MANILA, Philippines — The Civil Aviation Authority of the Philippines (CAAP) will cut the dividends it remits to the government to raise the P13 billion it requires to upgrade air traffic control facilities and prevent the airspace shutdown from happening again.
Transportation Undersecretary Roberto Lim told The STAR that CAAP would request dispensation from Republic Act 7656, or the Dividends Law, which mandates all state-run firms to declare and remit 50 percent of their net earnings to the government every year.
Under the law, the percentage of remittance may be adjusted by the President upon the recommendation of the Department of Finance.
Lim said the government should give CAAP the time to recover its financial losses, especially as its income flow was hurt by the pandemic. By exempting CAAP from its dividends mandate, the agency can allocate funds for the improvement of the air traffic management system.
CAAP turned over P6 billion to the government at the height of the pandemic in 2020, making it the fourth largest contributor among state-run firms that year. CAAP earns from the certification of aircraft, airlines and airports and the licensing of aviation personnel and officers.
Prior to this, CAAP deputy director general Danjun Lucas said the state-run firm remitted P23 billion to the government from 2017 to 2019 in compliance with the law.
For context, CAAP assembled its air traffic control system through a P10.8 billion financing from Japan, inaugurated its radars in 2019 and started using them in 2019.
Transportation Secretary Jaime Bautista estimates that at least P13 billion is needed to upgrade the system to the standards observed by developed economies, such as Singapore.
Further, CAAP director general Manuel Antonio Tamayo hopes that the government can extend subsidies to the agency to fund its modernization. He said the loss of communication and power would be avoided if CAAP has enough support to maintain its equipment and facilities.
“Our budget at CAAP is really limited because during the pandemic the bulk of CAAP’s savings were transferred to the national treasury. In the past two years, in 2021 and in 2022, CAAP was getting subsidies from the national government,” Tamayo said.
“This year, we don’t see any budget subsidies for CAAP and that is our main concern right now: to be able to maintain this vital equipment. Safety is paramount. Since safety is paramount, we have to have the tools to perform this,” he said.
Awaiting full year data, the Bureau of the Treasury said CAAP received P2.15-billion in subsidies from the government from January to November 2022.
However, apart from last year, the only time that the government subsidized CAAP was in 2021 (P1.53 billion) and 2013 (P1 billion), with the agency shouldering all of its expenses since it was founded in 2008.
Local carriers who suffered the most from the New Year fiasco threw their support behind CAAP in its bid to cut dividends to the government to pay for its equipment upgrade. Cebu Pacific, for one, said any business should keep a portion of its earnings for reinvestment.
“As in any business, we keep retained earnings for use in reinvestment of our equipment and for new technology. Not all earnings are remitted to our head office or dividends to stockholders as we need to ensure more efficient use of funds for better business,” Cebu Pacific told The STAR.
Philippine Airlines (PAL) spokesman Cielo Villaluna said the flag carrier backs any and all efforts to raise the efficiency of air traffic management in the country.
Villaluna said that what is most important right now is to avert the air traffic management breakdown from happening again, disclosing that PAL alone had to cancel 300 flights of 24,000 passengers consequent to the incident.
On Jan. 1, CAAP encountered a power malfunction, forcing all aircraft bound for Manila to be cancelled, delayed or diverted.