AN ACT GRANTING CEBU AIR

Case Overview and Summary

Nature and Scope of Franchise (Section 1):
- Grants Cebu Air, Inc. a franchise to establish, operate and maintain transport services for the carriage of passengers, mail, goods and property by air, both domestic and international, with Cebu as its base.
- Includes maintenance and operation of hangars, aircraft service stations, facilities, and other auxiliary services.
- Allows construction, operation and maintenance of wireless telegraphy, direction finding, and other radio aids to air navigation.

Civil Aeronautics Board (Section 2):
- Grantee must secure appropriate permits and licenses from the Civil Aeronautics Board.
- Aircraft and crew must be licensed and meet airworthiness, radio communication, safety, and other requirements set by the Air Transportation Office.
- Grantee must comply with Republic Act No. 776 and its regulations.

Responsibility to the Public (Section 3):
- Grantee must maintain scheduled, non-scheduled, and/or charter air transport services between any points in the Philippines and other countries, with at least 25% of frequencies for the domestic market.

Rates for Services (Section 4):
- Grantee shall fix just and reasonable rates for transportation of passengers, mail, goods and freight, subject to regulations and approval of the Civil Aeronautics Board and other regulatory agencies.

Term of Franchise (Section 5):
- Franchise term is 40 years from the date of approval, unless sooner revoked or canceled.
- Franchise will be deemed revoked if grantee fails to operate within 2 years from effectivity.

Landing Facilities (Section 6):
- Grantee may use landing and other airport facilities owned or maintained by the Philippine Government, subject to terms, conditions, restrictions and national policy considerations.
- Reciprocally, the Philippine Government shall have the right to use the grantee's landing and airport facilities in the Philippines.

Contracts (Section 7):
- Grantee is authorized to enter into transportation contracts with the Philippine Government, including carrying mail, upon mutually agreed terms and conditions.
- Grantee shall give preferential consideration to contracts with the Philippine Government.
- Grantee may also enter into transportation, maintenance, servicing, and other contracts relating to air transport with other foreign-owned airlines, particularly those with international routes.

Right of Government (Section 8):
- In case of war, insurrection, domestic trouble, public calamity or national emergency, the Philippine Government, upon the order of the President, shall have the right to take over and operate the grantee's equipment, paying for its use or damages.

Public Equity Participation (Section 9):
- Grantee shall make public offering through the stock exchanges of at least 30% of its common stocks within 10 years from the date of effectivity.
- No single person or entity shall be allowed to own more than 5% of the stock offerings.

Warranty in Favor of National and Local Governments (Section 10):
- Grantee shall hold the national, provincial and municipal governments harmless from all claims, accounts, demands or actions arising out of accidents or injuries caused by the operation of services under the franchise, attributable solely to the act or omission of the grantee.

Tax Provisions (Section 11):
- Grantee shall pay the Philippine Government a franchise tax of 5% of the gross revenues derived from transport operations during the life of the franchise.
- If any competing individual, partnership or corporation receives tax privileges or favorable terms that disadvantage the grantee, such provisions shall be deemed part of the franchise and operate equally in favor of the grantee.
- Grantee shall be subject to income tax under the National Internal Revenue Code and tax on real property under existing laws on revenues earned from activities other than air transportation.

Sale, Lease, Transfer, Assignment, Usufruct, etc. (Section 12):
- Grantee shall not lease, transfer, grant the usufruct of, sell or assign the franchise and rights acquired thereunder to any person, firm, company, corporation, or legal entity without prior approval of Congress.
- Any entity to which the franchise is sold, transferred, or assigned shall be subject to all the conditions, terms, restrictions, and limitations of the Act.

Legislative Amendments (Section 13):
- The franchise is subject to amendments or repeal by Congress when the common good so requires.

Separability Clause (Section 14):
- If any section or provision of the franchise is held or declared unconstitutional or invalid by a competent court in a final judgment, the other sections or provisions shall continue to be in force.

Repealing Clause (Section 15):
- All laws, decrees, orders, instructions, rules and regulations, or parts thereof, which are inconsistent with the Act are hereby repealed or modified accordingly.

Effectivity (Section 16):
- The Act shall take effect 15 days after its publication in at least two national newspapers of general circulation.