DoTC to ask KLM to reconsider move to stop Manila-Amsterdam flights

MANILA, Philippines—The government will try to dissuade Air France-KLM from halting its Manila-Amsterdam route—the country’s last direct service to Europe.

The airline decision to stop direct flights between the two cities, announced over the weekend, was prompted by the government’s insistence on charging a 3-percent common carriers tax and a 2.5-percent gross Philippine billings tax on cargo and passenger revenues originating from the country. The same taxes, together with increasing competition from heavily subsidized Middle Eastern competitors, have forced other European airlines out of the Philippine market over the last decade.

Transportation and Communications Secretary Manuel “Mar” Roxas II said he would discuss the matter with the foreign carrier.

“We will talk to them,” Roxas said, when asked about the matter.

Air France-KLM currently flies daily between Manila and Amsterdam. By the end of the month, the company said it would reduce flights to six a week. By April 2012, flights going directly to Amsterdam will cease, and instead have a Hong Kong detour.

Having a stopover in Hong Kong means less tax because the duty is only charged for revenues earned for flights directly from the Philippines.

The government said it would push for a “change of heart” on the part of the Air France-KLM officials in the Philippines.

“This is a sad turn of events if it ever pushes through,” Civil Aeronautics Board (CAB) executive director Carmelo Arcilla said in an interview. “We need direct flights to support our tourism sector.”

Arcilla said tourist arrivals from Europe have not grown significantly over the past decade, settling at around 300,000, or 10 percent of the total, at the end of 2010.

He said increased air services to Europe would help the government attain its goal of doubling tourist arrivals to six million by the end of President Aquino’s term in 2016.

Data released by the CAB on Monday showed international air passenger traffic into and out of the Philippines grew by 10 percent in the first half of 2011 over the same period in 2010.

The total number of incoming and outgoing passengers grew to 8.035 million from 7.269 million in the first six months of 2010.

Flag carrier Philippine Airlines (PAL) remained the top carrier with 2.044 million passengers for the period, up 4.7 percent year on year. This was followed by Cebu Pacific, which carried 1.3 million passengers, or 28 percent up from last year.

Occupying the 13th slot was Air France-KLM, which carried 129,056 passengers in the six-month period, down 9.6 percent from the year before.

Arcilla said the approval of House Bill 3928 filed by Batangas Representative Hermilando Mandanas, seeking to exempt foreign airlines from the carriers tax, could help in resolving the situation.

The House ways and means committee has given its approval for the bill, but the proposal has yet to progress in Congress.