Treaty (3 March 2004)

March 03, 2004

MEMORANDUM OF UNDERSTANDING

Delegations representing the aeronautical authorities of the Republic of Philippines and the People's Republic of China met in Beijing from 2-3 March 2004 to discuss issues related to further development of their aviation relations in accordance with the Air Services Agreement between the Government of the Republic of Philippines and the Government of the People's Republic of China signed on 8 July 1979 ("the Agreement"). The discussions were held in a friendly and cordial atmosphere. A list of the members of the two delegations is attached hereto as Appendix. The two delegations reached the following understanding:

1. Application This Memorandum of Understanding shall replace the relevant parts in the Memoranda of Understanding signed respectively on 3 September 1992 and 6 October 1997, and Annex 1 of the Agreement. This MOU shall enter into force on the date of the exchange of diplomatic notes confirming the agreement reached by both delegations. Pending such exchange of diplomatic notes, this MOU shall be given provisional effect on the date of signature.

2. Route Schedule The designated airlines of China may operate on the following routes for passenger, all cargo or combination services: Points of points in China Origin: Intermediate two (2) points to be designated Points: by the Chinese side Points of Manila and two (2) additional Destination: points in the Philippines, and from2006 three (3) additional points in the Philippines. These additional points shall be designated by the Chinese side Beyond one (1) point to be designated by Points: the Chinese side except USA, the Republic of Korea, Japan, Australia and Europe The designated airlines of the Philippines may operate on the following routes for passenger, all cargo or combination services: Points of points in the Philippines Origin:Intermediate two (2) points to be designated Points: by the Philippine side Points of Beijing and six (6) additional Destination: points in China, and from 2006 two (2) additional points in China. These additional points shall be designated by the Philippine side Beyond one (1) point to be designated by Points: the Philippine side except USA, the Republic of Korea, Japan, Australia and Europe Note: The designated airlines of each Contracting Party may, at their own option, omit any or some of the points on their routes on any or all of their services, provided that such services originate and terminate in the country designating them.

3. Co-Terminal Rights (1) The designated airlines of China may co-terminalize the following points: Points of origin, and Manila and 3 points in the Philippines (2) The designated airlines of the Philippines may co-terminalize the following points: Points of origin, and Beijing and 3 points in China 4. Capacity Entitlement (1) For combination services: the designated airlines of each Contracting Party may operate up to 6000 seats per week from mid-March 2004 up to 8000 seats per week from mid-March 2006 up to 10000 seats per week from mid-March 2008 on their respective routes specified in the Route Schedule.

(2) For freighter services: the designated airlines of each Contracting Party may operate up to 300 tons per week per direction on their respective routes specified in the Route Schedule.

(3) Favorable consideration would be given to requests from any of the designated airlines for minor variations in the above capacity levels from time to time in order to accommodate seasonal market needs or aircraft with configurations which would give rise to capacity being operated slightly in excess of the level permitted.

(4) The aeronautical authorities of each Contracting Party shall have the right to allocate at its own discretion the capacity entitlement among its designated airlines.5. Fifth Freedom Traffic Rights The designated airlines of both sides may exercise fifth freedom traffic rights for passenger or combination services to one (1) beyond point provided for in subparagraph A and B of the Route Schedule up to 7 weekly frequencies per direction. Neither party shall exercise fifth freedom traffic rights on the intermediate points on the services specified in the Route Schedule.

6. Stop-over Rights The designated airlines of the Philippines may exercise stop-over rights subject to the local customs and immigration laws and regulations between any three (3) city-pair points in China in accordance with Paragraph 2 (Route Schedule), except the following combinations: Beijing-Shanghai v.v. Beijing-Guangzhou v.v. Shanghai-Guangzhou v.v. In the event that China grants stopover rights between and among Beijing, Shanghai and Guangzhou to any foreign carrier, the designated carriers of the Philippines shall receive the same grant of stopover rights with the agreement by Chinese aeronautical authorities. The designated airlines of China may exercise stop-over rights subject to the local customs and immigration laws and regulations between any three (3) city-pair points in the Philippines in accordance with Paragraph 2 (Route Schedule).

7. Aircraft Leasing The designated airlines of each Contracting Party shall be allowed the use of leased aircraft (wet-lease or dry-lease) for operation of air services. Favorable consideration would be given by the respective aeronautical authorities in accordance with their rules and regulations.

8. Overflight Rights The civil aeronautical authorities of one side shall, subject to their regulations, allow the designated airline(s) of the other side for overfly rights on all overfly routes over the territory of the other side which shall include all overfly routes between Asia and Europe.

9. Rights for the Designated Airlines of the Philippines Operating to Haikou and/or Sanya Notwithstanding the above framework, the designated airlines of the Philippines shall be entitled to the following rights provided that they operate passenger, all cargo or combination services to/from Haikou and/or Sanya:

(1) unlimited 3rd and 4th freedom traffic rights (2) stop-over rights between Haikou and/or Sanya and any other points in China except Beijing, Shanghai or Guangzhou with up to seven (7)frequencies between each city-pair (3) unlimited 5th freedom traffic rights between third countries to/from Haikou and/or Sanya 10. Airline Crew and Personnel Visa Both sides agreed to recommend to their competent authorities to extend waiver of visa fees for airline crew and personnel of the designated carriers of the other party.

Done in Beijing on the 3rd day of March 2004.

(Sgd.) (Sgd.) For the Aeronautical Authorities For the Aeronautical Authorities of the Republic of the Philippines of the People's Republic of China Chinese Delegation Appendix Chairman Mr. Yang Vice Minister Guoqing CAAC Vice Chairman Mr. Wu Zhouhong Deputy Director General Department of International Affairs and Cooperation CAAC Members Mr. Ding Senior Official Chunyu International Relations Division Department of International Affairs and Cooperation CAAC Ms. Shao Senior Official Fengru International Relations Division Department of International Affairs and Cooperation CAAC Ms. Wu Qihui Senior Official Department of International Affairs and Cooperation CAAC Airline Observers:Ms. Hou International Affairs Xueying Department Air China Ms. Dai Fei Marketing Department China Cargo Airlines Mr. Bao Han Assistant General Manager Revenue Management China Eastern Airlines Ms. Li Chen Manager International Department China Eastern Airlines Ms. Zeng Min Deputy Director Industry and Alliances China Southern Airlines Mr. Sun Peng Assistant Manager Cargo Business Development China Southern Airlines Ms. Pan Ling Assistant Manager Industry and Alliances China Southern Airlines Ms. Niu Regional Manager Yingxin International Sales Office Marketing and Sales Department Hainan Airlines Mr. Yu Heng International Division Commercial Department Shanghai Airlines Mr. Shi Yuan International Division Commercial Department Shanghai Airlines Ms. Zeng E Passenger Marketing Department Xiamen Airlines The Philippine Delegation Chairman Atty. Edward Harun Undersecretary for Air Sector V. Pagunsan and Staff Services Department of Transportation &Communication Chairman, Philippine Air Panel Vice Chairman Mr. Franklin M. Undersecretary, Department of Ebdalin Foreign Affairs Vice Chairman, Philippine Air Panel Members Mr. Willy C. Gaa Ambassador Embassy of the Philippines Ms. Evelyn B. Pantig Undersecretary Department of Tourism Ms. Felicitas Assistant Secretary for Agoncillo-Reyes International Trade Department of Trade and Industry Atty. Carmelo L. Deputy Executive Director Arcilla Civil Aeronautics Board Atty. Irene Susan B. Director, Treaties Division, Natividad Legal Affairs Department of Foreign Affairs Atty. Evelyn R. Director, Legal Services Cajigal Department of Tourism Mr. Victor Jose I. Vice President Luciano Clark Development Corporation Mr. Porvenir P. Chief, Economic Planning & Porciuncula Research Division Civil Aeronautics Board Mr. Danilo R. Senior Executive Assistant Crisologo Department of Transportation and Communication Ms. Elizabeth Te Third Secretary Embassy of the Philippines Observers:

Mr. Reynaldo L. Asia Overnight Express Rodriguez Corporation Atty. Racquel T. Cebu Pacific Ruiz-DimalantaMr. Emilio Yu Philippine Airlines Atty. Roberto CO. Philippine Airlines Lim Ms. Ma. Socorro R. Philippine Airlines Gonzaga Atty. Ma. Clara de Philippine Airlines Castro Mr. Joselito D. Pacific East Asia Cargo Lontok Mr. Felicisimo I. Pacific East Asia Cargo Guerrero