DOTR To Ground PAL

Owes the Philippine Government ₱7 Billion in Fees and Charges

27 September 2017

The Department of Transportation (DOTr) is taking legal action against Philippine Airlines (PAL) if the flag carrier fails to settle almost ₱7 billion in unpaid “navigational fees and other charges” in the next 10 days.

DOTr said that PAL owes the Civil Aviation Authority of the Philippines (CAAP) ₱6.594 billion as of December 2015. The flag carrier also has a separate overdue account of ₱370,583,588.96 for January - July 2017 alone.

Meanwhile, PAL also owes Manila International Airport Authority (MIAA) ₱322,112,385.00, as of 26 September 2017.

"Final demand for full payment of all unpaid charges has been sent to PAL, preparatory to the filing of appropriate legal action in order to protect the interest of government," the DOTr said in a statement.

DOTr said that aside from the collection suit PAL will not be permitted to use the facilities of Manila International Airport, its main hub. The airline will not be also permitted to fly for failure to pay air navigational fees and other charges.

"Pay up or prepare to be grounded" - Duterte
In a speech at the Philippine Constitution Association on Tuesday night, President Rodrigo Duterte has warned business tycoon Lucio Tan, chairman and chief executive officer of Philippine Airlines, to settle his liabilities with the government in 10 days or he would shut down Terminal 2 of the Ninoy Aquino International Airport (Naia).

Aeronautical Fees are supposed to be remitted to the General Fund in the National Treasury to be used for the maintenance and operation of other international and domestic airports in the country, in accordance with Section 3 of E.O.No. 298 dated July 26, 1987.

Duterte said the money could already have been used in the completion of much delayed airport projects in Tacloban and Bicol had PAL paid for their dues.

The President said he don't care if plenty of passengers would be inconvenienced in PAL's grounding.

“We have to enforce the law.if you are put into a great discomfort, sorry. Wala akong magawa. The law is the law. It is the law,” Duterte explains.

DOTr earlier told PAL to “settle your obligations in 30 days, otherwise, we will be constrained to do all that is necessary to protect the interests” of the state. It was amended later to 10 days by order of the President.

The transport department confirmed that PAL had negotiated to settle its growing unpaid fees in seven years but the request was denied telling the airline to pay the fees in full like any other airline would.

PAL said it has received demand letters from CAAP as early as August 2016 to settle unpaid navigational charges “in the amount of ₱6.63 billion” and that it was seeking a compromise settlement. It already settled ₱370 million out of these unpaid charges.

“This issue on alleged unpaid navigational charges involves complex legal issues which PAL has been trying to thresh out with the Authority for years,” PAL Spokesperson Cielo Villaluna said.

Villaluna said it already submitted an offer to the CAAP through its inter-agency panel of negotiators under CAAP Authority Order 149-17, but has not received a response just yet.

The airline is offering to pay the government ₱4 billion in seven years to finally settle the issue on unpaid navigational charges.

"We look forward to meeting the negotiating panel and we are ready to submit a Compromise Agreement to settle this issue once and for all," PAL added.

CAAP said it has unpaid accounts from PAL amounting to ₱6,965,146,149.63 as of July 30 2017. Of this amount only P3.6 billion of the P6.91 billion being demanded by CAAP is backed by invoices while the rest is unsubstantiated claims.

Why it Grew So Big?
DOTr disclosed that landing and parking fees has not been paid by PAL since its privatisation and occupation of the Ninoy Aquino International Airport (NAIA) Terminal 2 in 1998.

PAL is supposed to pay the government ₱803 million per year for the exclusive use of the terminal but wasn't paying because there was no lease contract executed between MIAA and the airline.

PAL was owned by the government until 1996 when it was fully privatised. The airline enjoyed tax privileges and fee exemptions prior to its privatisation in 1992 as a government owned airline. It went into bankruptcy and rehabilitation in 1999. It was allowed one year free-use of the terminal and free navigational fees by then President Joseph Estrada as government support for its rehabilitation efforts.

In 2002, the Department of Justice said Philippine Airlines is no longer exempt from payment of aeronautical fees to the Manila International Airport Authority (MIAA) and was sued for payment. In 2007, the Court of Appeals upheld a compromise deal between MIAA and PAL for the settlement of P2.93 billion in unpaid aeronautical fees to be paid in tranches for seven years. Until now this settlement deal has not been fully paid by PAL contrary to their earlier made commitments which got the ire of President Duterte.

The Transport Department also said that PAL wanted to use Terminal 3 all to themselves in 2005 prior to the move of Cebu Pacific and Air Philippines to use the terminal but the request was denied by MIAA because it had a pending ₱5.1- billion unpaid fees owed to the airport owner.


  1. “In August 2016, the Civil Aviation Authority of the Philippines (CAAP), sent letters to PAL demanding payment of unpaid navigational charges in the amount of PHP 6.63B.

    This issue on alleged unpaid navigational charges involves complex legal issues which PAL has been trying to thresh out with the Authority for years. In fact, the same legal issues were the subject of a court case between PAL and the MIAA years back where the court ruled in favor of PAL. Despite the favorable ruling, PAL then opted to settle amicably with the MIAA as a manifestation of its full support to the government.”

    In a similar vein, PAL earlier manifested its willingness to amicably settle with the CAAP as a manifestation of its continued support for the Authority. Communications have been open between the parties as regards this matter. In fact, PAL stressed that CAAP created an inter-agency panel of negotiators for the proposed settlement via CAAP Authority Order 149-17.

    PAL formally submitted its offer to CAAP which offer is more than the amount covered by the CAAP supporting invoices received by PAL. To date however, PAL has not received any official response from CAAP on its offer.

    “We look forward to meeting the negotiating panel and we are ready to submit a Compromise Agreement to settle this issue once and for all,” said PAL vice president for legal Clara de Castro.

  2. Make Philippine Airlines as a government owned airline company once again.

    1. looking at our government, I don't think it will work


    "The DOTr has accepted the offer of PAL to pay in full the P6-billion claims of the CAAP/MIAA, and PAL commits to keep all transactions updated and current with the CAAP/MIAA," the DOTr and PAL said in a joint statement on Friday.

    The settlement comes one day short of the 10-day ultimatum given by President Rodrigo Duterte for PAL to pay its navigational and other charges payable to CAAP and MIAA.

    1. Afterwards, they need to generate profit now as the peak holiday travel is slowly approaching. In my opinion, they must slow their expansion for a while, given they will settle their unpaid dues of almost Php 7 billion. That's a lot of money to be paid for the government.

    2. Same credit facility as the SMC buyout. Still, much better than being grounded. A slipping stocks spiraling downwards as a result of grounding is VERY BAD for the airline.

      There is also definite delay of expansion plans as a result of this action.


    "PAL has paid the government on 3 November 2017, its P6 billion unpaid air navigational charges to the national government, which were incurred since 1970s up to 30 July 2017,” the Department of Transportation (DOTr) said in a statement.

    The Civil Aviation Authority of the Philippines (CAAP) received a check in the amount of ₱5,677,887,615, while the Manila International Airport Authority (MIAA) received a check worth ₱258,594,230.33 net of taxes.