REVIEW OF RELATED LITERATURE
Background and Literature Overview
The regulatory landscape of the air transport industry throughout the world has been
changing dramatically since the 1980s to meet the growing density of air traffic as a result
of the increasing integration of economies. Reforms were made through deregulation and
liberalization, all aimed at reducing the restrictions on competition in order to increase the
efficiency of the industry.
This study examined the regulatory and policy regimes of the Philippine air transport
industry and their effects on the state of competition and market structure of the industry.
Until 1995, the country had a one-airline policy. This gave the Philippine Airlines (PAL)
the virtual monopoly of the countrys air transport industry. The monopoly, however,
created so much inefficiency that the airline was not conscious to keep its service to certain
standards. The landmark for reform came in 1995 with the passing of Executive Order 219
establishing the domestic and international civil aviation liberalization policy of the
country. For the domestic air transportation, restrictions on domestic routes and
frequencies were eliminated and so were government controls on rates and charges. For the
international air transportation, the EO allows at least two international carriers to be
designated as official carriers for the country. For the negotiation of traffic rights with the
countrys bilateral partners, the primary consideration is national interests where it used to
be the interest of the flag carrier. In 1999, the government also launched a policy on
progressive liberalization of the countrys bilateral air services agreement. Nonetheless,
there is really not much liberalization going under EO 219. Several areas remained
