Grant of Air Transportation Service Franchise to Astro Air International, Inc.

March 26, 1992

REPUBLIC ACT NO. 7304

AN ACT GRANTING THE ASTRO AIR INTERNATIONAL, INC., A FRANCHISE TO ESTABLISH, OPERATE AND MAINTAIN DOMESTIC AND INTERNATIONAL AIR TRANSPORTATION SERVICES AND OTHER ALLIED SERVICES FOR THE CARRIAGE AND TRANSFER OF PASSENGERS, MAIL, GOODS AND OTHER PROPERTY BY AIR AND FOR OTHER PURPOSES

SECTION 1. Nature and Scope of Franchise. — Subject to the provisions of the Constitution and applicable laws, rules and regulations, there is hereby granted to the Astro Air International, Inc., hereunder referred to as the grantee, its successors or assigns a franchise to establish, operate and maintain domestic and international air transportation services, and other allied services for the carriage and transfer of passengers, mail, goods and other property by air.

Air transport services shall include the maintenance and operation of hangars and aircraft service stations and facilities and other services of similar nature which may be necessary, convenient or useful as an auxiliary to aircraft transportation. cd

The grantee shall have the right at its terminals and landing fields, as well as in its aircraft, to construct, operate and maintain stations or transmitting sets for wireless telegraphy and direction findings, and other radio aids to air navigation, using wavelengths in accordance with the rules and regulations issued from time to time by the proper agencies of the Government. The wireless communication facilities shall be used solely for receiving and transmitting weather forecasts and other matters in connection with the grantee's services.

SECTION 2. Prior Approval of the Civil Aeronautics Board. — The grantee shall secure from the Civil Aeronautics Board the appropriate permits and licenses for its operations.

All aircraft used by the grantee including their accessories and equipment shall at all times be airworthy and the crew members shall be licensed by the Government of the Philippines.

The grantee's equipment and the operation of such equipment shall at all times be subject to inspection and regulation by the Air Transportation Office. casia

The grantee shall comply with the provisions of Republic Act Numbered Seven hundred and seventy-six, and the regulations promulgated thereunder from time to time.

SECTION 3. Responsibility to the Public. — Excepting cases of force majeure and whenever weather conditions permit, the grantee shall maintain scheduled and/or nonscheduled and/or charter air transport services between Manila and any and all points and places throughout the Philippines and between Manila and other countries at such frequencies as traffic needs may require: Provided, however, That at least twenty-five percent (25%) of all its frequencies shall be for the domestic market.

SECTION 4. Rates for Services. — The grantee shall fix and charge reasonable rates for the transportation of passengers, mail, goods and freight, subject to the regulations and approval of the Civil Aeronautics Board and other proper regulatory agencies of the Government.

SECTION 5. Term of Franchise. — This franchise shall be for a term of forty (40) years from the date of the effectivity of this Act, unless sooner revoked or cancelled. In the event that the grantee fails to operate within two (2) years from the effectivity of this Act, this franchise shall be deemed ipso facto revoked.

SECTION 6. Landing Facilities. — 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 on the grantee's lines subject to such terms and conditions, restrictions and national policy considerations as the Philippine Government may impose: Provided, That the Philippine Government shall have the right to use such landing and other airport facilities as may be maintained or owned by the grantee in the Philippines. acd

SECTION 7. Contracts. — The grantee is hereby authorized to enter into transportation contracts with the Philippine Government, including the carrying of mail, upon terms and conditions to be mutually agreed upon. The grantee shall give preferential consideration to contracts with the Philippine Government. The grantee may likewise enter into transportation maintenance and/or service contracts, and such other contracts relating to air transport with other foreign-owned airlines, particularly with those which have international routes.

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

SECTION 9. Public Equity Participation. — In compliance with the constitutional mandate to democratize ownership of public utilities, the herein grantee shall make a public offering through the stock exchanges of at least thirty percent (30%) of its common. stocks within a period of ten (10%) years from the date of effectivity of this Act: Provided, That no single person or entity shall be allowed to own more than five percent (5%) of the stock offerings.

SECTION 10. Warranty in Favor of National and Local Governments. — 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 inquiries, whether to property or to persons, caused by the operation of the services under the franchise hereby granted, attributable solely to an act or omission of the grantee.

SECTION 11. Tax Provisions. — The grantee shall pay to the Philippine Government during the life of this franchise a franchise tax of five percent (5%) of the gross revenues derived by the grantee from transport operations. casia

In the event that any competing individual, partnership and corporation receives and enjoys tax privileges which tend to place the grantee herein at any disadvantage, then such provisions shall be deemed part hereof and shall operate equally in favor of the grantee.

The grantee shall however be subject to income tax levied under Title II of the National Internal Revenue Code, as amended and tax on its real property under existing laws on revenues earned from activities other than air transportation.

SECTION 12. Sale, Lease, Transfer, Assignment, Usufruct, etc. — The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise and the rights and privileges acquired thereunder to any person, firm, company, corporation, or legal entity, nor shall the controlling interest in the grantee be transferred to any such private person, firm, company, corporation, or entity without the prior approval of Congress.

Any person or entity to which this franchise is sold, transferred, or assigned shall be subject to all the conditions, terms, restrictions, and limitations of this Act.

SECTION 13. Legislative Amendment/Repeal. — This franchise is subject to amendment or repeal by Congress when the common good so requires.

SECTION 14. Separability Clause. — If any section or provision of this franchise is held or declared unconstitutional or invalid by a competent court in a final judgment, the other sections or provisions hereof shall continue to be in force as if the section or provisions so annulled or voided had never been incorporated in this Act.

SECTION 15. Effectivity Clause. — This Act shall take effect fifteen (15) days after its publication in at least two (2) national newspapers of general circulation in the Philippines.

Approved: March 26, 1992

Published in the Philippine Times Journal and Malaya on April 3, 1992. Published in the Official Gazette, Vol. 88 No. 19 page 2766 on May 11, 1992.