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TRAIN 2 will harm airline industry — PHL AirAsia

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AirAsia Airbus A320
Passengers board an AirAsia Airbus A320 plane at the domestic airport in Manila, May 23, 2014.

AIRLINES are worried about the negative impact of the second package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which they say will effectively remove their tax incentives once it is approved.

“I hope they don’t go through with their TRAIN 2 plans, which will remove our tax incentives. It will make the domestic airlines — not only us, but all the others: PAL (Philippine Airlines), Cebu Pac (Cebu Pacific) — less competitive with our peers in the international market,” Philippines AirAsia President and Chief Executive Officer (CEO) Dexter M. Comendador told reporters in an interview in Pampanga.

He said the passage of TRAIN 2 means everything will be taxed, from spare parts to fuel. Mr. Comendador noted that maintenance, spare parts and fuel are the biggest expenses of carriers, and taxing them will impose huge costs on the airline industry.

“You’re killing the industry that was liberalized by President Ramos. Why do it now, when the market for aviation is growing,” he added.

AirAsia is a unit of Malaysia’s AirAsia Group, founded by CEO Anthony Francis Fernandes. It started operations in the Philippines in 2012. Mr. Fernandes, who is better known by the name Tony, said in a separate interview in Pampanga that AirAsia is doing very well in the Philippines right now, noting it is their “best kept secret.”

Mr. Comendador said Mr. Fernandes is bullish on the Philippines. The airline currently dominates the market in Malaysia and Thailand, and is boosting its resources in the country to perform better.

The company is hoping to conduct its initial public offering by the end of 2018, after it overcomes a negative equity balance.

The bill for TRAIN 2 was filed with the House of Representatives in March, and is up for discussion in the third regular session in July, after the State of the Nation address of President Rodrigo R. Duterte.

The bill intends to cut corporate income tax rates from 30% to 25%, while also rationalizing investor incentives.

Mr. Comendador said the Air Carriers Association of the Philippines (ACAP) is working on a position paper to submit to the government by next month.

The Department of Finance has said it is looking to implement TRAIN 2 by January 2019. The first package of TRAIN was implemented January of this year, which hiked taxes for tobacco, fuel and sugar, among others. — Denise A. Valdez