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    Southeast Asia
     Apr 20, 2010
EU ban darkens Philippine skies
By Jennee Grace U Rubrico

MANILA - A European Commission decision to ban Philippine carriers from European airspace, which took effect on April 1, threatens to undermine the country's crucial tourism sector.

The prohibition, the most recent in a series of problems for the Philippine aviation industry over the past two years, was issued on the basis of safety assessments by the International Civil Aviation Organization (ICAO) in September 2009 and the downgrade of the country's safety rating by the US Federal Aviation Administration (FAA) in 2008.

In a statement, the 27-member European Commission said that it had been in constant communication with Philippine regulatory bodies prior to reaching its decision, and acknowledged efforts of


the two-year-old Civil Aviation Authority of the Philippines (CAAP), the new regulatory body that was formed after the dissolution of the Air Transportation Office, to reform the country's civil aviation system.

It also recognized measures taken by the two biggest airlines of the country - Philippine Airlines and Cebu Air - to better ensure aircraft safety. These efforts, however, did not prevent the community from adding Philippine airlines to its blacklist.

EU ambassador Alistair MacDonald said: "The commission considers that the supervisory authority is currently not able to implement and enforce the relevant safety standards, and decided therefore to ban from EU airspace all air carriers licensed in the Philippines until these deficiencies are corrected."

The head of the CAAP, Alfonso Cusi, acknowledged the reasoning for the EC's decision, but said that it was based on outdated information. "There has been no audit after the FAA downgrade two years ago. Then there was an ICAO audit. The EU was acting on findings of ICAO but that was still in October," Cusi said.

Cusi, who assumed his post last month, said that the concerns raised by the EC included monitoring of airlines' business processes to check whether they are on par with international standards. "The question is how we check it. There must be a process that is acceptable. There must be manuals, systematic procedures. They [European Commission] did not see this," he said.

What the European Commission weighed were processes used by the Philippine civil aviation regulators two years prior, which were then deemed unsatisfactory. "Now, we want to show them that [the reforms are] here. We want to correct the impression," he said, noting that the CAAP has reiterated a request that the EC visit the country in May to check the progress of recent reforms.

No carrier licensed in the Philippines at present services Europe, so technically the ban does not affect any Philippine airlines' revenues from ticket sales. Industry players, however, note that the repercussions of the EC's preemptive restrictions are far-reaching and damaging both to Philippine carriers and the country.

Aviation industry analyst and Asian Institute of Management (AIM) associate professor Wilfred Manuela said that because the ban is on Philippine-licensed airlines, the reputation of local airlines is at risk.

"If a country's civil aviation authority appears not to be implementing what the ICAO requires ... the validity of the certifications issued by the civil aviation authority to airlines is now in doubt," he said. "Perhaps even local passengers will now entertain some doubts regarding the safety of local carriers."

Cebu Air, which operates Cebu Pacific flights to other Asian destinations, claims to have a fleet with an average age of 17 months while Philippine Airlines' planes are reportedly eight years old on average.

Tourism deterrent
The EU ban may also erode tourist arrivals and eventually airline revenues, analysts say. In 2008, when the FAA downgraded the safety ratings of the country to Category 2 from Category 1, the US Embassy issued a travel advisory discouraging its citizens in the Philippines from using local airlines.

Category 2 indicates that the FAA had assessed that the Philippines' civil aviation authority had failed to comply with ICAO safety standards for the oversight of air carrier operations. While in Category 2, Philippine air carriers are permitted to continue current operations to the US under heightened FAA surveillance.

"Whenever possible, Americans traveling to and from the Philippines should fly to their destinations on international carriers from countries whose civil aviation authorities meet international aviation safety standards for the oversight of their air carrier operations under the FAA's International Aviation Safety Assessment (IASA) program," the advisory stated.

Philippine Airlines, the only local carrier that services the US, was badly affected by the US advisory since the US market, with its huge population of Filipinos, contributed 30% of its revenues. Expansion plans were also put on hold until the Category 2 classification could be lifted.

While the European Commission ban would not have a direct impact on Philippine-licensed carriers, the reputational hazard could be costly. Europeans who come to the Philippines for business or tourism are expected to stay away while the ban is in place. Tourist destinations in the Philippines are generally reached through transfers from international airports.

Since only Philippine-licensed carriers service domestic routes, an advisory that discourages European and American citizens from using local carriers could prevent them from visiting the country altogether and severely impact the tourism industry.

"Since the Philippines does not allow foreign airlines to pick up passengers from gateway airports to other domestic destinations, visitors are forced to take local airlines. They may stop coming to the Philippines if they start to entertain the idea that local airlines are unsafe," said AIM's Manuela.

"For European tourists who have taken local flights before, this may not be a problem. For those visiting the Philippines for the first time, either they ride at their own risk or cancel their travel plans to the Philippines altogether," said Manuela. "I don't think they would ride at their own risk."

The local tourism industry is already feeling the heat. Tourism Secretary Ace Durano said that European insurance companies have stopped covering travelers for domestic air travel in the country, leading to the cancellation of bookings for April to August to the Philippines by travel operators from Germany, the United Kingdom and France. Figures from the National Statistics Coordination Board show that European visitors made up 10% of the total tourist arrivals in the Philippines in 2008.

Code-sharing arrangements between Philippine-registered airlines and international carriers may also be jeopardized by the EC's decision to blacklist local carriers. Philippine Airlines has code-sharing arrangements with airlines of the Gulf States for Middle Eastern destinations, to which around half of the more than one million Filipino overseas contract workers are deployed each year.
These destinations are also used as transfer points for passengers going to Europe from the Philippines. "If the Gulf States think that the EU ban has any merit, they might take a second look at the code share agreements with Philippine Airlines. If they are convinced that the EU ban is credible, they might suspend or withdraw code share agreements," said Manuela.

Other civil aviation bodies may also take their cue from the European Commission, in the same way the bloc took its cue from the FAA and the ICAO, and institute a similar ban on Philippine-based airlines in their airspace. Manuela, however, noted that the FAA was not likely to impose harsher measures for US routes given that the agency has not taken further adverse actions in the two years since it downgraded the Philippines to Category 2.

The government is in damage-control mode. Cusi said that as soon as the European Commission advisory came out, his CAAP got in touch with other aviation authorities to assure them that the concerns of the European bloc are already being addressed.

"Immediately after the advisory came out, we wrote to the authorities in the other countries and parts of the region informing them that we are safe. For instance, we wrote to IOSA [IATA Operational Safety Audit] to let them know that our airlines are very compliant. They said they understood. So far I think we're holding on," he said.

Jennee Grace U Rubrico has been a journalist for over 10 years.

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