San Pedro: Revving up Aviation Industry

THE highly restrictive tax regime was the single biggest stumbling block that drove away the KLM, the last European carrier to leave the country, and prompted other foreign carriers to steer away from the Philippines further stalling efforts to improve the aviation and tourism industry.

The three-percent common carriers tax (CCT) and the 2.5-percent gross Philippine billings tax imposed on foreign carriers did it – pushed the aviation industry into the dustbin of neglect. While foreign carriers avoid the Philippines as a route, the Federal Aviation Authority also downgraded the category rating of our airports to Category 2.

What else to do? Scrap the highly restrictive tax regime and improve the safety and security of the country’s major gateways. That was exactly what President Benigno Aquino III did when he signed into law Republic Act 10376, granting a package of exemptions to foreign airline and shipping companies to improve connectivity and stir interest in the Philippines as a destination.

Reports have it that the category rating of the Philippines will also soon revert to Category 1, a development that will bring in the warm bodies and the moolah.

RA 10376 would “actually mean an initial loss in revenue for us, but it is ultimately a strategic move” as it would bring in more traffic and facilitate connectivity with other countries,” according to President Aquino.

The removal of the three-percent common carriers tax and the 2.5 percent gross Philippines billing tax will take away the primary constraint on foreign air carriers’ capacity growth and places the Philippines on a level playing field with other countries. It is also expected to boost the government’s efforts to attract 10 million tourists by 2016.

In Clark airport, we had seen the increase of passenger volume to over a million in just a year and we expect that to double with the removal of the restrictive tax regime.

The move of the Aquino administration will have a multiplier effect on the development of the aviation industry considering that it will further improve the aviation industry, bring in more tourists, and create businesses and jobs and so on. In short, it will help in economic development.

These were truly exciting developments in the aviation industry because in Clark, we had been expecting the entry of more airlines particularly the launching of the Dubai-Clark-Dubai flights starting on October 1.

Where Emirates Airlines locate, others will also follow. Everything is now rosy for the country’s aviation industry and let us see what will happen this year as far as the development of the tourism industry and Clark are concerned.