Philippines stops SEAIR, Tiger Airways collaboration

MANILA Thu May 19, 2011 6:13am EDT

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MANILA May 19 (Reuters) - Philippine authorities have given South East Asian Airlines (SEAIR) a cease-and-desist order on two new routes over concerns arrangements with part-owner Tiger Airways violate local laws, the regulator and local carrier said.

Four rival domestic carriers had filed a joint opposition to the partnership, saying SEAIR was selling tickets and accepting bookings through Singapore-listed Tiger's website, which they said was not allowed under the agreement covering the lease of two of Tiger's Airbus 320 jets to SEAIR.

Manila's Civil Aeronautics Board (CAB) said on Thursday there were signs the collaboration between the two airlines was beyond the allowed aircraft lessor-lessee relationship and a normal marketing agreement.

SEAIR president Avelino Zapanta said the carrier had complied with the CAB directive while it evaluated the order, and was waiting for the regulator's final decision.

"The CAB order is for us to temporarily stop the Manila-Cebu and Manila-Davao flights that we were supposed to launch in July. SEAIR's international flights will not be affected," he told Reuters.

"We are thinking of using the leased aircraft for our Manila-Macau flights that will be launched on May 27," Zapanta said in a phone interview.

Carmelo Arcilla, CAB executive director, said the order was issued "based on strong indications of possible violation of the restriction on cabotage, and in order to prevent injury to public interest and an exacerbation of the questioned activity."

Cabotage is the right to transport cargo or passengers within a country, and is reserved for local entities.

"(The cease-and-desist order) will take effect until the board finally resolves all the issues," Arcilla told Reuters.

Complainants Philippine Airlines , Cebu Pacific , Air Philippines and Zest Air, all of which compete in the domestic market, also said they did not think SEAIR could finance an expensive aircraft lease on its own.

The order showed the four carriers said Tiger had virtually taken over SEAIR, as the Singapore budget carrier was handling all the core operations of the Philippine airline.

Tiger and SEAIR launched their marketing partnership last November. In February, Tiger said it had agreed to buy a 32.5 percent stake in SEAIR for $6 million. [ID:nL3E7DO0XR]

Zapanta said the CAB order wouldn't affect the lease agreement and Tiger's ongoing due diligence on SEAIR for the stake purchase. (Reporting by Erik dela Cruz; Editing by Rosemarie Francisco and John Mair)

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