House approves Cebu Pacific’s 50-year franchise renewal bill

The House of Representatives has approved on third and final reading a bill renewing Cebu Pacific's legislative franchise for another 50 years. House Bill No. 11536 passed with 289 affirmative votes, none against, and two abstentions. The measure now moves to the Senate for further consideration.

The House of Representatives on Monday approved on third and final reading a bill seeking to renew the legislative franchise of Cebu Air, Inc., which operates as Cebu Pacific, for another 50 years. House Bill No. 11536 received 289 affirmative votes, with none against and two abstentions.

The measure seeks to extend Cebu Pacific’s authority to provide domestic and international air transport services for passengers, mail, goods, and property under its existing franchise granted through Republic Act No. 7151. If enacted, the renewed franchise would take effect upon the expiration of the airline’s existing franchise.

Under the bill, Cebu Pacific would be required to maintain scheduled, nonscheduled, and charter air services according to traffic demand, subject to exceptions for force majeure and adverse weather conditions. The airline’s rates would remain subject to the applicable regulatory authority of the Civil Aeronautics Board (CAB). Its aircraft and flight crews would also be required to comply with licensing, airworthiness, and other aviation safety requirements administered by the Civil Aviation Authority of the Philippines (CAAP).

The measure provides for the revocation of the franchise if the airline fails to operate continuously for two years, subject to the conditions specified in the bill. It would also authorize Cebu Pacific to use government-owned and privately owned landing facilities under reciprocal arrangements, operate aircraft communications and navigation equipment, and enter into transportation and mail contracts with the government. During war, national emergencies, calamities, or other instances of public peril, the president would be authorized to temporarily take over, operate, or suspend the airline’s facilities, subject to the payment of due compensation.

The proposed franchise would require Cebu Pacific to pay corporate income tax, value-added tax, and real property tax, subject to applicable laws and the conditions specified in the measure. It also provides tax exemptions for certain purchases and importations of aviation fuel, oil, aircraft, spare parts, and machinery, subject to specified requirements, including conditions relating to their availability in the domestic market. The bill would allow the airline to use accelerated depreciation for qualifying assets at up to twice the normal rate and carry over net operating losses for income tax purposes for five years, subject to the measure’s conditions.

It also contains provisions on foreign borrowing and the issuance of debt instruments, including specified tax treatment. Cebu Pacific would be allowed to employ foreign nationals with special qualifications, subject to applicable notification and registration requirements. The airline would generally be prohibited from selling, leasing, transferring, or assigning its franchise, or transferring its controlling interest, without prior congressional approval, except as otherwise provided under the measure.

The bill would require Cebu Pacific to maintain a fuel supply security framework and submit a Fuel Risk Management and Contingency Plan to the CAB. Proposed adjustments to airline rates during declared emergencies would also be subject to CAB approval under the measure. The airline would be required to comply with applicable labor laws, give priority to qualified Filipino workers and local residents as provided in the bill, and offer employment and on-the-job training opportunities.

The measure also provides that the franchise renewal cannot be used as grounds for the arbitrary termination of regular employees. Cebu Pacific would be required to report employment figures in its annual General Information Sheet submitted to the Securities and Exchange Commission. Under the proposed franchise, the airline would submit an annual compliance report to Congress by April 30, accompanied by audited financial statements and regulatory certifications from the CAB and CAAP. Failure to submit the report within the prescribed period would carry a fine of P1,000 for each working day of noncompliance.