Permits, Licensing, and Regulatory Compliance
- The grantee must acquire appropriate permits and licenses from the Civil Aeronautics Board (CAB) for operations.
- All aircraft and equipment must be airworthy, equipped with required safety and communication systems, and operated by government-licensed crew.
- Compliance with Civil Aviation Authority of the Philippines (CAAP) rules and other regulatory requirements is mandatory.
- Continuous inspection and regulation by CAAP apply.
- Obliged to follow the Civil Aeronautics Act and related regulations.
Operations and Service Maintenance
- Scheduled, non-scheduled, and charter air services are to be maintained subject to weather and force majeure conditions.
- Flights must serve all points within the Philippines and link the country internationally.
- At least 25% of flight frequencies must cover domestic routes.
Rates and Pricing Regulation
- The grantee shall set just and reasonable rates for air transportation services.
- These rates are subject to CAB and other government agency approval and regulation.
Term and Conditions of Franchise
- The franchise is valid for 25 years from effectivity unless revoked or canceled earlier.
- Automatic revocation occurs if the grantee fails to:
- Start operations within one year from CAB permit approval.
- Obtain Air Operator Certificate (AOC) within one year of CAB permit application.
- Continuously operate for at least two years.
- Commence operations within two years of franchise effectivity.
Acceptance and Enforcement
- The grantee must accept the franchise in writing within 60 days after effectivity.
- Nonacceptance voids the franchise.
Bond Requirement
- A bond is to be filed in favor of the CAB to guarantee compliance with franchise conditions.
- The CAB determines the amount.
- Fulfillment of obligations within three years leads to bond cancellation; otherwise, bond forfeiture and franchise revocation.
Use and Access to Landing and Airport Facilities
- The grantee may use government-owned landing and airport facilities within the Philippines subject to terms and national policies.
- The government reserves the right to use the grantee’s landing and airport facilities.
Contractual Authority
- Authorized to enter into transportation contracts with the Philippine government, including mail carriage.
- Must give preferential consideration to government contracts.
- May contract with foreign airlines for operations or servicing, especially regarding international routes.
Government’s Special Rights
- The President of the Philippines reserves the right to temporarily take over or suspend grantee’s facilities and equipment in times of war, public peril, emergencies, calamities, or disturbances.
- Temporary use by government agencies is allowed with due compensation.
Liability and Warranty
- The grantee shall hold national and local government entities free from any claims or liabilities arising from operational accidents or injuries.
Restrictions on Franchise Transfer or Sale
- The franchise cannot be leased, transferred, assigned, or sold without prior approval from Congress.
- All transfers, mergers, or changes in controlling interest must be reported within 60 days.
- Failure to report results in automatic revocation.
- Any assignee assumes all terms and conditions of the original franchise.
Ownership Dispersal Requirement
- At least 30% of the grantee’s outstanding capital stock must be offered to Filipino citizens within five years of starting operations.
- Higher required percentages may be prescribed by future laws.
Equality Clause on Franchise Privileges
- Advantages or privileges granted under other franchises must be extended immediately and unconditionally to the grantee.
- This clause excludes provisions on territorial coverage, franchise lifespan, or types of authorized service.
Annual Reporting Obligations
- The grantee must submit an annual compliance and operations report to Congress by April 30 each year.
- The report must be submitted through relevant legislative committees.
- Reportorial compliance is necessary for permit or certificate applications with the CAB.
Penalties for Failure to Comply with Reporting
- A fine of PHP 500 per working day applies for failure to submit the annual report.
- The CAB will collect fines separately from other penalties.
Separability Clause
- If any provision is declared invalid, all other unaffected provisions shall remain in force.
Repealability and Non-Exclusivity
- The franchise may be amended, altered, or repealed by Congress if public interest so requires.
- The franchise is non-exclusive.
Effectivity
- The Act takes effect 15 days after publication in the Official Gazette or in a newspaper of general circulation.