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WHEREAS, Republic Act 776, as amended, otherwise known as the “Civil Aeronautics Act of the Philippines, authorizes the CAB to make and amend such general and special rules, regulations and procedures to carry out the provisions of RA 776, Section 10 (B) thereof, provides, to wit:

SECTION 10. Powers and duties of the Board. B) The Board may perform such acts, conduct such investigations, issue and amend such orders, and make  and  amend  such  general  and  special  rules,  regulations,  and procedures as it shall deem necessary to carry out the provisions of this Act.

WHEREAS, the Board sees the necessity to continuously review and revise existing policies to keep abreast with developments in civil aviation and to ensure that entities intending to operate air transport services, whether scheduled or non-scheduled  have  proven  capacity  and  capability  to  operate  the  services applied for;

WHEREAS, the Board by reason of public interest safety, and to prevent proliferation of “paper airlines” which puts the Philippine civil aviation industry in a bad light;

NOW, THEREFORE, the Board RESOLVED, as it hereby RESOLVES to adopt the following guidelines, in addition to existing requirements, in granting permits to domestic carriers intending to operate scheduled/ non-scheduled domestic/ international air transportation services:

I.    Coverage: This Guidelines shall apply to all domestic carriers, in addition to the requirements of this Board, applying for an original, and as maybe applicable, renewal of Certificate of Public Convenience and Necessity to Operate:

a.   Domestic Scheduled
b.   Domestic Non-scheduled
i.    Agricultural Air Spraying Services
c.   International Scheduled, and
d.   International Non-scheduled

II.    Capitalization Requirement

a.   Scheduled Air Transport Services

1.    Domestic    :    300M
2.    International    :    800M

b.   Non-scheduled

1.    Domestic

i.    Air Taxi    :    25M
ii.   Agricultural Air-spraying    :    10M

2.    International Non-Scheduled    :    150M

III.  Operational Requirement:

a.   Domestic Air Transport

i.    An applicant-carrier securing a permit to operate Domestic Non- scheduled Air Transport Services shall have at least one (1) serviceable aircraft duly registered and certified Airworthy by the Civil Aviation Authority of the Philippines (CAAP) and capable of providing the services applied for. It shall have in its employ Pilot/s and/ or crew duly rated and licensed by the Civil Aviation Authority of the Philippines.

ii.    An   applicant-carrier   securing   a   permit   to   operate   Domestic Scheduled Air Transport Services shall have at least two (2) serviceable aircraft, duly registered and certified airworthy by the Civil Aviation Authority of the Philippines, and capable of providing the services applied for. It shall have in its employ Pilot/s and/or crew duly rated and licensed by the Civil Aviation Authority of the Philippines

b.   An applicant-carrier securing a permit a permit to operate International Non-scheduled air transport services:

i.     must have a valid permit or Certificate of Public Convenience and Necessity (CPCN) to operate domestic scheduled and/or domestic non-scheduled air transport services;

ii.    shall have been in continuous operation of domestic scheduled and/ or domestic non-scheduled air transport services for at least one (1) year; and

iii.    must  at  least  have  two  (2)  serviceable  aircraft  in  its  fleet  duly registered and certified airworthy by the Civil Aviation of the Philippines, capable of operating non-scheduled international/ regional routes, provided that the required number of aircraft shall be increased, depending on the routes applied for and the frequency thereof

c.   An applicant-carrier securing a permit to operate International Scheduled air transport services:

i.     must have a valid permit or Certificate of Public Convenience and Necessity (CPCN) to operate either a Domestic Scheduled Service and/ or Non-scheduled International air transport;

ii.    shall have been in continuous operation of Domestic Scheduled and/or International Non-scheduled air transport services for at least one (1) year; and

iii.    must at least have two (2) serviceable aircraft duly registered and certified airworthy by the CAAP, and capable of operating scheduled international/ regional routes; provided that an additional aircraft is acquired or leased in the immediately succeeding year of operation to ensure that its services are not disrupted. This does not preclude the airline from acquiring more aircraft.

IV. That, the required prior and continuous domestic operations and/ or non- scheduled international operations stated in the immediately preceding paragraphs may be dispensed with, provided the applicant is able to prove that it has sufficient capital to start and sustain the operations applied for. In which case the paid-up capital and/or working capital required of the start-up airline,  as  provided  in  item II  shall  be  equivalent  to  double  the  amount required under this Guidelines. Provided that, the applicant-carrier shall have the  required  number  of  aircraft,  whether  owned  or  leased,  in  its  fleet. Provided further that, it has managerial and operational personnel with a good track record and have been engaged in the management and/ or operation of air transport services for at least five (5) years.

V.   A determination of an applicant-carrier's financial requirement shall be based on its proposed operation. The determination of the applicant’s total financial requirement is equal to the sum of:

a.   its start-up costs;

b.   its operating and overhead costs associated with operating the business for a 90-day period under conditions of optimum demand; and

c.   for businesses already in operation, any owners’ deficit, as reported in the applicant's audited balance sheet. The deficit that is reported for financial requirements purposes should be net of any start-up costs that have already been incurred and were included in arriving at the owner’s deficit (i.e., start-up costs incurred on or before the audited balance sheet’s fiscal year-end date).

An air carrier, already in operation, which has a negative working capital or is capital deficient, shall be required to submit a “Stockholder’s Undertaking to Infuse Additional Capital” and to infuse the same within a period of one (1) year from the issuance of the said “Stockholder’s Undertaking. Provided that, a “going-concern” assumption in its Audited Financial Statement shall not mean that the business will cease, but the air carrier shall be required to submit its plans and programs to address its losses as may be directed by the Board.

VI.  The applicant-carrier must be able to prove that it has acquired or can acquire  the  necessary  funding  to  meet  the  financial  requirement.  The applicant must demonstrate that:

a.   it has, or can acquire, through a combination of equity and/ or debt, funds in an amount at least equal to the financial requirement/s as described in the preceding paragraph.

b.  the funds are not encumbered and consist of liquid assets (i.e., readily convertible to cash); and

c.   the  funds  are  available  and  will  remain  available  to  finance  the  air
service.

VII. The financial fitness of the applicant shall be based on the following capital structure: based on a 90-day start-up and operating cost

The Financial Requirements Statement computes the:

(i)   Financial requirement;

(ii)  Capital funding requirement that must be funded by owner’s capital; and

(iii) Balance of the financial requirement, which is not restricted to being funded by owners’ capital.

Line	Descr i pti on
1000 1001 1002 1003	Shareho l ders’ or Part ners’ Equity / Defi cit (This secti on only appli es to appli cants t hat are al ready in operati on) Equ ity / (Defi cit) (f rom audit ed balance sheet, defi cit report ed as a nega ti ve number) S t art -up costs i ncurred pri or to fi nanci al st at ement year -end date Ne t equity / (defi cit) (li ne 1001 + li ne 1002, defi cit report ed as a negati ve Number )
2000 2001 2002 2003 2004 2005	Financia l Requirement S t art -up costs Opera ti ng costs (f rom 90 Day Operati ng St at ement) Total costs (li ne 2001 + li ne 2002) Ne t defi cit, if any (f rom li ne 1003, defi cit report ed as a positi ve) F i nanci al r equir ement (li ne 2003 + li ne 2004)
3000 3001 3002 3003	Cap i tal Fundi ng Requi re m ent 50 % of t ot al costs (li ne 2003 x 50%) Ne t equity (defi cit ), if any (f rom li ne 1003, defi cit report ed as a negati ve) Capit al f undi ng requi rement (li ne 3001 -li ne 3002; if negati ve, ent er zero)
4000 4001 4002 4003	Ba l ance of Fundi ng Requi rement F i nanci al requi rement (f rom li ne 2005) Capit al f undi ng requi rement f rom li ne 3003 Ba l ance of f undi ng requi rement (li ne 4001 -line 4002)

VIII.  A  higher  paid-up  capital  may  be  required  from  an  applicant-carrier, depending on the scale of its proposed operation as provided in its business plan

IX.  Existing  grantees  of  Certificate  Public  Convenience  and  Necessity  to Operate Air Transport Services for Domestic Scheduled and Non-scheduled Operations and International Scheduled and Non-scheduled Operations shall be required to comply with the foregoing capitalization and operational requirement within a period of one (1) year from the effectivity hereof or upon renewal of its CPCN, whichever comes first.

X.   All other issuances, rules or regulations contrary to the foregoing are hereby deemed amended

XI.  Any provision, found to be contrary to or in violation of existing laws and the Constitution are deemed null and void; all other provisions shall remain in force

XII. This Resolution shall take effect fifteen (15) days after its publication in a newspaper of general circulation and deposit in the UP Law Center.

25 May 2018.
Pasay City, Philippines.
 
 

(SGD) MANUEL ANTONIO L. TAMAYO Undersecretary for Aviation and Airports Department of Transportation Alternate Chairman	(SGD) REYNALDO L. CHING Assistant Secretary for Administration and Special Concerns Department of Tourism Alternate Vice Chairman
(SGD) JIM C. SYDIONGCO Director General Civil Aviation Authority of the Philippines Member	(SGD) EDMUND F. GAMMAD   Member
(SGD) DANILO O. MENDEZ Member
Attested by:	Noted:
(SGD) JEAN MARIONNE A. BERMUDEZ   Acting Board Secretary	(SGD) CARMELO L. ARCILLA Executive Director