authority applies only to land required for the actual purpose for which the franchise is granted.
- Section 10 prohibits broader use or occupation beyond the actual franchise purpose.
Government indemnity for accidents
- Section 11 requires the grantee to hold national, provincial, city, and municipal governments harmless.
- Section 11 covers all claims, demands, or actions arising from accidents or injuries.
- Section 11 covers injury or damage to property or persons.
- Section 11 ties liability to accidents or injuries caused by operation of the services under the franchise.
Franchise tax and income tax treatment
- Section 12 requires the grantee to pay the Philippine government, during the life of the franchise, a franchise tax of five (5%) of gross revenues derived from transport operations.
- Section 12 subjects the grantee to income tax under Title II of the National Internal Revenue Code as amended.
- Section 12 subjects the grantee to tax on its real property under existing law.
- Section 12 limits additional income tax scope: income from activities other than air transportation is covered.
Ownership requirement and cancellation penalty
- Section 13 requires the franchise to be granted on the understanding that the grantee is a corporation sixty percent (60%) of whose capital stock is bona fide property of citizens of the Philippines.
- Section 13 requires that citizens’ interest in the grantee’s capital stock—or in the capital of any company it may merge with—shall at no time fall below sixty percent (60%).
- Section 13 imposes the penalty: failure to maintain the sixty percent (60%) threshold results in cancellation of this franchise.
No exclusivity and matching of favorable terms
- Section 14 provides that the franchise is not an exclusive grant of the privileges provided.
- Section 14 requires that if a competing individual, partnership, or corporation receives a similar permit or franchise with terms and/or provisions more favorable than those granted to the grantee, or which tend to place the grantee at a disadvantage, those more favorable terms and/or provisions become part of the grantee’s franchise.
- Section 14 states that the substituted favorable terms operate equally in favor of the grantee.
Amendability by Congress and franchise term
- Section 15 provides that the franchise is subject to amendment, alteration, or repeal by the Congress of the Philippines.
- Section 16 sets the franchise term at fifty (50) years from the date of the effectivity of this Act.
Non-transferability and congressional approval
- Section 17 prohibits the grantee from leasing, transferring, granting the usufruct of, selling, or assigning the franchise or the rights/privileges acquired thereunder.
- Section 17 prohibits the grantee from merging with another company or corporation organized for the same purpose.
- Section 17 allows these actions only with prior approval of Congress of the Philippines.
- Section 17 binds any transferee: any person or entity to which the franchise is sold, transferred, or assigned is subject to all franchise conditions, terms, restrictions, and limitations as if granted to it.
Acceptance requirement within two years
- Section 18 provides that the franchise is not valid unless the grantee accepts it within two (2) years after its effectivity.
- Section 18 requires the grantee to file the acceptance in writing with the Civil Aeronautics Board.
Effectivity and publication
- Section 19 provides that the Act takes effect fifteen (15) days after its publication in at least two (2) newspapers of general circulation.
Dates, approval, and legislative context
- The Act is Republic Act No. 7909, titled “AN ACT GRANTING A FRANCHISE TO PACIFIC AIRWAYS CORPORATION TO ESTABLISH AND MAINTAIN RURAL AIR TRANSPORT SYSTEM AND ALLIED SERVICES IN THE PHILIPPINES.”
- Republic Act No. 7909 is February 23, 1995.
- The Act is approved by the President on February 23, 1995.
- The legislative passages occurred on February 6, 1995 (House) and February 2, 1995 (Senate).