SEAIR transport franchise lapses into law

MANILA, Philippines - A measure that gives budget carrier Southeast Asian Airlines, Inc. (SEAIR) a 25-year franchise to operate domestic and international air operations has lapsed into law. Malacañang failed to sign Republic Act 9517, which gives the airline the authority to operate the service from Clark, Pampanga as its base. In a phone interview, SEAIR President Avelino L. Zapanta said the franchise would boost their corporate standing and make the carrier more attractive to investors. "The value of the company has increased and it will attract some investors in terms of additional equity or lending, and that would allow us to expand our operations," he told BusinessWorld. Under the Constitution, the President has 30 days to sign or veto a bill. In the absence of an action, it automatically lapses into law. The House of Representatives approved the SEAIR franchise on May 12, while the Senate passed its own version on Sept. 29. The bill was sent to the Palace for the President’s signature in November, and it had until Dec. 27 to act on it. Mr. Zapanta noted that before the franchise, SEAIR had obtained a mere certificate from the Civil Aeronautics Board (CAB), which had allowed it to offer air service. The law requires SEAIR to allot at least a quarter of its operations to the domestic market. It may carry passengers, mail, goods and freight, subject to government regulation. The law bars SEAIR from transferring or selling its franchise to a third party without congressional approval. Moreover, SEAIR must list at least 30% of its outstanding capital stock on the exchange within five years to encourage public ownership of utilities. Established in 1995, SEAIR is based in Pampanga and has hubs in Puerto Princesa, Cebu and Zamboanga. Its local destinations include Boracay Island via Caticlan; and Busuanga, El Nido and Puerto Princesa in Palawan. SEAIR is owned by foreigners Iren Dornier and Nikos Gitsis and the Filipino group of Tomas Lopez, Jr. In a related development, rival Zest Airways, Inc. is planning to fly to Japan by the second quarter to take advantage of available air rights under an air agreement approved last year. The flights will compete directly with services offered by Lucio Tan-owned flag carrier Philippine Airlines (PAL) and another budget carrier, Gokongwei-led Cebu Pacific. "We’ll have the same plane, we’ll have the same route... It will all boil down to marketing," Zest Airways Chairman Alfredo M. Yao said in an interview Monday. Based on documents filed with the Civil Aeronautics Board last month, Zest Airways wanted to start daily flights between Manila and Osaka, and between Cebu and Fukuoka starting May. These are similar to Cebu Pacific’s thrice-a-week Manila-Osaka service that started in November. PAL, meanwhile, flies from Cebu to Osaka twice weekly. The flag carrier revived the service in October, which it stopped offering in 2001 in the wake of the Sept. 11 terrorist attacks in the US. Both PAL and Cebu Pacific’s regular roundtrip flights to Japan cost around $500. Mr. Yao said his airline had yet to decide on ticket prices. Zest Airways’ planned service is in line with a recent deal between the Philippines and Japan increasing the frequency of flights between the two countries, mainly from Manila and Clark. Local officials, however, earlier admitted the traffic between the two countries had declined due to the slowing global economy. The government was supposed to hear Zest Airway’s application on Dec. 18, but the hearing had been moved to this month, officials of the CAB’s air rights division said. Earlier, the carrier bought seven new airplanes as part of its refleeting program. Five of the 50- to 60-seater aircraft will be used to expand the airline’s local operations, while two 150-seater Airbus 320s will fly to regional destinations. Set up in 1995, Zest Airways flies to 12 local and three international destinations — Incheon, Korea; Sandakan, Malaysia; and Macau using a fleet of 10 planes. Mr. Yao, who also owns juice maker Zest-O Corp., bought Asian Spirit in March reportedly for P1 billion. He had offered to buy rival SEAIR, but the parties failed to close the deal.