How PH aviation transformed from shame to pride

MANILA, Philippines – After a visit to Malacañang where he and his AirAsia team in the Philippines met and were photographed with President Benigno Aquino III, Tony Fernandes, one of Asia’s business icons and richest, dropped by the office of local aviation industry chief regulator William Hotchkiss III. The director general of the Civil Aviation Authority of the Philippines (CAAP) shrugged off their Malacañang visit and said, “If he (Aquino) sent you to me, it means I will be the one to decide,” an aviation official who was in that meeting recalled in an interview with Rappler.

Hotchkiss was referring to the days-long suspension CAAP imposed on Zest Air in August 2013, citing the airline’s lack of an accountable manager and several air safety violations.

The suspension was a blow to Fernandes and his Filipino partners, including Aquino’s cousin Tonyboy Cojuangco, since their budget airline AirAsia Philippines acquired majority stake in Zest Air just months before.

Fernandes was not the only airline boss who has been given the cold shoulder. In June 2013, Lance Gokongwei, who heads budget airline giant Cebu Pacific, was also told by the CAAP leaders to inhibit from vying for the lifting of the ban by the European Union aviation body. Cebu Pacific was among the 6 local airlines keen to fly non-stop to destinations in the bloc’s 28-member states, but the timing of that make-or-break EU meeting that month was off. The Brussels meeting came days after a Cebu Pacific plane skidded off the runway of the Davao airport, prompting the airport’s closure for days and causing public uproar. 

Hotchkiss is one brave snob, according to industry insiders and governance watchers who have monitored the industry for decades. For business and politics to have no influence on how Hotchkiss and his CAAP peers make decisions — especially those that cause airlines billions of pesos of losses — is a testament to how far this agency has come. Aviation has been one of the local industries long considered as case studies for regulatory capture, a textbook truism for government agencies that put the interests of the few above that of the public’s.

After only 22 months on the job, Hotchkiss and his team turned CAAP from a source of national shame to pride. Burdened by sins of the past, CAAP was embarrasingly slapped by triple sanctions of the US Federal Aviation Authority (US-FAA), International Civil Aviation Organization (ICAO), and the European Union between 2008 and 2010. Now CAAP is the toast of the town.

Last April 10, two peer bodies in the US and EU announced almost simultaneously they’re giving the Philippines a thumbs up. FAA reclassified CAAP as a Category 1 agency, a move that means the Philippines is able to police how the local airlines flying to and from US destinations are implementing global safety standards. FAA downgraded CAAP’s predecessor to Category 2 in 2008. It’s a good news that was 6 years in the making.

On the same day, the EU announced that it was lifting its ban on Cebu Pacific, reflecting an almost 10-month delay. Only legacy carrier Philippine Airlines (PAL) was allowed back in European skies in July 2013, weeks after Cebu Pacific’s Davao incident and Gokongwei’s eventful meeting with Hotchkiss and the CAAP team.

These two announcements piggybacked on the March 2013 decision of the United Nations unit ICAO to lift its previous audit findings, which other countries and entities rely on for guidance. ICAO sets the global industry’s standards, which are used to evaluate if a country has the proper laws to oversee airlines and a civil aviation authority with expertise, personnel and procedures to enforce safety regulations.

(View TIMELINE: PH aviation status upgrade)

The trio heaped praises on the former military general. “We saw a very significant process since the arrival of General Hotchkiss,” EU Ambassador to the Philippines Guy Ledoux told Rappler in July. It is a sentiment echoed many times over, especially by groups that benefit from a vibrant airline industry, including tourism, real estate, construction and more.

Sins of the past

CAAP’s rise to national and international prominence and the praises for Hotchkiss’ leadership are a sharp contrast to the regulator’s murky past.

The agency’s predecessor, the Air Transport Office (ATO), had been weakened by decades of politicking, pressure from commercial interests, and the accommodation of unqualified officials. While civil aviation experienced three milestones — the 9/11 terrorism attacks in the US, the rise of budget airlines, and the introduction of newer and modern types of aircraft — ATO wasn’t focused on setting new strategies, acquiring higher level of expertise and more funds to cope with the new safety and security standards that followed.

ATO was supposed to ensure that local aviation is on par with one of the world’s most regulated commercial industries. Post 9/11, US-bound airlines must be subjected to a stricter checklist of security requirements in the country of origin. ATO needed to install more powerful x-ray machines that could detect explosives. Airlines had to train their pilots and crew how to prevent attempts by terrorists to divert flights.

Even if the airlines were voluntarily meeting these standards, ATO had to stand above them and hold them to account. The regulator needed to update its voluminous documents of technical standards, as well as check pilots who regularly inspect the commercial airlines’ aircraft and personnel with upgraded skills.

The problem started at the top. ATO was cited as a recipient of “abuse of presidential prerogative that has led to the appointment of unqualified but politically well-connected persons to the government bureaucracy,” the influential Makati Business Club had said in a previous statement. Past presidents had the tendency to assign retired Philippine Air Force generals to the ATO more as a reward for their good works as military officials, than as leaders of an institution that needs to be attuned with the fast changing global and commercial environment.

Old habits, however, die hard. When CAAP was created by law as an independent body to replace ATO in 2008, it remained a repository of retired military men or political rejects who did not have the hard and soft skills to independently maneuver the business and political environment.

Under retired air force general Ruben Ciron, CAAP repeatedly failed the FAA audits, while under Alfonso Cusi, the agency was levied sanctions by ICAO, prompting the EU to blacklist Philippine airlines. Cusi, a former Manila airport chief and a political ally of former President Gloria Macapagal Arroyo, shrugged off the EU ban and said it did not matter much since no local airline was plying the Manila-Europe direct route at the time. He was wrong.

Japan and Korea followed suit and imposed similar sanctions by limiting the destinations and flight frequencies of Philippine carriers operating there. (Note: Japan only agreed to liberalize air links with the Philippines after EU’s favorable decision in 2013. It agreed to increase flight frequencies between the two countries to 400 from 199 a week, and added unlimited traffic between airports outside congested Manila and Haneda.)

The blacklists meant higher travel insurance fees for passengers visiting the Philippines since some travel agencies cited the country’s higher aviation safety risks. Corporate clients also wanted their executives and staff travels to be certified safe. The US did not evaluate individual airlines, but the EU had a list of airlines banned from flying to its airports.

The sanctions under Cusi’s watch, as well as his ties to the Arroyo government, did not sit well with the Aquino government, which took over in 2010. Cusi was eased out in 2011 and was replaced by Ramon Gutierrez, a former air force colonel and retired commercial pilot. It was during Gutierrez’s watch when former Transportation Secretary Mar Roxas, a close political ally of Aquino, walked out of a crucial meeting between CAAP and FAA auditors. The CAAP team was reportedly unprepared. For the nth time, CAAP failed that audit and stayed a Category 2.

No politics

Roxas was itching to break free from the lingering blacklists. He called Hotchkiss in June 2012 to ask him to become the next CAAP director general.

Hotchkiss, 71, was then on retirement mode, and chairing a rural bank in Cantilan, a town in Surigao del Sur where his great grandfather, an American educator at the University of Santo Tomas in Manila, settled. The former commanding general of the Philippine Air Force agreed to come out of retirement and accepted the job when Roxas agreed to his two conditions: Shield the agency from politics, and allow him to bring his own team.

He assembled a team of former military and airline pilots, including John Andrews, son of the first commander of the air force. As deputy director general, Andrews brings with him his over a decade-long experience as an airline executive in PAL and Cebu Pacific. They complement their chief’s visionary style.

“I personally chose the team I brought in. I insisted on it. I based it on professional competence. I think they delivered. I just exercise leadership functions,” Hotchkiss told Rappler when asked how CAAP navigated the long and winding roads to Category 1 and out of the EU ban.

He shared something with his predecessors: He too was a retired air force official. What sets him apart, however, is his eagle-like focus: Get out of the blacklists. He wasn’t keen on playing footsies with the powers that be.

“When I asked if we can resign if things get too hot here, he told me, ‘Success is the only option’,” shared Rodante Joya, CAAP chief financial officer. Other airlines aside from Zest Air and Cebu Pacific received similar iron fist treatment from CAAP.

A cleanup within started, too. CAAP suspended two airworthiness inspectors who cleared the plane that flew Interior Secretary Jesse Robredo to his death in August 2012. “Corruption in CAAP kills,” Andrews had stressed.

Sustaining the gains

Staffing CAAP properly was among the reforms that the Hotchkiss-led team implemented. Up to 2012, holdovers from ATO could not be slotted into CAAP organizational structure. It was a chicken and egg situation: The Civil Service Commission approved qualification standards for flight inspectors that did not meet ICAO’s. The bureaucratic nightmare was eventually addressed after the commission and the new CAAP officials met to sort out the process to move things forward, which include complying with documentary requirements.

A core issue to this was a flaw in the law that created CAAP: The director general was not granted the powers to appoint and hire personnel. Malacañang was supportive. It issued an administrative order authorizing the CAAP chief to make appointments.

Another headache was attracting and retaining qualified technical staff. Certified flight safety inspectors, especially those for wide-bodied aircraft, were lured by job offers from commercial airlines and other regulators abroad that pay salaries far more than what CAAP could afford. Extensive discussions with the Civil Service Commission resulted in a ruling that allowed the CAAP chief to appoint retired airline pilots 65-year-old and above who were not after fat pays. Filling these positions was crucial for ICAO, FAA and EU.

Even with feathers in their cap and the bureaucracy behind them, CAAP is soldiering on. “There are still some weaknesses, which we are trying to address. We’re doing it with a strategic roadmap,” Hotchkiss told Rappler. The EU, which already lifted the ban on PAL and Cebu Pacific, has yet to give its stamp of approval on CAAP’s capability to oversee the airlines. Once achieved, the CAAP no longer has to accompany all Philippine carriers to the EU body in Brussels for their individual pitch. CAAP’s thumbs up will be enough for the EU to allow Philippine airlines in their skies.

ICAO, FAA and other regulators of other countries will still be regularly sending over audit teams to check if the safety checklists are religiously carried out. Vigilance is key as a slip here and there will just result in a cycle of upgrades and downgrades. Hotchkiss is keen to sustain the gains.

Banking on the momentum, Hotchkiss pioneered sustainability workshops for key CAAP staff who helped craft a strategic plan. It binds all agency personnel into making sure industry players they supervise meet global safety standards all the time. The EU and FAA gave weight to this strategic plan in their recent decisions. Future ones will depend on it, too.

The work at CAAP is far from over. It has just begun. – Rappler.com