AN ACT GRANTING A FRANCHISE TO FILIPINAS ORIENT AIRWAYS

Case Overview and Summary

Summary of Republic Act No. 4147:

Granting of Franchise
- Grants Filipinas Orient Airways, Incorporated (the grantee) a franchise to establish, operate and maintain air transport services for passengers, mail, industrial flights and cargo within the Philippines and between the Philippines and other countries. (Section 1)
- The grantee shall maintain scheduled or non-scheduled air transport services as required by traffic needs, except in cases of force majeure or adverse weather conditions. (Section 2)

Rates and Regulations
- The grantee shall fix just, reasonable and uniform rates for transportation, subject to regulations and approval of the Civil Aeronautics Board or designated regulatory agency. (Section 3)
- All aircraft, flight crew, and equipment shall be licensed by the Philippine government and maintained in airworthy condition per regulations. (Section 3)
- The grantee's equipment and operations shall be subject to inspection and regulation by the Civil Aeronautics Administration. (Section 3)
- The grantee shall comply with Republic Act No. 776 and its regulations. (Section 3)

Facilities and Communication
- The grantee may use government-owned landing and replenishment facilities in the Philippines, except those restricted for military or naval reasons. Reciprocally, the government can use the grantee's facilities. (Section 4)
- The grantee can construct and operate wireless telegraphy stations and radio aids for air navigation, but solely for weather forecasts and aircraft-related communications. (Section 5)

Contracts and Government Control
- The grantee can enter into transportation contracts with the Philippine government, including mail carrying, with preferential consideration given to government contracts. (Section 6)
- The grantee can also enter into contracts with foreign-owned airlines, particularly those with international routes. (Section 6)
- In case of war, insurrection, public calamity or national emergency, the government can take over and operate the grantee's equipment upon order of the President, with compensation. (Section 7)

Legal Provisions
- The grantee shall be subject to existing and future laws of the Philippines. (Section 8)
- With government approval, the grantee can exercise the right of eminent domain as reasonably necessary for its facilities, but with proper condemnation proceedings and just compensation. (Section 9)
- It is unlawful for the grantee to use or contract for labor of persons held in involuntary servitude. (Section 10)
- The grantee shall hold the government harmless from claims arising out of accidents or injuries caused by its operations. (Section 11)

Tax and Financial Provisions
- The grantee shall pay the national government a tax of 2% of its gross revenue or earnings from operations under this franchise, payable quarterly and in lieu of other taxes, except real property tax. (Section 12)
- The grantee shall keep accounts of gross receipts, revenues or earnings, subject to inspection by the Commissioner of Internal Revenue. The definition of "gross receipts", "revenue", and "earnings" is provided. (Section 13)

Ownership and Transfer
- The franchise is granted with the understanding that at least 60% of the grantee's capital stock is owned by Filipino citizens, under penalty of cancellation. (Section 14)
- The franchise is not an exclusive grant. (Section 15)
- The franchise is subject to amendment, alteration or repeal by the Congress of the Philippines. (Section 16)
- The term of the franchise is 50 years from the date of acceptance. (Section 17)
- The grantee must accept the franchise within 2 years after approval, by filing acceptance with the Civil Aeronautics Board. (Section 18)
- The grantee shall execute a bond of 20,000 pesos and commence operations within 1 year from acceptance, or the franchise will be canceled. After 1 year of satisfactory operation, the bond will be canceled. (Section 19)
- The grantee cannot lease, transfer, grant usufruct, sell or assign the franchise, or merge with another company without prior approval of the Congress of the Philippines. Any transferee or merged entity shall be subject to the same conditions and restrictions. Abandonment of any line for 1 year will lead to cancellation of the franchise for that line. (Section 20)

Violations and Termination
- Substantial violation of any provision will result in forfeiture of privileges and franchises, and a fine of up to 20,000 pesos. (Section 21)
- The grantee's planes used for international flights shall be considered national flag carriers of the Philippine government. (Section 22)
- Upon termination of the franchise, all public land, property and rights granted to the grantee shall revert to the Philippine government. Any real property not disposed of within 2 years shall also revert. (Section 23)