AN ACT GRANTING THE AIR MABUHAY CORPORATION A FRANCHISE TO ESTABLISH

Case Overview and Summary

Summary of Republic Act No. 9039:

Nature and Scope of Franchise (Section 1):
- Grants Air Mabuhay Corporation (the grantee) a franchise to establish, operate and maintain domestic and international air transport services for the carriage of passengers, mails, goods and property.
- Includes the maintenance and operation of hangars, aircraft service stations, facilities, and other allied services.
- Allows the grantee to construct, operate and maintain wireless communication facilities for receiving and transmitting weather forecasts and other matters related to its services.

Civil Aeronautics Board (Section 2):
- The grantee shall secure appropriate permits and licenses from the Civil Aeronautics Board for its operations.
- All aircraft, crew members, equipment, and operations shall comply with regulations and requirements of the Air Transportation Office or other regulatory bodies.
- The grantee shall comply with the provisions of Republic Act No. 776 and its regulations.

Responsibility to the Public (Section 3):
- The grantee shall maintain scheduled, non-scheduled, and/or chartered air transport services throughout the Philippines and between the Philippines and other countries, as traffic needs require.
- At least twenty-five percent (25%) of all its frequencies shall be for the domestic market.

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

Term of Franchise (Section 5):
- The franchise shall be for a term of twenty-five (25) years from the date of effectivity of this Act, unless sooner revoked or canceled.
- The franchise shall be deemed ipso facto revoked if the grantee fails to:
1. Commence operations within one (1) year from the approval of its permits by the Civil Aeronautics Board.
2. Operate continuously for two (2) years.
3. Commence operations within two (2) years from the effectivity of this Act.

Acceptance and Compliance (Section 6):
- Acceptance of this franchise shall be given in writing within sixty (60) days after the effectivity of this Act.
- Upon giving such acceptance, the grantee shall exercise the privileges granted under this Act.
- Non-acceptance shall render the franchise void.

Bond (Section 7):
- The grantee shall file a bond issued in favor of the Civil Aeronautics Board, which shall determine the amount, to guarantee compliance with the conditions of the franchise.
- If after three (3) years from the date of the approval of its permit by the Board, the grantee shall have fulfilled the conditions, the bond shall be cancelled by the Board.
- Otherwise, the bond shall be forfeited in favor of the government, and the franchise ipso facto revoked.

Landing Facilities (Section 8):
- The grantee may use the landing and other airport facilities on land and water as may be maintained or owned by the government within the Philippines, subject to terms, conditions, restrictions and national policy considerations imposed by the Philippine government.
- The Philippine government shall have the right to use the landing and other airport facilities as may be maintained or owned by the grantee in the Philippines.

Contracts (Section 9):
- The grantee is authorized to enter into transportation contracts with the Philippine government, including the carrying of mail, upon mutually agreed terms and conditions.
- The grantee shall give preferential consideration to contracts with the Philippine government.
- The grantee may also enter into transportation, maintenance, servicing contracts, and other contracts relating to air transport with other foreign-owned airlines, particularly those with international routes.

Right of Government (Section 10):
- The President of the Philippines has a special right, in times of war, rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, to:
1. Temporarily take over and operate the facilities or equipment of the grantee.
2. Temporarily suspend the operation of any facility or equipment in the interest of public safety, security and public welfare.
3. Authorize the temporary use and operation thereof by any agency of the government, upon due compensation to the grantee.

Warranty in Favor of National and Local Governments (Section 11):
- The grantee shall hold the national, provincial and municipal governments of the Philippines harmless from all claims, accounts, demands or actions arising out of accidents or injuries, whether to property or to persons, caused by the operation of the services under the franchise.

Sale, Lease, Transfer, Usufruct, etc. (Section 12):
- The grantee shall not lease, transfer, grant the usufruct of, sell nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other corporation or entity, nor shall the controlling interest of the grantee be transferred, whether as a whole or in parts and whether simultaneously or contemporaneously, to any such person, firm, company, corporation or entity without the prior approval of the Congress of the Philippines.
- Any person or entity to which this franchise is sold, transferred or assigned shall be subject to the same conditions, terms, restrictions and limitations of this Act.

Dispersal of Ownership (Section 13):
- In accordance with constitutional provisions to encourage public participation in public utilities, the grantee shall offer at least thirty per centum (30%) of its outstanding capital stock or a higher percentage that may hereafter be provided by law in any securities exchange in the Philippines within five (5) years from the commencement of its operations.
- Non-compliance shall render the franchise ipso facto revoked.

Interpretation of Franchise (Section 14):
- This franchise shall not be interpreted to mean as an exclusive grant of the privileges herein provided for.
- However, in the event that any competing individual, partnership, or corporation shall receive a similar permit, authority or franchise with terms and/or provisions more favorable than those herein granted or which tend to place herein grantee at any disadvantage, then such terms and/or provisions shall be deemed part hereof and shall operate in favor of the herein grantee.

Separability Clause (Section 15):
- If any of the sections or provisions of this Act is held invalid, all the other provisions not affected thereby shall remain valid.

Repealability and Non-exclusivity Clause (Section 16):
- This franchise shall be subject to amendment, alteration or repeal by the Congress of the Philippines when the public interest so requires and shall not be interpreted as an exclusive grant of the privileges herein provided for.

Reportorial Requirement (Section 17):
- The grantee shall submit an annual report to the Congress of the Philippines on its compliance with the terms and conditions of the franchise and on its operations within sixty (60) days from the end of every year.

Effectivity (Section 18):
- This Act shall take effect fifteen (15) days from the date of its publication, upon the initiative of the grantee, in at least two (2) newspapers of general circulation in the Philippines.