AirAsia executive says TRAIN 2 to kill aviation industry

The removal of tax incentives of companies under the planned second package of the comprehensive tax reform program will hurt the aviation industry given the rising costs of fuel worldwide, a top official of budget carrier AirAsia Philippines said.

"'Wag lang nila ituloy 'yung pinaplano nilang TRAIN 2 which will remove our tax incentives. I hope they don't do that," Philippines AirAsia chief executive officer Dexter Comendador said in an interview.

"It will make the domestic airlines — not only us but all the others: PAL, Cebu Pac — less competitive with our peers in the international market," he explained.

Under the planned second package of the Tax Reform for Acceleration and Inclusion (TRAIN), the government will lower the corporate income tax (CIT) and modernize fiscal incentives.

In the proposal submitted by the Department of Finance (DOF) to Congress in January, the government wants to lower the CIT rate from 30 percent to 25 percent, and limit tax perks.

"Everything will be taxed — spare parts, fuel will be highly taxed. 'Yun ang primarily kasi 'yung ang biggest expense eh. Maintenance, spare parts, fuel. Those are the biggest expense from airline. So dun pa lang, 'pag tinamaan ka, wala na. Tapos gusto pa i-control 'yung fares," Comendador said.

"'You're killing the industry that was liberalized by President [Fidel] Ramos. Why do it now? Kung kelan naggo-grow 'yung market ng aviation eh," he added.

His remarks come as world oil prices have gone up, with a barrel of North Sea Brent passing $80 per barrel for the first since November 2014.

According to a report by Agence France-Presse, French oil giant Total CEO Patrick Poyanne said he would not be surprised to see the price of a barrel of crude reach $100 in the coming months.

"Tayo na nga lang natitirang one of the smallest passenger growth in ASEAN because of these things that are set up, tapos gaganyanin mo pa? Lalong mawawala. Eh ang laki laki ng potential. The potential is so big sa aviation travel," said Comendador.

In the first quarter of the year alone, the Philippines welcomed over two million international visitors. A majority of these visitors are Chinese and Koreans.

Comendador said several airlines are now studying the proposed TRAIN Package 2, after which they will submit a position paper to the DOF.

"We're doing the study now as ACAP (Air Carriers Association of the Philippines). ACAP will do the study. We already hired an international company to help us with the study," he said.

AirAsia Philippines earlier said it hopes to go ahead with its initial public offering (IPO) this year, once regulatory requirements have been addressed. —ALG, GMA News