The Philippines Government, as threatened last month, has scrapped its air services agreement with Taiwan as a high-stakes dispute over a new air accord has boiled over.
The Philippine Civil Aeronautics Board (CAB) has ordered the suspension from November after Taiwan refused to agree to a demand that its two home-based carriers accept a cut to weekly capacity, to 3,000 seats from 9,600.
The dispute began months earlier, after the CAB accused Taipei-based China Airlines (CAL) and EVA Airways of violating the terms of the 1996 air services agreement by carrying passengers from Manila on to the USA via Taipei.
After failing to prove its case for sixth-freedom violations, the CAB ordered a 30-day suspension of CAL's Hong Kong-Manila route, saying the airline had carried more passengers on its Taipei-Manila flights than allowed. It also accused the carrier of operating aircraft into the Philippines for which it did not have approval.
The suspension was reduced to 15 days, but air services talks held at the end of July failed, after the Philippine side gave 60 days' notice to Taiwan of a unilateral scrapping of the agreement.
Two months of on-off talks failed. After the notice period expired, the Philippines tore up the air accord, saying it had "tried its utmost to maintain air services between the two countries".
Taiwan says its airlines are unfairly accused of violating the air accord to protect Philippine Airlines (PAL), which has been in receivership since mid-1998 under a debt of more than $2 billion. It has also threatened economic sanctions against the Philippines.
Manila's actions have taken many by surprise and have led to warnings by regional airline and tourism groups that it is a return to protectionism.
The Philippines has stood firm, however, and is targeting carriers from Hong Kong, Singapore, South Korea and elsewhere in its drive to create a "level playing field" for PAL.
It forced Emirates to scrap its Hong Kong-Manila flights this year after threatening to bar the carrier from the Philippines.
Source: Airline Business
