Get rid of carriers’ taxes, Aquino prodded

THE 30-strong organization of foreign carriers with routes to the Philippines has urged President Aquino to put more teeth to his tourism advocacy and boost other economic sectors by certifying as “urgent” a new bill that will be filed in the Senate. The bill aims to eliminate current taxes that supposedly hamper the carriers’ operations in the country.

Steven Crowdey, first vice chairman of the Board of Airline Representatives (BAR), told the BusinessMirror, “The repeal of these taxes will help accelerate the development of the secondary gateways of the Philippines under [Mr. Aquino’s] ‘pocket open skies’ policy to benefit both tourism and trade investments. We hope that this bill will be certified as urgent by the Office of the President and that the legislative process will be completed within the year 2012 under the current 15th Congress.”

(Steven Crowdey, BAR First Vice Chairman, and GM for Australia, Micronesia and the Philippines for Delta Air.)

Crowdey said an instruction from the President to the Senate to pass the new bill quickly would help the foreign carriers “plan for capacity in the next three to five years to service the needs of the tourists, exporters, importers, overseas Filipino workers and the general riding public.” Crowdey is also general manager for Australia, Micronesia and the Philippines for Delta Air Lines Inc., a US carrier.

Sen. Ralph Recto, chairman of the Senate Ways and Means Committee, is expected to file a new bill soon that would reflect results of a public hearing held February 2 this year on his earlier proposed legislation to remove the 3-percent common-carriers tax (CCT) and the 2.5-percent tax on gross Philippine billings (GPBT) imposed on foreign carriers, which he filed in November 2011. Recto, however, could not be reached for comment as of press time.

The Aquino administration has been pinning its hopes on the tourism sector as a major driver of economic growth for the country. It aims to attract 10 million foreign tourist arrivals by 2016, the year the President steps down from office.

The BAR, in a press statement on July 25, commended the administration for the aviation reforms it has adopted, foremost of which is the “pocket open skies” policy, which “proves” the government’s “global openness.” The policy allows foreign carriers to land in provincial international airports, thus bringing more foreign tourists and businessmen directly to their intended destinations, instead of having to pass through Manila.

Sang Woo Noh, regional manager for the Philippines of South Korea’s Asiana Airlines, said, “The airport infrastructure backlog is now being addressed by the [Department of Transportation and Communications]. The Economic Development Cluster of the Cabinet has already approved the implementation of the 24/7 operations by [Customs, Immigration and Quarantine] personnel. Again, this is a landmark policy reform happening for the first time under President Aquino’s office. The tax issue is the remaining stumbling bloc to realizing the expected benefits of open skies.”

In a letter to Mr. Aquino on April 13, Anthony Tyler, director general and chief executive officer of the International Air Transport Association (Iata), also appealed to the President to certify the new Senate bill as urgent as doing so will “send the signal to the global airline community that the Philippines under the leadership of your administration is finally open to global business and investments.”

Citing studies done by economic think tank Oxford Economics and the Iata, Tyler said “the aviation impact in the Philippines is comparatively lower than many other countries in the region, thus indicating the untapped aviation and tourism potentials…. Abolishing these taxes will reduce the likelihood that additional airlines will remove the Philippines from their network or further downsize their operations.”

The Iata is an international trade body representing 240 airlines around the world, which account for 84 percent of global air traffic.

The House of Representatives approved on third and final reading House Bill (HB) 6022 on May 21, which also removes the CCT applied on passengers and cargo and eliminates the GPBT as long as the home countries of the foreign carriers do the same for the Philippines. Entitled “Rationalizing the Taxes on International Air Carriers Operating in the Philippines,” HB 6022, sponsored by Rep. Jerry Treñas of Iloilo, seeks to amend Sections 28 (A) (3) (a), 108 (B) (6) and 118 of the National Internal Revenue Code of 1997, as amended.

Crowdey said the BAR was grateful that the President had certified as urgent HB 6022. Such certification, he added, pushed congressmen to speedily act on it.

(Qatar Airways terminated its Doha-Cebu flights in March, claiming it was burdened by Philippines aviation taxes. Photo from airline's web site.)

Meanwhile, Cees Ursem, regional manager for KLM in the Philippines, said in the same press statement issued by the BAR that recent developments on the airline-tax issue will “definitely help to reconsider our operations in the future and continue our 60 years of uninterrupted services to the Philippines.”

KLM stopped flying directly from Amsterdam to Manila in March this year, saying taxes were affecting the economic viability of the carrier’s operations in the Philippines. “There are no more direct connections [from the Philippines] to Europe today [compared to 22 frequencies per week a decade ago], and carriers with long haul and extensive global and regional connection have left the Philippines, citing these taxes as a major reason for their exit,” the BAR said.

Also in March, Qatar Airways terminated its Doha-Cebu connection for the same reason. The BAR, quoting Abdallah Okasha, Philippine country manager of Qatar Airways, said, “Cebu is a destination with tremendous potentials for tourism and trade. We closed our Cebu operations because our operations have become expensive relative to all other destinations where we have presence, particularly in emerging Asian markets where we are not burdened with such taxes.”

Crowdey said “there is no distinction between CCT for passenger and cargo on any passenger carriers’ financial bottom line. Removing CCT for cargo also goes toward the goal of easing connectivity for the Philippines for the betterment of tourism. The repeal of the CCT for both passenger and cargo will help improve our margins and therefore enable us to increase our capacity to the Philippines rather than to neighboring countries.”

He added, “Ease of access to a location is a critical factor in decisions about where to establish offices, particularly for shared services, and factories. Additional frequencies and capacity will be used by exporters and will tend to lower freight rates, thereby enhancing export competitiveness. Access to more non-stop destinations will provide new markets for exports, particularly for agribusiness and other time-sensitive commodities.”

(This piece was originally published in the BusinessMirror on July 31, 2012. Photo of Steven Crowdey courtesy Delta Airlines.)

Foreign carriers rejoice as House moves to remove airline taxes

MANILA, Philippines - Foreign carriers with connections to Manila welcomed the recent approval on third and final reading of House Bill No. 6022, which seeks to remove burdensome taxes that have been hampering the airlines’ profitability in the country.

In a press statement, Board of Airline Representatives (BAR) First Vice Chairman Steven Crowdey said: “This is indeed positive and exciting news to the international airline community that has been monitoring the progress in legislation. We thank the Aquino administration for supporting the approval of the bill in the Lower House.”

Pushed primarily by Iloilo City Rep. Jerry Treñas, HB 6022 entitled “Rationalizing the Taxes on International Air Carriers operating in the Philippines” aims to amend Sections 28 (A) (3) (a) , 108 (B) (6) and 118 of the National Internal Revenue Code of 1997, as amended.

The proposed legislation would remove the three-percent common carriers tax and the 2.5 percent tax on gross Philippine billings imposed on foreign carriers, based on reciprocity.BAR has long been pushing for the elimination of these taxes which its members say is the major reason behind the slow development in international air connectivity of the Philippines. (For the rest, pls. click InterAksyon.com. My piece was originally published on May 30, 2012.)

Clark too far for locals, tourists–Delta Air exec

Steven Crowdey (third form left), Delta Air Lines Inc. general manager for Australia, Micronesia, and the Philippines, was a guest panelist at a forum hosted by the Department of Tourism, which unveiled the agency’s national strategy to boost tourist arrivals in the country. Other panelists are (from left) Camarines Gov. LRay Villafuerte; Pagcor Chairman Cristino Naguiat Jr.; Joy Bulauitan, Tourism Infrastructure and Enterprise Zone Authority assistant chief operating officer; and Tourism Undersecretary Daniel Corpuz. (DOT photo)

AN OFFICIAL of Delta Air Lines Inc. urged the Philippine government to rethink its plans to transfer the country’s premier international gateway from the Ninoy Aquino International Airport (Naia) in Parañaque, to the Clark International Airport in Pampanga.

Steven Crowdey, Delta’s general manager for Australia, Micronesia and the Philippines, also told a gathering of tourism industry stakeholders on Thursday, that “I disagree that Naia is the ‘worst airport in the world’. There are others [which are] worst.”

While he didn’t identify those other airports, his pronouncement was met with cheers from the representatives of various tourism sectors who had gathered for the unveiling of the National Tourism Development Plan, by the Department of Tourism at the SMX Convention Hall.

His statement was in reaction to a travel blog’s tag in October on the Naia as the “worst airport in the world,” and to CNNGo’s ranking of the facility as fifth among the “world’s most hated airports” in November.

The DOT forum, dubbed “Tomorrow’s Tourism: Harnessing the Growth Potentials of the Tourism Sector,” was held in conjunction with the 45th Annual Meeting of the Board of Governors of the Asian Development Bank held in Manila from May 2 to 5.

“Clark is a very long way from Manila proper,” said Crowdey, in an interview with the BusinessMirror, after the forum. “It’s farther than Hong Kong is from the Hong Kong [International] Airport. It’s much farther than Narita [International Airport] from Tokyo.”

Besides, he added, foreign tourists don’t use public transportation in Manila like they do in Hong Kong or Tokyo.

“So I think there are massive challenges in trying to get people from Clark down to the city proper.”

Also the first vice chairman of the Board of Airline Representatives (BAR), Crowdey said if passengers had to transfer from Clark, on top of their long-haul flight, the country would likely not be recommended as a tourist destination.

“You’re not going to get too many tourists recommendations, and you’re not going to get too many repeat visits. So I think it’s important that the primary airport remains in place to serve both those [foreign and domestic] tourists, and those 25 million Filipinos living in Manila and south of the city.”

Clark International Airport from the air. (Photo from Clark-Subic Marketing.)

Close to 30 million passed through the Naia last year, according to data from the Airport Council International, exceeding the total capacity of its three terminals. Terminal 1 was built to accommodate only 4.5 million passengers a year, while Terminal 2 (Centennial) was built for 9 million, and Naia 3 for 13 million passengers, or a total of 26.5 million.

Since the Ramos administration in the 1990s, the Philippine government has been eyeing Clark as a premier international gateway, due to the massive congestion at Naia. Summer, being a peak season for travel, has worsened the congestion with numerous flights delayed for hours, or worse, canceled, and causing hundreds of irate passengers.

The relocation plans to Clark have again been announced by the Aquino administration. Yet it has put on hold the controversial NorthRail project that would have linked Manila to the Clark terminal.

Meanwhile, Crowdey said there were no immediate plans for Delta to offer direct flights between Manila and the US. However, its Boeing 747’s currently serving the route via stopovers in Nagoya and Narita in Japan, are currently being refurbished.

“We’re about halfway through with the process at the moment. It will be complete by October. Some of the aircraft flying the route, all of them will have lie-flat beds and all of them will have video on demand in the economy class,” he said.

At present, Delta flies seven times a week from Manila to 10 gateways in the US via Narita, and five times a week to Detroit, the carrier’s hub for its flights to Asia, via Nagoya. Said hub and Manila routes were acquired when Delta merged with Northwest Airlines in October 2008.

“At the moment we’re looking at continuing to pass through Narita and Nagoya,” the airline official said when asked if Delta was considering direct flights between the US and Manila. “That’s how we can service the demand. That’s the best service. We can offer one-stop service to 10 gateways cities in the US. It’s very convenient. That’s how we think we can best serve the market.”

On the possibility of moving its operations to Naia Terminal 3 from Terminal 1, Crowdey said, like other international carriers, Delta is “willing [to move] subject to” certain conditions that need to be met by the Manila International Airport Authority (Miaa), the manager of the Naia airport terminals.

“We have some security requirements. We have requirements in terms of space, offices and lounges. A cargo facility next to the terminal would be nice. And all these discussions are ongoing with current airport authorities. So we’re interested in moving, but only if ‘a, b, c, d, e, f, g, h’ [are] completed,” he stressed.

The Arroyo administration expropriated the facility in December 2004, when it was already 99-percent complete, alleging anomalous changes in the build-own-transfer contract between its original owners PairCargo and Fraport AG, and the administration of former President Joseph Estrada.

Foreign carriers bucked the transfer to Naia 3 then, citing uncertainties due to the legal issues arising from the government takeover.

Crowdey said the response from the Miaa regarding the requirements of foreign carriers “has been very positive. So we’re working through those with [Miaa].” If ever these issues are fully addressed this year, he said they could move to Naia 3, but “it is going to be very late in the year.”

Only AirPhil Express - the budget carrier affiliate of Philippine Airlines - Cebu Pacific, and Japan carrier All Nippon Airways - are currently flying out of Naia 3.

BAR is composed of representatives of some 30 foreign carriers operating in the Philippines. It has been very vocal in asking the government to address issues that are hampering the carriers’ profitability.

(Originally published in the BusinessMirror, May 7, 2012.)

NAIA is NOT 'the worst airport in the world' - Delta Air exec

"I disagree that NAIA is the worst airport in the world."

Thus said Steven Crowdey, Delta Airlines' general manager for Australia, Micronesia, and the Philippines - a pronouncement which was received with resounding cheers from a gathering of tourism stakeholders on Thursday.

Crowdey, one of the guest panelists at a parallel forum hosted by the Department of Tourism during the 45th Annual Meeting of the Board of Governors of the Asian Development Bank, also expressed optimism that the issues currently hampering the profitability of foreign carriers in the country, will be resolved by the government very soon, some of these, perhaps within the year.

The forum – attended by representatives from the accommodations, conventions, and transport sectors, as well as tour/travel agencies – was meant to unveil the DOT’s new strategy to boost visitor arrivals in the country. (Click InterAksyon.com for the rest. Originally published May 5, 2012.)