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AITOpinion, Nadine Gutierrez

Aquino and the airline industry


Today, President Benigno Aquino III will give his State of the Nation Address (SONA). In line with this, we here at Salimbay would also like to give a review of the Aquino administration’s tourism-related work.

Let’s start with the airline industry.

Pocket open skies policy

In 2010, the administration implemented a 1995 Executive Order (EO 219) which adopts the “pocket open skies” policy. Originally issued during the time of President Fidel V. Ramos, the EO was intended to help boost tourism and investment in the country.

The idea behind the E.O. was that it would introduce more liberal policies on international aviation, allowing foreign carriers to expand and operate in the country which would encourage more competition and long-term investments in the country. Plus, it gave passengers more choices and opportunities to travel. The EO also instructs that the Philippines should have at least two international airlines as flag carriers. (I smell Cebu Pacific pouncing at this opportunity.)

Imagine the outrage of local carriers, who argued that the Aquino administration was no longer protecting or promoting local industries. They also pointed out that restricting local carriers was actually a means to level the playing field because other countries such as the United States were virtual monopolies of the airline industry from production to sales and rental of aircrafts around the world.

It’s rather depressing for me to think that we have the first and oldest airlines in Asia, and that once upon a time it was the largest. I know a lot of factors may have contributed to the local airline industry’s relatively slow growth over the years, but players like Cebu Pacific seem to be stepping up to the challenge especially with their newly revealed $ 1 billion investment on new aircrafts and expansion to long-haul flights. Maybe throwing in some competition might encourage our local carriers to do the same.

Last July 13, the Aquino administration reported that their efforts to boost tourism in the country through the “Pocket Open Skies” policy were not futile.

“Our Pocket Open Skies Policy has already generated almost a 15% increase in incoming and outgoing flights to the Philippines from January to June of this year. This has led to a similar increase in inbound and outbound passenger traffic growth for both international and domestic travels,” Aquino said.

This is a beacon of hope for our tourism industry that has been lagging behind our Asian neighbors in terms of tourist arrivals for quite some time now. We of course have already accepted the fact that the difficulty lies in our archipelagic situation, and the “Pocket Open Skies” policy is just one of the ways by which we are making ourselves more accessible.

But is the number of incoming and outgoing flights to the Philippines and the number of passengers really enough to gauge whether tourism in the country has improved? It’s a start. A first step, but numbers can sometimes be deceiving. We, after all, are after substantial and pro-poor tourism development and growth.

The Aquino government is targeting at least 4.2 million tourist arrivals for 2012, and 10 million tourist arrivals by 2016.

Infrastructure Projects

The Aquino administration also has a number of planned and ongoing infrastructure projects in order to improve tourism-related services and facilities.

This includes the construction of new airports in Panglao, Legaspi airport in Daraga, and  Misamis Oriental airport in Laguindingun. While plans to upgrade a number of airports, such as the Mactan-Cebu International airport and the Puerto Princesa Airport in Palawan to name a few, are also on the way.

You can read more about the specific developments here: http://www.rappler.com/business/7013-dotc-to-to-spend-p327-m-for-7-provincial-airports

Like a cup, once it is full we can no longer pour more into it, least we risk the spills and mess that comes from it overflowing. Same goes for tourist arrivals. In order to accommodate more incoming and outgoing flights (and minimize accidents and disaster) we must expand our capacity – get a larger cup.

I see this as support for the “Pocket Open Skies” policy. It seems only natural that since we expect more to come and operate in the country, we must expand our capacity.

Aside from being in line with international standards we need our airports to be globally competitive, or else another report about the Philippines having the “worst airport” might hurt our feelings once again and lead us to point fingers on who’s to blame or question the “legitimacy” of the actual ranking.

While we improve the other airports around the Philippines, we can’t ignore the ever growing problem of the elephant in the room in terms of Philippine airports: The Ninoy Aquino International Airport (NAIA). After all, it is still one of the main gateways into the country and it is now a head ache in terms of runway size, traffic, delayed flights, maintenance, display screens, etc.

Something tells me that unless they find some way to expand the runway with the already crowded surroundings, gateway operations might as well be moved to another, better-planned airport with a larger land area, not necessarily in the center of the city.  (Clark, anyone?) After all, if we look at places like Hong Kong their airport isn’t smack at the center of the city. Of course, for this to actually happen we need a whole lot of planning and a whole lot of dedication.

Air Passenger Bill of Rights: Resolution 28 and 29

After plans of a ban on overbooking practices – a practice where airlines sell more tickets than actual seats – the local airline industries really felt that the Aquino administration was out to get them. The practice helps airlines keep fares cheap by countering the problem of “no show” passengers, and seeks to maximize revenue by assuring that no flight leaves with an empty seat.

After the backlash from local carriers however, the ban was reconsidered and now domestic airlines face suspension and fees for bumping off passengers from overbooked flights, and disallowing refunds and re-booking of airline tickets, which was imposed by the Civil Aeronautics Board (CAB).

The CAB argued that the airlines’ obligation to its passengers is paramount, as stated in the ‘certificate of public convenience and necessity’ granted by the government. Both resolutions followed the increase complaints of passengers regarding denied boarding, and non-refundable and non-rebookable low-cost fares.

As a passenger I am rejoicing, but as a student of BS Tourism I understand the need for these practices in the airline industry.

Ultimately, it is a commercial operation, and unlike the MRT or LRT where government subsidizes the bulk of the fare, it cannot afford to operate at negative profit. These practices actually help the airline industry become more competitive and allow its passengers to enjoy low fares.

That’s why it’s a promo fare in the first place.  You remove all the extra frills and privileges – no re-booking and no re-funding included – of the full fare to get the dirt-cheap promo fares.  These low fares have significantly increased domestic travel in the past couple of years and are seen to boost the industry in the coming years.

With the implementation of these two resolutions, there is no doubt in my mind that the airline operators will pass these expenses and fees to its passengers. After all, airlines need to find means to remain profitable. Seeing as their age old practice of overbooking to maximize revenue is being frowned upon, I’m sure they’ll start charging passengers a little more to serve as a safety net.

Removal of “discriminatory” taxes

Following Air France – KLM’s decision to stop operating direct flights between Amsterdam and Manila – the last direct link from Philippines to Europe – due to supposed discriminatory taxes, House Bill No. 6022 (HB 6022) was drafted.

HB 6022 seeks to remove “discriminatory” taxes on foreign carriers. HB 6022 removes the 3 percent common carriers taxes (CCT) and 2.5 percent gross Philippine billing (GBP) which foreign airlines say gives local companies an advantage.

On May 21, HB 6022 was approved on the third and final reading.

And as the last protective wall of the local carriers is about to fall, we are opening ourselves up to investments and operations of foreign carriers in the country.

In the past, the Philippine government had refused to remove these taxes which have been the cause of carriers leaving the Philippines or shifting their capacity to the benefit of neighboring countries’ tourism and trade. HB 6022 is the Aquino administrations way of hopefully getting a piece of the action that our neighbors have enjoyed due to the vast operation of foreign carriers, and is seen as a means to achieve its goal of growing tourist arrivals to 10 million by 2016.

It will be interesting to see how this will unfold and if the effects, although theoretically promising, will really yield the results we want in terms of Philippine tourism.

Is the Aquino administration the local airline industry’s worst nightmare? Maybe so. But admirable is the fact that the current administration is really prioritizing the tourism agenda, moving the heavens to really push it despite making very wealthy enemies on the way. After all, if I learned anything from my studies, it is that accessibility is the most important part of tourism, because although you may have the most beautiful attractions, they are useless if people cannot get to them. – Nadine Gutierrez

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The official newsletter of the UP Asian Institute of Tourism.

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