Analyst raps CA ruling on FedEx operations in Phl

MANILA, Philippines - A stock analyst said the decision of the Court of Appeals to declare FedEx as a foreign-owned public utility and as such prohibited by the Constitution to operate locally may set a bad precedent.

“What if other local firms start filing cases against any other international airfreight companies in the future? It would be setting a bad precedent that could lead to industry shake up,” said Eagle Securities president Joey Roxas.

Records show that last May 2, the Civil Aeronautics Board CAB issued a five-year permit to Federal Express Pacific Inc.  to operate as an international airfreight forwarder.

But two local companies (Merit Freight International Inc. and Ace Logistics Inc.) questioned before the CA FedEx application in the CAB citing that under the Philippine Constitution, only Filipino citizens can operate public utilities.

In its defense, FedEx pointed out that this rule on nationality does not apply to public utilities engaged exclusively in international commerce.  Therefore, foreigners can own and operate air and sea carriers engaged exclusively in the foreign transport of passengers or goods or both, to and from Philippine airports and seaports. 

Also, various opinions from as far back as 1946 (with the latest one being issued in 2011), the secretary of justice has interpreted the Constitutional provision requiring Philippine nationality for public utilities as not covering airfreight forwarders exclusively engaged in international commerce.

It was pointed out that the CA decision puts at risks the licenses of more than a dozen international airfreight forwarding firms in the Philippines. These are: UPS, DHL, FedEx, TNT, Ecu Line, Expeditors, Kintetsu, Konoike, Logwin Air, MIQ Logistics, Mitsui-Soko, Nippon Express, NNR Global Logistics, and Scan Global Logistics.

Other international air and sea transport companies operating in the Philippines may also be indirectly affected. They are: Maersk, Mitsui OSK Lines, Air Asia, Air China, Air Niugini, All Nippon Airlines, Asiana Airlines, Cathay Pacific, China Airlines, China Eastern Airlines, China Southern Airlines, Delta, Dragon Air, Egypt Airlines, Emirates, Etihad, Eva Air, Gulf Air, Hawaiian Airlines, Hong Kong Express, JALWays, Japan Airlines, Jeju Air, JetStar, JetStar Asia, KLM, Korean, Kuwait, Malaysia Airlines System, Qantas, Qatar Airways, Royal Brunei, Saudia, Singapore Airlines, Thai Airways, Tiger Airways, United, etc.

Industry sources are worried about the CA’s decision’s effect on the policy and regulatory instability that foreign investors face in the Philippines as they might ask: will the rules change a few years down the road?

The industry is after “policy continuity” because it is essential for businesses – whether local or foreign –to be able to prosper and, in turn, contribute to the growth of the local economy.