AIR LAWS and ETHICS, ENGINEERING ECONOMICS REVIEWER

AIR LAWS and ETHICS

PD1570

PD 1570 IRR

AERO ENGINEERING CODE OF ETHICS

RA 776 SUMMARIZED

RA 776 and RA 9497 DEFINITION OF TERMS

PCAR SUMMARIZED

INTERNATIONAL ORGANIZATIONS AND LAWS

AIR TRAFFIC RIGHTS

ENGINEERING MANAGEMENT

AIR TRANSPORT ECONOMICS

ENGINEERING ECONOMICS

Basic Definitions

Economics Proper

COMPUTATIONS:

Simple Interest

Compound Interest

Annuity

Perpetuity

Capitalized and Annual Costs

 PD 1570

June 11, 1978 - PRESIDENTIAL DECREE No. 1570

April 6, 1982 - FIRST BOARD OF Aero Engineering PRC
September 23, 1982 – Adoption of the BoAE of the IRR
October 12, 1982 – Approval of the IRR by the PRC
15 days after publication at the official gazette - IRR Effectivity
July 1983 - FIRST LICENSURE EXAM
36 Sections

• Section 1. Title of the Decree.

• Section 2. Objectives.
• Section 3. Creation of the Board.
• Section 4. Qualifications of Board Members.
• Section 5. Term of Office.
• Section 6. Removal of Member.
• Section 7. Powers and duties of the Board.
• Section 8. Procedure of investigation of violations.
• Section 9. Compensation of Members.
• Section 10. Conduct of Examinations.
• Section 11. Schedule of fees.
• Section 12. Annual report of the Board.
• Section 13. Board of Examinations
• Section 14. Qualification for examinations.
• Section 15. Schedule of examinations.
• Section 16. Scope of examinations.
• Section 17. Passing average.
• Section 18. Report of Ratings.
• Section 19. Certificate of Registration.
• Section 20. Registration without examinations.
• Section 21. Temporary registration; issuance of special permits.
• Section 22. Refusal to issue certificate.
• Section 23. Suspension and revocation of certificate.
• Section 24. Reinstatement or replacement of certificate.
• Section 25. Seal and its use.
• Section 26. Posting certificates.
• Section 27. Meaning of practice of aeronautical engineering.
• Section 28. Unlawful practice.
• Section 29. Definitions.
• Section 30. Enforcement of this Decree by officers of the law.
• Section 31. Roster of aeronautical engineers.
• Section 32. Integration of Aeronautical Engineering Profession.
• Section 33. Penalties for violations of this Decree.
• Section 34. Separability Clause.
• Section 35. Laws in conflict.
• Section 36. Effectivity
 PD 1570

REGULATING THE PRACTICE OF AERONAUTICAL ENGINEERING IN

THE PHILIPPINES

Pres. Ferdinand Marcos – Phil. President who approved the PD.

Section 1. Title of the Decree. This Decree shall be known as the "Philippine
Aeronautical Engineering Decree."

Section 2. Objectives. This Decree provides for and shall govern:

(a) The standardization and regulation of aeronautical engineering;

(b) The examination for registration of aeronautical engineers; and

(c) The supervision, control, and regulation of the practice of aeronautical

engineering in the Philippines.

Section 3. Creation of the Board. There is hereby created under the Professional
Regulation Commission a Board of Aeronautical Engineering, hereinafter referred to as
the Board, which shall be composed of a Chairman and two members, all to be
appointed by the President of the Philippines from among the registered aeronautical
engineers of recognized standing in the Philippines upon recommendation of the
Commission which shall exercise jurisdiction, general supervision, and administrative
control over the Board in accordance with the powers vested in it under existing laws.

Section 4. Qualifications of Board Members. No person shall be appointed member of

the Board of Aeronautical Engineering unless at the time of his appointment, he
possesses the following qualifications:

(a) A citizen and resident of the Philippines;

(b) At least thirty-one years of age, and must be of good moral characters;

(c) A holder of the degree of Bachelor of Science in Aeronautical Engineering.

(d) A registered aeronautical engineer under this Decree, with the exception of
the first group of appointees;

(e) Had been in active practice of aeronautical engineering or teaching of

subjects thereof for at least ten years;

(f) Not a member of the faculty of any university, college, institute, or school
where a regular course in aeronautical engineering is taught or review classes
conducted;
 (g) Not financially interested, directly or indirectly, in any university, college,
institute, or school where a regular course in aeronautical engineering is taught
or review classes conducted; and

(h) Not an elective officer of any professional association or organization of

aeronautical engineering.

Section 5. Term of Office. The Members of the Board shall hold office for a term of
three years from and after the date of their appointment: Provided, however, That of the
first appointees, to the Board, one shall serve for a term of one year and shall
automatically be the Chairman thereof; one for two years and shall serve as Member
during the first year, then shall automatically be the Chairman in the subsequent
remaining year, and one for three years and shall serve as Member for the first two
years and shall then automatically be the Chairman in the third year. Thereafter,
chairmanship shall be by seniority membership in the Board, serving first as Member for
the first two years, the Chairman in the third year.

No Member of the Board shall serve for more than two (2) successive complete terms
and, in case of vacancy by reason of death, resignation, or removal of an incumbent
Member, the same shall be filled for the unexpired portion of the term of the previous
incumbent. Each Member of the Board shall qualify by taking the proper oath of office
before entering upon the performance of his duties.

Section 6. Removal of Member. Any member of the Board may, upon recommendation
of the Commission be removed by the President of the Philippines by reason of neglect
of duty, incompetence, commission or tolerance of irregularities in the examinations,
malpractices, or unprofessional or unethical, immoral, or dishonorable conduct, after
having given the opportunity to defend himself in a proper administrative investigation to
be conducted by the Commission.

Section 7. Powers and duties of the Board. Subject to review by the Commission, the
Board is vested with authority, conformably with the provisions of this Decree, to

(a) Administer oaths or affirmations in connection with the performance of its

functions;

(b) Issue, suspend or revoke certificates of registration for the practice of

aeronautical engineering for justifiable cause;

(c) Study the conditions affecting the aeronautical engineering profession in the
Philippines, and exercise such powers as may be necessary for the maintenance
of good ethics, morality and professional standards in the practice of aeronautical
engineering, and for this purpose, the Board may conduct inspection or visit to
determine compliance with this Decree and the rules and regulations
promulgated pursuant thereto, or as an aid in formulating, amending, or revising
policies of the Board;
 (d) Coordinate with the Commission in prescribing, amending, or revising
collegiate courses leading to the degree of Bachelor of Science in Aeronautical
Engineering;

(e) Determine and impose the essential requirements and facilities, including the
minimum number and qualifications of the teaching personnel as well as the
student-teacher ratio of universities, colleges, institutes, or schools offering
courses in aeronautical engineering and for this purpose visit and inspect the
same. The Board may deny admission to the license examinations graduates of
universities, colleges, institutes, or schools found deficient of the essential and
minimum requirements.

Permits or authorization to offer or open aeronautical engineering course shall be

based upon the written recommendation of the Board and the representative of
the Government entity concerned with the granting of school permits or
authorization.

(f) Recommend or adopt from time to time and whenever necessary, such
measures as may be deemed proper for the advancement of the profession in
keeping with the progress of the aeronautical industry;

(g) Adopt and enforce a Code of Ethics for the practice of aeronautical
engineering, and to have an official seal to authenticate its official documents;
and

(h) Promulgate, subject to approval of the Commission for their effectivity such
rules and regulations as may be necessary to carry out the provisions of the
Decree.

The Code of Ethics and the rules and regulations shall be published by the Board in the
Official Gazette and shall take effect fifteen days after the publication.

Section 8. Procedure of investigation of violations. The Board shall investigate all

violations of the provisions of this Decree and the rules and regulations issued
thereunder as may come to its knowledge. For this purpose, the Board shall issue
subpoena and subpoena duces tecum to secure the appearance of witnesses and the
production of books, papers, documents, records and any or all pertinent data as may
be necessary in connection with the charges presented to or any investigation pending
before the Board. Any member of the Board may administer oaths or affirmations of
witnesses appearing before it.

The Board shall have the power to hold any person in contempt, directly or indirectly,
and impose appropriate penalties therefor.

A person of misbehavior in the presence of, or so near the Chairman or any Member of
the Board as to obstruct or interrupt the proceedings before the same, including
disrespect toward said officials, offensive personalities toward others, or refusal to be
sworn or to answer as a witness or to subscribe an affidavit or deposition when lawfully
required to do so, may be summarily adjudged in direct contempt by said officials and
punished by a fine not exceeding P100.00.

The person adjudged in direct contempt by the Chairman of the Board or Member
thereof may appeal to the Commission and the execution of the judgment shall be
suspended pending the resolution of the appeal.

Indirect contempt shall be dealt with by the Chairman or Member of the Board in the
manner prescribed by the Revised Rules of Court.

All decisions of the Board shall be made en banc. However, hearing and reception of
evidence may be conducted by the hearing officer or professional regulations attorney
of the Commission.

Section 9. Compensation of Members. Each member of the Board shall receive a

compensation of not less than fifteen pesos for each applicant who shall take the written
board examinations, and ten pesos for each certificate of registration to be issued to
temporary registrants as provided for under Section twenty-one of this Decree.

Any registered aeronautical engineer in the service of any branch of the government of
the Philippines appointed as Member of the Board shall receive the same compensation
herein provided, in addition to his regular compensation in the government service. All
authorized expenses of the Board, including the compensation of the Members thereof,
shall be paid by the collecting and disbursing officer of the Commission out of the
commission out of the collection of fees and such other charges fixed under this
Decree.

Section 10. Conduct of Examinations. The Commission and the Board shall jointly
conduct the written examinations given by the Board in accordance with this Decree
and the rules and regulations promulgated thereunder.

Section 11. Schedule of fees. The following fees shall be collected by the Board from
any person dealing with it:

(a) For the filing of application for written examination P100.00

(b) For the issuance of certificate of registration to successful examinees 50.00
(c) For the issuance of certificate of registration to temporary registrants 250.00
(d) For registration without examinations 150.00
(e) For the issuance of special permit 30.00
(f) For the reinstatement of a revoked or suspend certificate of 25.00
registration as well as the replacement of lost, destroyed or mutilated
certificate of registration
Section 12. Annual report of the Board. The Board shall, within sixty days following the
end of each fiscal year, submit to the Commission an annual report on its activities
during the fiscal year just ended.

Section 13. Board of Examinations. Unless otherwise specifically exempted from taking
the written examinations as provided for under Section twenty of this Decree, all
applicants for registration for the practice of aeronautical engineering shall first undergo
the required written technical examinations.

Section 14. Qualification for examinations. Any person who shall apply for admission to
take the written examinations for aeronautical engineers shall establish to the
satisfaction of the Board that he has the following qualifications:

(a) At least twenty-one years of age;

(b) A citizen of the Philippines or of a foreign country qualified to take the

examinations under existing laws;

(c) He must be of good moral character and reputation;

(d) A holder of the degree of Bachelor of Science in Aeronautical Engineering

from any institution of learning recognized by the Government of the Philippines
or of an equivalent course offered in any institution of learning in a foreign
country subject to the provisions of existing laws; and

(e) Must not have been convicted of any crime involving moral turpitude.

Section 15. Schedule of examinations. Written examinations of candidates desiring to

practice aeronautical engineering in the Philippines shall be given by the Board once a
year at a date and place to be fixed by the Commission.

Section 16. Scope of examinations. The examinations provided in this Decree shall
consist of written test which shall cover the following subjects: Mathematics,
Aerodynamics; Aircraft Structures and Design; Powerplant Theory and Practice; and Air
laws and Regulations, and such other related subjects as the Board may deem
necessary; Provided, That in case of increase in the number of subjects, the
corresponding relative weight credited for every subject shall be reduced accordingly
and the relative weights that may be deducted therefrom shall be credited to the
additional subject or subjects; Provided, further, That the relative weights that will be
deducted shall always be divisible exactly by five.

Section 17. Passing average. In order that a candidate may be deemed to have passed
the examinations successfully, he must have obtained a general weighted average of
seventy-five per cent in all subjects, with no rating below fifty per cent in any subject.
Subject to approval of the Commission, the Board shall have the power to prescribe,
amend, or revise the subjects and their corresponding relative weights.

Section 18. Report of Ratings. Within ninety days after the last day of the examinations
or on such date as may be determined by the Commission, the Board shall submit its
report on the ratings obtained by each candidate to the Commissioner of the
Commission for approval or other appropriate action. All ratings shall be released at
least seventy days before the next examination period.

Section 19. Certificate of Registration. All successful candidates in the written

examinations shall each be issued by the Board a certificate of registration as
aeronautical engineer upon payment of the required fee. The certificate of registration,
to be signed by the Members of the Board and approved by the Commissioner shall
bear the full name of the registrant and the serial number of the certificate, and shall be
authenticated with the official seal of the Board.

The issuance of the certificate of registration by the Board under this Decree shall be
evidence that the person named therein is entitled to all the rights and privileges of a
registered aeronautical engineer while it remains unrevoked or unsuspended.

Before commencing the practice of aeronautical engineering, all registrants under this
Decree shall be required to take professional oaths before the Board or before any
person authorized to administer the same.

Section 20. Registration without examinations. The Board may issue certificates of
registration as aeronautical engineers to the Members of the first Board and to any
applicant for registration without the necessity of taking the written examinations
prescribed under Section thirteen of this Decree: Provided, That

(a) The Members of the first Board meet all the requirements prescribed under
Section four of this Decree and

(b) The applicants for registration other than the Members of the first Board, in
addition to the requirements prescribed under Section fourteen of this Decree,
shall present evidence satisfactory to the Board showing that on the date of
approval of this Decree

(1) he has at least five years of active practice in aeronautical engineering;

and

(2) he shall indicate that he could be entrusted to perform or render

professional aeronautical engineering service.

For purposes of this section, the teaching of aeronautical engineering in any recognized
university, college, institute, or school shall be considered as active practice of
aeronautical engineering: Provided, That the evidence thereof shall be duly certified by
the Registrar of the institution of learning concerned and under oath.

Section 21. Temporary registration; issuance of special permits. Upon application and
payment of the required fee, and subject to approval of the Commission, the following
may be granted temporary certificates of registration as aeronautical engineer to
practice aeronautical engineering in the Philippines;
 (a) Aeronautical engineers from foreign countries called for consultation or for a
specific design, construction or project, whose services in the Philippines shall be
limited only to such particular work, and such engineers are legally or technically
qualified to practice aeronautical engineering in their own country, and

(b) Any person from foreign countries employed as technical officers or

professors in such specialized branches of aeronautical engineering as may, in
the judgment of the Commission be necessary and indispensable for the country.

Subject to approval of the Commission, the Board may issue a special permit,
renewable every year, to any person specified under this section who shall file with it an
application for the issuance of such permit, accompanied by evidence or other proof
satisfactory to the Board showing that the applicant is competent to perform the service
or activity for which said permit is sought, and that the issuance of such permits will not
jeopardize the interests of any citizen of the Philippines duly registered as aeronautical
engineer under this Decree: Provided, That such permit shall be subject to the rules and
regulations of the Board, and may be suspended, revoked, or reissued by the Board in
the manner prescribed for the suspension, revocation and reissuance of the certificate
of registration.

Nothing in this Decree shall be construed to prevent aeronautical engineering students,

apprentices and other persons employed or acting as subordinates of, or undergoing
training under a person holding a valid certificate of registration, from performing any of
the acts constituting the practice of the said profession under the instruction, control and
supervision of their employer.

Section 22. Refusal to issue certificate. The Board may refuse to issue certificate of
registration to any person convicted by a court of competent jurisdiction of any criminal
offense involving moral turpitude, or to any person guilty of unprofessional, unethical,
immoral or dishonorable conduct, or to any person of unsound mind. In the event of
refusal to issue a certificate the Board shall forthwith furnish the applicant a written
statement setting forth its reason or reasons for such action, which statement shall be
incorporated in the records of the Board.

Section 23. Suspension and revocation of certificate. The Board shall have the power,
after proper notice, to reprimand an aeronautical engineer, suspend, or revoke his
certificate of registration for any of the grounds enumerated in the next proceeding
section or by reason of malpractice, incompetence and gross negligence of the
registered aeronautical engineer concerned, or by reason of the use or perpetration of
any fraud, deceit, or false statement in obtaining such certificate of registration, or
refusal to join and to remain a member of good standing of the integrated professional
organization of aeronautical engineering which is accredited by the Commission.

Section 24. Reinstatement or replacement of certificate. After the expiration of two

years from the date of revocation or suspension of a certificate of registration, the Board
may, in its discretion and for reason it may deem meritorious, reinstate the validity of a
revoked or suspended certificate, or issue a new one in lieu of the one previously
revoked upon payment of the required fee.
Section 25. Seal and its use. All aeronautical engineers shall obtain official seal of a
design prescribed by the Board, bearing the registrant's name, the number of his
registration certificate, and the words; "Aeronautical Engineer." Plans, specifications,
reports and such other professional documents prepared by or executed under the
immediate supervision of, and issued by an aeronautical engineer shall be stamped on
every sheet thereof with the official seal when filed with government authorities, or when
submitted or used professionally during the life of the registrant's certificate.

It shall be unlawful for anyone to affix his official seal on any documents after his
certificate of registration has expired or has been revoked or suspended, unless said
certificate shall have been renewed, reissued, or reinstated.

Section 26. Posting certificates. The owner, manager or other person in-charge of any
aircraft or of firm, co-partnership, corporation, or joint corporation operating an aircraft
shall post or cause to be posted in any conspicuous place within such station or
establishment the certificate of registration of the aeronautical engineer or engineers
employed in such station or establishment.

Section 27. Meaning of practice of aeronautical engineering. The practice of

aeronautical engineering shall constitute in holding out oneself as skilled in the
knowledge, science, and practice of aeronautical engineering, and as qualified to render
professional services as an aeronautical engineer; or offering or rendering, or both, on a
fee basis or otherwise, services such as planning, designing, analyzing, constructing,
assembling, installing, altering or maintaining of aircraft structures, power plants or
accessories through scientific or accepted engineering practice, or the teaching of the
same in any university, college, institute, or school of learning duly recognized by the
Government of the Philippines.

An aeronautical engineer shall be considered such in the practice of his profession, if

the nature and character of his employment whether as an officer or employee in a
private enterprise or educational institution involves decision-making requiring
professional knowledge in the science of aeronautical engineering, and such
employment or position requires that the holder thereof must be an aeronautical
engineer; or if he holds or is appointed to a position in the aeronautical engineering
occupational group in the government or in government-owned or controlled
corporations, including those performing propriety functions, where a civil service
eligibility as an aeronautical engineer is a prerequisite.

Section 28. Unlawful practice. It shall be unlawful for:

(a) Any person who, without a valid certificate of registration shall practice or
offer to practice aeronautical engineering as defined herein or any aspect thereof
in the Philippines; or to use the title "Aeronautical Engineer" or any word, letter,
figure, or sign whatsoever, tending to convey the impression that he is an
aeronautical engineer; or to advertise or indicate in any manner that he is
qualified to perform the work of an aeronautical engineer; and

(b) Any firm, company or corporation to engage in designing, planning,

construction, installation, alteration, manufacture or marketing of any aircraft and
 its components, accessories, instruments, equipment and supply without the
certification, supervision, or guidance of an aeronautical engineer.

Section 29. Definitions. The following definitions, unless the context otherwise requires,
shall govern in the application and construction of this Decree.

(a) Commission The Professional Regulation Commission created under

Presidential Decree No. 223 or subsequent decree.

(b) Board The Board of Aeronautical Engineering created under Section three of
this Decree;

(c) Aircraft Any contrivance now known or hereafter to be used, invented or

designated for navigation of or flight in the air;

(d) Aeronautical engineer is a bona fide holder of a certificate of registration

issued by the Board in accordance with this Decree.

Section 30. Enforcement of this Decree by officers of the law. It shall be the duty of all
duly constituted law enforcing officers of the National Government, or of any of its
agencies or instrumentalities to enforce the provisions of this Decree and to prosecute
any person violating the same.

Section 31. Roster of aeronautical engineers. A roster showing the names, the
addresses and places of business, and the names and addresses of the employers, if
they are so employed, shall be prepared by the Commission at least once a year.
Copies of this roster shall be sent to the President, the Secretary of Public Works,
Transportation and Communications, the Director of Civil Aviation, the Director of Public
Works, the Secretary of Public Highways, the Commissioner of Customs, any person or
corporation operating and maintaining aircrafts, and such other bureaus, government
entities or agencies as may be deemed necessary, and to the public upon request.

Section 32. Integration of Aeronautical Engineering Profession. The Commission shall

adopt rules to effect the integration of aeronautical engineering under such conditions
as it shall see fit in order to raise the standards of the profession and enable it to
discharge its public responsibilities more effectively.

Section 33. Penalties for violations of this Decree. The penalty of imprisonment ranging
from six months to six years and a fine ranging from two thousand pesos to six
thousand pesos, or both such imprisonment and fine, in the discretion of the court, shall
be imposed upon:

(a) Any person who shall practice aeronautical engineering in the Philippines as
herein defined, without holding a valid certificate of registration issued by the
Board;

(b) Any person who shall give any false or fraudulent statement to the Board or to
the Commission, or both to obtain a certificate of registration as aeronautical
engineer;
 (c) Any person who shall assume, use, or advertise as aeronautical engineer, or
append to his name, letters or words tending to convey the impression that he is
a registered aeronautical engineer when in fact he is not duly registered with the
Board as such.

(d) Any person who shall present or use as his own certificate of registration
issued to another under this Decree;

(e) Any person who shall present or use a revoked or suspended certificate of
registration as aeronautical engineer;

(f) Any aeronautical engineer, or any person on his behalf, who shall stamp or
seal any document with his seal as such after his certificate of registration has
expired or has been suspended or revoked;

(g) Any aeronautical engineer who shall sign his name, affix his seal, or use any
other method of signature on plans, technical description, or other documents
prepared by or under another aeronautical engineer's supervision, unless the
name is prepared in such a manner as to clearly indicate the part or parts of such
work actually performed by the former;

(h) Any person, except the aeronautical engineer in charge, who shall sign for
any branch of the aeronautical work, or any function or engineering practice not
actually performed by him;

(i) Any registered aeronautical engineer who shall refuse to surrender to the
Board as suspended or revoked certificate of registration or special permit;

(j) Any person who shall commit or attempt to commit any fraud for the purpose
of obtaining a certificate of registration as aeronautical engineer, or aid in so
doing, and

(k) Any person who, with or without consideration, misrepresent that he can fix
the results of the licensure examinations for the practice of aeronautical
engineering;

Section 34. Separability Clause. If any provision of this Decree or any portion thereof is
declared unconstitutional by any competent court, the other provisions thereof shall not
be affected thereby.

Section 35. All laws decree, executive orders, rules or regulations, or parts thereof, in
conflict with the provisions of this Decree are hereby repealed, amended or modified
accordingly.

Section 36. Effectivity. This Decree shall take effect immediately.

 PD 1570 Implementing Rules and Regulations (IRR)

• PRELIMINARY ARTICLE
• Section 1 Definition of Terms.
• Section 2 Seal of the Board of Aeronautical Engineering.
• Section 3 Seal of the Aeronautical Engineering.
• ARTICLE II Registration of Aeronautical Engineers
• Section 1. Registration with Examination.
• Section 2. Proof of qualification for Examination
• Section 3. Scope of Examination.
• ARTICLE III Practice of Aeronautical Engineering
• Section 1. Nature and Scope of Practice.
• Section 2. Sevices of Aeronautical Engineers.
• ARTICLE IV Code of Professional Ethics
• ARTICLE V Miscellaneous Provisions
• Section 1. Records of the Board.
• Section 2. Annual Report.
• Section 3. Roster of Aeronautical Engineers.
• Section 4. Amendment.
• Section 5. Effectivity.

Preliminary Article

Pursuant to the Provisions of Section 7 (g) and (h) of Presidential Decree No.
1570, otherwise known as the ―Philippine Aeronautical Engineering Decree‖
approved on June 11, 1978, the following Rules & Regulations including the Code
of Professionals Ethics are hereby adopted.

Section 1. Definition of Terms.

a. Commission – The Professional Regulation Commission created under DP 223

as amended by PD 657.

b. Board – The Board of Aeronautical engineering created under PD 1570.

c. Aircraft – Any contrivance now known or hereafter invented, used, or designed

for navigation of or flight in the air (Section 29 of PD 1570). Such contrivance or
device can be powered or non-powered flying machine that is lighter-than-air
(Balloon, dirigible), or heavier-than-air with fixed wing (airplane, glider), or heavier-
than-air with rotary wing (Helicopter, auto gyro). This contrivance can also be winged
or finned weapon system (missile, bomb) or any other device that is designed to
operate fully or partly in air and whose motion and flight path is influence or
determined by the combined effects of forces and moments created by its mass, its
power system, and the air, or by its mass and the air if non powered. A spacecraft
designed for operation in the outer space, can be treated as an aircraft while
operating in transit within the limits of the earth‘s atmosphere.

d. Aircraft Structures – Those parts of an aircraft comprising of what is collectively

known as the airframe which is the framework of the aircraft supports all other
components including the forces acting on the aircraft. The landing gear assembly
and the engine mount are considered parts of the aircraft structures.

e. Powerplant – Sometimes referred to in these Rules as Engine or

Power/Propulsion system. That part of an aircraft which generates power mainly to
produce the force or thrust necessary to cause the aircraft to move horizontally, or to
be lifted, or both a small fraction of the power generated by the power plant is used
to drive aircraft accessories and equipment, a propeller or a rotary wing is not part of
the powerplant.

f. Aircraft Components – All parts which comprise the basic aircraft. These consist
of aircraft structures, powerplant, instruments, control system, fuel system,
accessories, equipment and others.

g. Aerodynamics - The science that deals with the study of the air in motion and the
forces and moments created on bodies moving relative to the air in. Aerodynamic
theories/principles in general govern the flight of heavier-than-air aircraft which is
vertically supported in flight by an aerodynamic force ‗lift‘ created on its fixed or
rotary wing. A light-than-air aircraft, whose bulk consists mainly of one or more
bags/compartments filled with gas that is lighter-than-air is lifted by a ‗buoyant force‖
(not an aerodynamic force) equal to the weight of the displace air, during horizontal
and maneuvering flights of these two (2) types of aircraft, the resisting aerodynamic
force ―drag‖ created on each aircraft is overcome by the propulsive force ―thrust‖
which may be generated by a power system discharging a high-velocity exhaust gas
(jet) or driving a propeller or a tilted rotary wing, or combination of a jet and a
propeller.

h. Aeronautical engineering – The science and technology dealing with study of

the theories/principles of flight and basic engineering science and the application of
these theories/principles to the research and development, manufacture, operation,
maintenance, repair and modification of aircraft and its components.Aeronautical
engineering Practice – The act of rendering or offering to render professional
services in aeronautical engineering in the form of direct work participation,
consultancy, supervision, or management, with or without fee, salary or any other
kind of compensation, the professionals services as enumerated in Section 27 and
28 (b) of PD 1570 can be grouped into four (4) major activity areas ;

Research and Development – Basic and applied research in fluid mechanics

(study of gases and liquids at rest and motion) particularly on data acquisition
and analysis; formulation of plants, specifications, standards, technique and
 procedures: preparation of project feasibility study; design and construction of
test equipment and aircraft tooling; and other research activities leading to or
resulting in the development of new or improved aircraft and/or its components.

Manufacture of Aircraft – The planning design, analysis, construction/fabrication,

sub-assembly, test and evaluation of aircraft structures, powerplant, and other
aircraft components; final assembly of aircraft; pre-flight inspection and test; and
aircraft performance data collection/monitoring and evaluation during aircraft
production airworthiness flight test.

Aircraft Operation or Maintenance – The operation of aircraft or the maintenance,

repair and modification/alteration of aircraft structures, powerplant and other
aircraft components. Operation here is concerned with pre-flight and post-flight
checks, and functional test of aircraft and its components. Operation also
includes the release of aircraft for flight, monitoring of aircraft performance, and
other activities performed on the group and in flight to ensure aircraft
airworthiness and flight safety, except piloting (directing and controlling) aircraft
in flight , which function strictly belongs to the pilot. Marketing or selling of aircraft
and/or its components, which require thorough technical knowledge of aircraft
/components specifications, performance, maintenance, repair and other
pertinent information shall likewise be considered professional aeronautical
engineering service.

Education and training – The teaching of the theories/principles and/or

application of any one or more of the activities in the preceding items (1),(2) and
(3) leading to a collegiate course in aeronautical engineering in any education
institution recognized by the Government of the Philippines.

j. Aeronautical engineer – A person who is bonafide holder of a certificate of

registration issued by the board in accordance with PD 1570.

k. Other Aeronautical Terms – Aeronautical terms whose definitions are included

in this Section shall be understood to convey the meaning given to them by other
local aviation laws, rules and regulations or by international conventions adhered to
by the government of the Philippines if no definitions of such terms are locally
available.
Section 2. Seal of the Board of Aeronautical Engineering.

There shall be a seal to be used by the Board

authenticate its official documents. This seal which shall
be circular in shape with maximum diameter of 48
millimeters (1-7/8 inches) shall bear a design consisting
of an airplane wing section with shock waves attached to
its leading and trailing edges (leading edge at the right).
Near the leading edge of the wing section is an atom
having four (4) orbiting electrons the airplane wing
section here represents an aircraft. The atom as a whole
symbolizes engineering activity with its four (4) orbiting
electrons signifying the four (4) major activity / areas in the practice of aeronautical
engineering, these shock waves, which are normally created about a body moving in air
speeds way above the speed of flight condition symbolic of the fact that aeronautical
engineering is a dynamic and progressive profession. Between the two (2) concentric
circles along the circumference of the seal shall be inscribed the words ―Professional
Regulation Commission‖ and Board of Aeronautical Engineering‖ at the upper and the
lower portion of the circumference respectively.

Section 3. Seal of the Aeronautical Engineering

A seal shall likewise be used by a registered

aeronautical engineer to authenticate all official
documents in the pursuit of his profession. Except for the
inscriptions on the seal in the preceding section, the seal
of the aeronautical engineer shall have the same basic
design, meaning, and size as that of the Board. The
words ―Aeronautical Engineer‖ shall be inscribed on the
upper portion of the circumference of the seal with the
words ―Philippines‖ on the lower portion of the
circumference. Slight below the center of the seal shall
be printed horizontally the full name of the engineer. His corresponding registration
number shall also appear in a horizontal line above his name.

ARTICLE II Registration of Aeronautical Engineers

Section 1. Registration with Examination

Unless exempted from taking the licensure examination under Section 20 of PD 1570,
all applicants for registration for the practice of aeronautical engineering shall be
required to take and pass the said examination conducted jointly by the Commission
and the Board once a year at a date and place to be set by the Commission.
Section 2. Proof of qualification for Examination

The application for examination shall be supported by evidence showing that the
applicant possesses all the qualifications prescribed in Section 14 of PD 1570. Every
applicant shall submit with his application the following supporting papers:

a. Copy of the transcript of the scholastic records, duly authenticated, showing

completion of the prescribed curriculum leading to the degree of Bachelor of
Science in Aeronautical Engineering from any local institution of learning
recognized by the government of the Philippines, or completion of an equivalent
course offered in any institution of learning in a foreign country. The Board shall
deny admission to examination graduated of aeronautical engineering courses
found deficient of the essential subjects given in the licensure examination.

b. If the applicant is a foreigner, proof of reciprocity between the Republic of the

Philippines and the state or country of which he is a subject. Proof of reciprocity
may be copy of pertinent laws, rules and regulations of his country, duly
authenticated and proved by any means sanctioned by the Philippines laws or
jurisprudence, or any other documentary evidence confirmed by the Department
of Foreign Affairs of the Philippines, showing that his country‘s existing laws,
rules and regulations allows citizens of the Philippines to practice aeronautical
engineering on the same basis as, with the same privilege accorded to, and
under the same rules and regulations governing the subjects of citizens of the
foreign state or country.

Section 3. Scope of Examination.

a. Aerodynamics – 25%

b. Aircraft Structures and Design – 20%

c. Aircraft Powerplant – 20%

d. Aircraft Construction, Repair and Modification – 15%

e. Engineering Economics & Management, Laws & Ethics – 10%

f. Mathematics – 10%

ARTICLE III Practice of Aeronautical Engineering

Section 1. Nature and Scope of Practice.

The practice of Aeronautical Engineering shall be in accordance with the definitions in

Section 27 of PD 1570 and Article I of these Rules and Regulations and the Code of
Professional Ethics.
Section 2. Services of Aeronautical Engineers.

All firms, corporations, offices, education, institution and agencies, whether government
or private, whose activities in part or in full involve the operation of one (1) or more
aircraft or the practice of aeronautical engineering shall employ the services of
aeronautical engineers. Planning, design, operation, management or maintenance of
airports and their related facilities, except those activities that belong to other
professions regulated by the Commission, shall require professional aeronautical
engineering services. Department/division/unit heads and deputy/assistant heads of
organizations who are directly involved in the decision-making or in the implementation
of aeronautical engineering matters shall be registered aeronautical engineers.
Organizations referred to in the foregoing statement shall include government civilian
agencies, government owned/controlled corporations, educational institutions, and
private firms engage in activities fully or partly involving the practice of aeronautical
engineering.

ARTICLE V Miscellaneous Provisions

Section 1. Records of the Board.

All records of the Board to include resolutions, minutes of meetings and deliberations,
records or administrative proceedings and investigations, examination papers, and
other official documents shall be kept as part of the records of the Commission.

Section 2. Annual Report.

Within sixty (60) days following the end of each calendar year, the Board shall submit to
the Commission on Annual Report on its activities including appropriate
recommendations.

Section 3. Roster of Aeronautical Engineers.

There shall be a roster of aeronautical engineers showing their names, addresses, and
places of practice. To keep the roster updated, every registered aeronautical engineer
will report to the Board any change in address and place of practice, and the name(s) of
person(s) authorized by him to receive notices, communications, and other papers from
the commission or the Board.
 CODE OF ETHICS – AERONAUTICAL ENGINEER
Section 2. Relations with the State. -

a. Each and every engineer shall recognize and respect the supreme authority of the
State as expressed through its laws implemented by its agencies, whenever and
wherever such laws do not infringe upon the rights and privileges of citizens as
guaranteed by the Constitution.

b. He shall recognize that the well-being of the public and the interest of the State are
above the well-being and interest of any individual.

c. In the interest of justice, he shall aid the State, if and when the technology he is
involved in is needed in the prevention and/or prosecution of unjust, criminal, or
unlawful acts.

d. In the interest of good government, he shall extend cooperation to the State in the
accomplishment of its goals and objectives.

e. In the interest of social efficiency, he shall extend assistance, guidance and training
to subordinates under his jurisdiction in order to increase their skill and ability,
knowledge and experience for purposes of eventually increasing their responsibilities.

f. In the interest of national economy and wellbeing, he shall always strive in the
execution of his work for optimum efficiency, economy, and safety.

g. In the interest of national security, the State shall be given primary consideration in
all his inventions and/ or devices on aeronautical science and technology useful for
national security and defence.

h. In the event of any national emergency, he shall offer his technology, skill, ability,
and experience to the services of the State, even if it will involve personal sacrifices.

Section 3. Relations with the Public.-

a. He shall interest himself in public welfare and be ready to apply his special
knowledge for the benefit of mankind.

b. He shall guard against conditions that are dangerous or threatening to life, limb, or
property on the work for which he is responsible, or if he is not responsible, he shall
promptly call such conditions to the attention of those responsible so that the conditions
can immediately and effectively be corrected.

c. He shall have due regard for the safety of life and health of the public who may be
affected by the work for which he is responsible.
d. He shall endeavor to extend public knowledge of aeronautical engineering and he
shall strive to win or maintain the public confidence by discouraging the spread of
untrue, unfair, and exaggerated statements regarding his profession.

e. As a witness before a court, commission, and/or other tribunal, he shall express an

opinion only when it is founded on adequate and honest conviction.

f. He shall not issue statements on matters connected with public policy, and ex-parte
statements, criticisms, or arguments which are inspired or paid for by private interest,
unless he identifies on whose behalf he is making the statements.

g. He shall refrain from expressing in public any opinion on an engineering subject

unless he is fully familiar and knowledgeable with all facts relating to the subject.

h. His integrity shall be unquestionable and he shall discharge his duties and
responsibilities with fidelity to the public, his employers, and clients and with fairness
and impartiality to all.

Section 4. Relations with the Clients and Employers-’

a. He shall act in professional matters as a faithful agent or trustee, and treat as

confidential all matters and information concerning business affairs, technical
processes, and others, of his clients and/or employers.

b. He shall inform his client or employer of any financial interest on inventions,

equipment, and/or any other device, before undertaking any engagement in which he
may be called upon to decide on the use thereof.

c. He shall not accept any other compensation, financial or otherwise, except from an
interested party for a particular service or other services related therewith, without the
consent of all parties concerned.

d. He shall exercise fairness and justice when dealing with contracts between his
clients or employers and the contractors.

e. He shall not accept any commissions or allowances, directly or indirectly, from

contractors, suppliers, and all other parties dealing with his clients and/or employers in
connection with the work for which he is responsible.

f. He shall not be financially interested in the bid or bids of contractors, suppliers, and
other interested parties participating in a competitive work or job on which he has been
employed as engineer without full knowledge and consent of his clients or employers.

g. He shall promptly inform his clients or employers of any business in which he has
any interest, business connection, or affiliation which may compete with or affect the
business of his clients or employers.
h. He shall not allow any decision in connection with his work for which he has been
employed or on which he may be called to perform, to be affected by interest in any
business.

i. He will present clearly the consequences to be expected from deviations proposed if

his engineering judgment is overruled by nontechnical authority in cases where he is
responsible for the technical adequacy of engineering work.

j. He shall undertake only those engineering assignments for which he is qualified. He

shall engage or advise his employer or client to engage specialists and shall cooperate
with them whenever his employer‘s or client‘s interests are served best by such an
arrangement.

Section 5. Relations with the Engineers.-

a. He shall individually or collectively with others in the profession protect the

profession from misunderstanding and/or misrepresentations.

b. He shall not directly or indirectly injure the professional reputation, prospects, and
advancement, and/or practice of other engineers. However, if he has proof or personal
knowledge that an engineer has been unethical and/or illegal in his practices he shall
inform in writing the proper authorities for appropriate action.

c. He shall uphold the principle of appropriate and adequate compensation for those
engaged in the engineering profession, including those in the subordinate capabilities in
the interest of public service, and maintain the standards of the profession.

d. He shall not try to supplant another engineer in a particular employment after

becoming aware that definite steps have been taken towards the other‘s employment.

e. He shall not compete, by underbidding through reduction in his normal fees on the
basis of charges for work, after having been informed of the charges submitted by
another engineer.

f. He shall be fair and tolerant in his dealings with fellow engineers and give credit to
those to whom credit is properly due.

g. He shall uphold the honor and dignity of his profession and avoid association in
responsibility for work with engineers who do not conform to ethical practices.

h. He shall exercise due restraint in criticizing another engineer‘s work in public,

recognizing the fact that the engineering societies and the engineering press provide
the proper forum for technical discussions and criticism.
Section 6. Relations with the Profession.-

a. He shall cooperate in extending the effectiveness of the engineering profession and

endeavor to be well-informed of the latest development in the profession by sharing or
exchanging information and experience with other engineers, other professionals, and
students, and by contributing to engineering publications and participating in the
activities of engineering societies.

b. He shall cooperate in upholding the integrity and honor of the profession by avoiding
all conduct and practices that will be discrediting and injurious to the profession.

c. He shall be dignified in explaining and discussing his work and shall refrain from
self‘- laudatory advertising or propaganda.
 RA 776 (SUMMARIZED)
Approved, June 20, 1952.

10 Chapters

56 Sections

CHAPTER 1 - Title and Purpose

SECTION 1. Title of Act.

The Civil Aeronautics Act of the Philippines

SECTION 2. Purpose and Scope of Act.

The general purpose of this Act is the reorganization of the Civil Aeronautics Board and
the Civil Aeronautics Administration, defining their powers and duties and making
certain adjustment of funds and personnel in connection therewith; and the regulation of
civil aeronautics.

CHAPTER II - General Provisions

SECTION 3. Words and phrases defined

SECTION 4. Declaration of policies

CHAPTER III - CIVIL AERONAUTICS BOARD

SECTION 5. Composition of the Board

Chairman – Secretary of Transportation and Communications or Representative

Vice Chairman - Assistant Secretary for Air Transportation of the Department of

Transportation and Communications (Currently the DOT Secretary)

Commanding General of the Philippine Air Force* (Currently the CAAP DG), and

Two (2) members to be appointed by the President of the Philippines.

SECTION 6. Principal office and quorum

The Board shall have its principal office in Metro Manila.

Quorum Constitutes of either the Chair or the Vice-Chair and 2 members

SECTION 7. Permanent personnel

The Board shall have an Executive Director, a Deputy Executive Director, and a Board
Secretary who shall be a member of the Philippine Bar.
Executive Director shall be the Chief Executive of the Board

Deputy Executive Director – Assist the Executive Director

Board Secretary shall record all proceedings of the Board, take charge of and keep all
its papers, and perform such other duties as may be prescribed by the Board.

Chiefs of the Technical Divisions, and such other officers and employees as may be
required by the Board in the performance of its functions and duties.

SECTION 8. Temporary personnel.

SECTION 9. Annual Report.
SECTION 10. Powers and duties of the Board.

Board shall have the power to regulate the economic aspect of air transportation, and
shall have the general supervision and regulation of, the jurisdiction and control over, air
carriers, general sales agents, cargo sales agents, and airfreight forwarders as well as
their property, property rights, equipment, facilities, and franchise, in so far as may be
necessary for the purpose of carrying out the provisions of this Act.

The Board may perform such acts, conduct such investigations, issue and amend such
orders, and make and amend such general and special rules, regulations, and
procedures as it shall deem necessary to carry out the provisions of this Act.

The Board shall have the following specific powers and duties:

 In accordance with the provisions of Chapter 4 of this Act, to issue, deny, amend,
revise, alter, modify, cancel, suspend, or revoke, in whole or in part, upon petition
or complaint, or upon its own initiative, any temporary operating permit or
Certificate of Public Convenience and Necessity; Provided, however, That in the
case of foreign air carriers, the permit shall be issued with the approval of the
President of the Republic of the Philippines.

 To fix and determine reasonable individual, joint or special rates, charges or

fares, which an air carrier may demand, collect or receive for any service in
connection with air commerce. The Board may adopt any original, amended, or
new individual, joint or special rates, charges or fares proposed by an air carrier if
the proposed individual, joint, or special rates, charges for fares are not unduly
preferential or unduly discriminatory or unreasonable. The burden of proof to
show that the proposed individual, joint or special rates, charges or fares are just
and reasonable shall be upon the air carrier proposing the same.

 To authorize any type of charters whether domestic or international and special

air services or flight under such terms and conditions as in its judgment public
interest requires. Notwithstanding the existence of bilateral air agreement, the
CAB is authorized to grant any foreign airline increase in frequencies and/or
capacities on international routes when in its judgment the national interest
requires it, provided that the utilization of the increase frequencies and capacities
 is not more than thirty days. All grants of frequencies and/or capacities shall be
subject to the approval of the President.

 To approve or disapprove increase and/or decrease of capital, lease, purchase,

sales of aircraft of air carrier engaged in air commerce; consolidation, merger,
purchase, lease and acquisition and control of operating contracts between
domestic foreign air carriers, or between domestic air carriers or any person
engaged in any phase of aeronautics.

 To inquire into the management of the business of any air carrier and, to the
extent reasonably necessary for such inquiry, to obtain from such carrier, and
from any person controlling, or controlled by, or under common control with, such
air carrier, full and complete reports and other informations. Such reports shall be
under oath whenever the Board so requires.

 To require annual, monthly, periodical, and special reports from any air carrier, to
prescribe the manner and form in which such reports shall be made, and to
require from any air carrier specific answers to all questions upon which the
Board may deem information to be necessary. Such reports shall be under oath
whenever the Board so requires. The Board may also require any air carrier to
file with it any contract, agreement, understanding or arrangement, or a true copy
thereof, between such air carrier and any other carrier or person, in relation to
any traffic affected by the provisions of this Act.

 To prescribe the forms of any and all accounts, records, and memoranda of the
movement of traffic, as well as of the receipts and expenditures of money, and
the length of times such accounts, records and memoranda shall be preserved:
Provided, that any air carrier may keep additional accounts, records, or
memoranda if they do not impair the integrity of the accounts, records, or
memoranda prescribed or approved by the Board and do not constitute an undue
financial burden on such air carrier.

 To require each officer and director of any air carrier to transmit a report
describing the shares of stock with any persons engaged in any phase or other
interest held by such air carrier of aeronautics, and the holding of the stock in
and control of, other persons engaged in any phase of aeronautics.

The Board may investigate, upon complaint or upon its own initiative whether any
individual or air carrier, domestic or foreign, is violating any provision of this Act, or the
rules and regulations issued thereunder, and shall take such action consistent with the
provisions of this Act, as may be necessary to prevent further violation of such
provision, or rules and regulations so issued.

The Board may issue subpoena or subpoena duces tecum require the attendance
and testimony of witness in any matter or inquiry pending before the Board or its duly
authorized representatives, and require the production of books, papers, tariffs,
contracts, agreements and all other documents submitted for purposes of this section to
be under oath and verified by the person in custody thereof as to the truth and
correctness of data appearing in such books, papers, tariffs, contracts, agreements and
all other documents.

The Civil Aeronautics Board shall be advised of, and shall consult with the Department
of Foreign Affairs concerning the negotiation of any air agreement with foreign
governments for the promotion, establishment, or development of foreign air
transportation.

In exercising and performing its powers and duties under the provisions of this Act, the
Civil Aeronautics Board shall take into consideration the obligation assumed by the
Republic of the Philippines in any treaty, convention or agreement with foreign countries
on matters affecting civil aviation.
CHAPTER IV - Certificate of Public Convenience and Necessity

SECTION 11. Nature, terms and conditions.

Certificate of Public Convenience and Necessity is a permit issued by the Board

authorizing a person to engage in air commerce and/or transportation, foreign and/or
domestic. No person shall engage in air commerce unless there is in force a permit
issued by the Board.

SECTION 12. Citizenship requirement.

Except as otherwise provided, in the Constitution and existing treaty or treaties, permit
authorizing a person to engage in domestic air commerce and/or transportation shall be
issued only to citizens of the Philippines.

SECTION 13. Conduct of Proceedings.

SECTION 14. Delegation of authority to conduct hearings.
SECTION 15. Application of permit.

Application for permit shall be made to the Board in writing and shall be verified. Said
application shall be in such form, shall contain such information, and shall be
accompanied by such proof of service upon such interested persons as the Board shall
by regulation require.

SECTION 16. Notice.

(1) to the public, by posting a notice of such application in the Office of the Civil
Aeronautics Board and by publication once a week for three consecutive weeks, at the
expense of the applicant, in a newspaper of general circulation, and

(2) to such other persons as the Board may be regulation determine: Provided,
however, That notice or publication may be dispensed with the Board wherever, in its
judgment, the public interest so require. Any interested person may file with the Board a
memorandum in support of, or in opposition to, the issuance of the permit.

SECTION 17. Time and place of meeting.

SECTION 18. Non-appearance.
SECTION 19. Deposition.
SECTION 20. Hearings and records of proceedings
SECTION 21. Issuance of permit.

The Board shall issue a permit authorizing the whole or any part of the service covered
by the application, if it finds;
(1) that the applicant is fit, willing and able to perform such service properly in
conformity with the provisions of this act and the rules, regulations, and requirements
issued thereunder, and

(2) that such service is required by the public convenience and necessity, otherwise the
application shall be denied.

SECTION 22. Modification, suspension or revocation.

SECTION 23. Transfer of permit.

No permit may be transferred without the prior approval of the Board.

SECTION 24. Effective date and duration of permit. –

Each permit shall be effective from the date specified therein and shall continue in effect
until suspended or revoked or until the Board shall certify that operation thereunder has
ceased:

Provided, That if any service authorized by a permit is not inaugurated within a period of
ninety days (90) after the date of authorization as shall be fixed by the Board or after
such other period as may be designated by the Board, the Board may by order direct
that such permit shall thereupon cease to be effective to the extent of such service;

That no permit shall be issued for a period of more than twenty five (25) years.

CHAPTER V - Civil Aeronautics Administration

SECTION 25. Organization of the Civil Aeronautics Administration.

SECTION 26. The Civil Aeronautics Administrator.
SECTION 27. The Deputy Administrator.
SECTION 28. Authority of the Officers of the Civil Aeronautics Administration
to administer oaths.
SECTION 29. Permanent divisions.
SECTION 30. Officials and employees.
SECTION 31. Temporary personnel.
SECTION 32. Powers and duties of the Administrator.

CHAPTER VI - Registration and Record

SECTION 34. Eligibility for registration.

Except as otherwise provided in the Constitution and existing treaty or treaties, no
aircraft shall be eligible for registration unless it is owned by a citizen or citizens of the
Philippines and is not registered under the laws of any foreign country.

SECTION 35. Application for aircraft registration

Application for certificate of registration shall be made in writing, signed and sworn to by
the owner of any aircraft eligible for registration.

The application shall also state:

(1) the date and place of filing;

(2) the specification, construction, and technical description of the aircraft, and
(3) such other information as may be required by the Administrator in such manner and
form as the Administrator may by regulations prescribe.

SECTION 36. Issuance of certificate of registration.

SECTION 37. Revocation.
SECTION 38. Conveyance to be recorded.
SECTION 39. Form of conveyance.
SECTION 40. Method of recording.
SECTION 41. Previously unrecorded ownership.

CHAPTER VII - Violation and Penalties

SECTION 42. Specific Penalties.

SECTION 43. General Penalty.
SECTION 44. Compromise Regarding Penalty.

CHAPTER VIII - Orders and Judicial Review

SECTION 45. Enforcement of Orders.

SECTION 46. Effective date of orders and decisions.
SECTION 47. Reconsideration of Orders.
SECTION 48. Finality of Decision, Order or Ruling.
SECTION 49. Judicial Review.

CHAPTER IX - Receipts of the Civil Aeronautics Administration and Civil

Aeronautics Board

SECTION 50. Fees.

SECTION 51. Other Fees.
SECTION 52. Disposition of receipt.

CHAPTER X - Miscellaneous Provisions

SECTION 53. Separability of Unconstitutional Provisions.
SECTION 54. The provisions of Commonwealth Act
SECTION 55. Appropriation
SECTION 56. Effectivity.

DEFINITION OF TERMS (RA 776 and RA 9497)

Administrator - means the Civil Aeronautics Administrator.

Aerodrome- means a defined area on land or water, including any buildings,

installations and equipment intended to be used either wholly or in part for the arrival,
departure and movement of aircraft.

Aeronautics - means the science and art of flight.

Aeronautical telecommunication - means and includes any telegraph or telephone

communication signs, signals, writings, images and sounds of any nature, by wire, radio
or other systems or processes of signaling, used in the aeronautical service.

Aeronautical telecommunication station - means any station operated to provide

telecommunications for aeronautical purposes.

Air Carrier - means a person who undertakes, whether directly or indirectly, or by a

lease of any other arrangements, to engage in air transportation or air commerce.

Air Commerce - means and includes air transportation for pay or hire, the navigation of
aircraft in furtherance of a business, or the navigation of aircraft from one place to
another for operation in the conduct of a business.

Air Operator Certificate (AOC) - refers to a certificate authorizing an operator to carry

out specified commercial air transport operations.

Air route - refers to the navigable airspace between two points and the terrain beneath
such airspace identified, to the extent necessary, for application of flight rules.

Air transportation - means service or carriage of persons, property or mail, in whole or

in part, by aircraft.

Aircraft - means any contrivance now known or hereafter invented, used, or designed
for navigation of, or flight in the air.

Aircraft engine - means an engine used or intended to be used for propulsion of

aircraft and includes all parts, appurtenances, and accessories thereof other than
propellers.

Aircraft radio station - means a radio station on board any aircraft.

Airmen - means any individual who engages, as the person in command or as pilot,
mechanic, flight radio operator or member of the crew, in the navigation of aircraft while
under way, and any individual who is directly in charge of inspection, maintenance,
overhauling or repair of aircraft engine, propellers, or appliances; and any individual
who serves in the capacity of aircraft dispatcher or air-traffic control operator.

Air navigation facility - means any facility used in, available for use in or designed for
use, in aid of air navigation, including areas, lights, any apparatus or equipment for
disseminating weather information, for signaling, for radio-directional finding, or for radio
or other electrical communication, and any other structure or mechanism having a
similar purpose for guiding or controlling flight in the air or the landing and take-off of
aircraft.

Airport - refers to any area of land or water designed, equipped, set apart or commonly
used for affording facilities for the landing and departure of aircraft and includes any
area or space, whether on the ground, on the roof of a building or elsewhere, which is
designed, equipped or set apart for affording facilities for the landing and departure of
aircraft capable of descending or climbing vertically.

Airways - means a path thru the navigable air space identified by an area of specified
width on the surface of the earth designated or approved by the Administrator as
suitable for air commerce or air transportation.

Airworthiness - means that an aircraft, its engines, propellers, and other components
and accessories, are of proper design and construction being consistent with accepted
engineering practice and in accordance with aerodynamic laws and aircraft science.

Appliances - means instruments, equipments, apparatus, parts, appurtenances, or

accessories, of whatever description, which are used or are capable of being or
intended to be used in navigation, operation, or control of aircraft in flight (including
parachutes and communication equipment and any other mechanism or mechanisms
installed in or attached to aircraft during flight), and which are not a part or parts of
aircraft, aircraft engines or propellers.

Board - means the Civil Aeronautics Board

Citizen of the Philippines – means

(a) an individual who is a citizen of thePhilippines, or
(b) a partnership of which each member is such an individual or
(c) a corporation or association created or organized under the laws of the Philippines,
of which the directing head and two-thirds or more of the Board of Directors and other
managing officers are citizens of the Philippines, and in which sixty per centum of the
voting interest is owned or controlled by persons who are citizens of the Philippines.

Civil Aircraft - means any aircraft other than a public aircraft.

Dangerous goods - refers to articles or substances that are capable of posing

significant risks to health or safety of property when transported by air.

Domestic Air Carrier - means an air carrier who is a citizen of the Philippines:
Provided, That an air carrier who is not a citizen of the Philippines but who may be
allowed to engage in domestic and/or foreign air transportation, or domestic and/or
foreign air commerce.

Domestic air commerce - means and includes air commerce within the limits of the
Philippine territory.

Domestic air transportation - means air transportation within the limits of the
Philippine territory.

Flight radio operator - means and includes a member of the operating crew of aircraft
who is granted a radio operator's license by the Civil Aeronautics Administrator to
operate aircraft radio station.

Foreign air carrier - means an air carrier who is not a citizen of the Philippines, and/or
an air carrier other than a domestic air carrier.

Foreign air commerce - means and includes air commerce between the Philippines
and any place outside it.

Foreign air transportation - means air transportation between the Philippines and any
place outside it, or wholly outside the Philippines

General aviation operation - refers to an aircraft operation of a civil aircraft for other
than a commercial air transport operation or aerial work operation.
.
Landing field - means any locality either on water or on land, which is adapted for
landing and taking-off of aircraft located along an airway and is intermediate to airports
connected by the airway, whether or not facilities are provided for the shelter, servicing,
or repair of aircraft, or for receiving or discharging passengers or cargo.

Mail - means Philippine mail or foreign transit mail.

Navigation of aircraft - or navigate aircraft includes the piloting of aircraft.

Navigable air space - means air space above the minimum altitudes of flight
prescribed by regulations issued under this Act.

Permit - means Certificate of Public Convenience and Necessity.

Persons - means any individual, firm, co-partnership, corporation, company,

association, joint-stock association, or body politic, and includes any trustee, receiver,
assignee, or other similar representative thereof.

Propeller - includes all parts, appurtenances and accessories thereof.

Public aircraft - means an aircraft used exclusively in the service of the National
Government of the Republic of the Philippines or of any political subdivision or
instrumentality thereof, but not including any government-owned aircraft engaged in air
commerce.
Reasonable charges - are those which insure just and reasonable return on the capital
invested, taking into consideration the cost of construction, operation and maintenance
and non-aeronautical revenue of the air navigation facility affected, which shall be
uniform.

General sales agent - means a person not a bonafide employee of an air carrier, who
pursuant to an authority from an airline, by itself or through an agent, sells or offers for
sale any air transportation, or negotiates for, or holds himself out by solicitation,
advertisement or otherwise as one who sells, provides, furnishes, contracts or arranges
for, such air transportation.

Cargo sales agent - means any person, who does not directly operate an aircraft for
the purpose of engaging in air transportation or air commerce and not bonafide
employee of an air carrier, who as principal or agent, sells or offers for sale any air
transportation of cargo, or negotiates for, or holds himself out of solicitation,
advertisement, or otherwise as one who sells, provides, furnished, contracts or arranges
for such air transportation of cargo.

Airfreight forwarder - means any indirect air carrier which, in the ordinary and usual
course of its undertaking, assembles and consolidates or provides for assembling
and consolidating such property or performs or provides for the performance of break-
bulk and distributing operations with respect to consolidated shipments, and is
responsible for the transportation of property from the point of receipt to point of
destination and utilizes for the whole or any part of such transportation the services of a
direct air carrier.

Landing fees - refer to all charges for the use of any landing strip or runway by any
aircraft landing or taking off at an aerodrome.

Terminal fees - refer to charges for parking at or near the ramp, terminal area, or
building, for purposes of loading or unloading passengers and/or cargo.

Royalties - refer to all charges based on gross business or sales, or gross or net profit.

Supplies- include any and all items of whatever nature or description which may be
necessary for, or incident to, the operation of an aircraft.
 PHILIPPINE CIVIL AVIATION REGULATIONS (PCAR)

PART I GENERAL POLICIES, PROCEDURES, and DEFINITIONS

PART II PERSONNEL LICENSING
PART III APPROVED TRAINING ORGANIZATIONS
PART IV AIRCRAFT REGISTRATION AND MARKINGS
PART V AIRWORTHINESS
PART VI APPROVED MAINTENANCE ORGANIZATION
PART VII INSTRUMENTS AND EQUIPMENT
PART VIII OPERATIONS
PART IX AIR OPERATORS CERTIFICATE AND REGISTRATION
PART X COMMERCIAL AIR TRANSPORT BY FOREIGN AIR CARRIERS WITHIN
REPUBLIC OF THE PHILIPPINES
PART XI AERIAL WORK AND OPERATING LIMITATIONS FOR NON-TYPE
CERTIFICATED AIRCRAFT

PCAR SUMMARIZED

Airborne collision avoidance system (ACAS). An aircraft system based on

secondary surveillance radar (SSR) transponder signals which operates independently
of ground-based equipment to provide advice to the pilot on potential conflicting aircraft
that are equipped with SSR transponders.

Aeronautical chart. A representation of a portion of the earth, its culture and relief,
specifically designated to meet the requirements of air navigation.

Aeronautical operational control (AOC). Communication required for the exercise of

authority over the initiation, continuation, diversion or termination of flight for safety,
regularity and efficiency reasons.

Aircraft address. A unique combination of twenty-four bits available for assignment to

an aircraft for the purpose of air-ground communications, navigation and surveillance

Aircraft operating manual (AOM). A manual, acceptable to the State of the Operator,
containing normal, abnormal and emergency procedures, checklists, limitations,
performance information, details of the aircraft systems and other material relevant to
the operation of the aircraft.

Air operator certificate (AOC). A certificate authorizing an operator to carry out

specified commercial air transport operations
Airport (aerodrome). A defined area on land or water including any buildings,
installations and equipment intended to be used either wholly or in part for the arrival,
departure and surface movement of aircraft.

Airport traffic zone (ATZ). An airspace of defined dimensions established around an

airport for the protection of airport traffic.

Airport operating minima. The limits of usability of an airport for:

a. take-off, expressed in terms of runway visual range and/or visibility and, if necessary,
cloud conditions;

b. landing in precision approach and landing operations, expressed in terms of visibility

and/or runway visual range and decision altitude/height DA/H as appropriate to the
category of the operation;

c. landing in approach and landing operations with vertical guidance, expressed in

terms of visibility and/or runway visual range and decision altitude/height DA/H; and

d. landing in non-precision approach and landing operations, expressed in terms of

visibility and/or runway visual range, minimum descent altitude/height MDA/H and, if
necessary, cloud conditions.

Air traffic. All aircraft in flight or operating on the manoeuvring area of an Airport.

Air traffic advisory service (ATAS). A service provided within advisory airspace to
ensure separation, in so far as practical, between aircraft which are operating on IFR
flight plans

Air traffic service (ATS). A generic term meaning variously, flight information service,
alerting service, air traffic advisory service, air traffic control service (area control
service, approach control service or Airport control service).

Alternate airport. An airport to which an aircraft may proceed when it becomes either
impossible or approach with vertical guidance at which a missed approach must be
initiated if the required visual reference to continue the approach has not been
established.

Certificate of Airworthiness (CofA). or an airworthiness certificate, is issued for

an aircraft by the national aviation authority in the state in which the aircraft is registered.
The airworthiness certificate attests that the aircraft is airworthy insofar as the aircraft
conforms to its type design.

Take-off alternate. An alternate aerodrome at which an aircraft can land should this
become necessary shortly after take-off and it is not possible to use the aerodrome of
departure.
En-route alternate. An aerodrome at which an aircraft would be able to land after
experiencing an abnormal or emergency condition while en route.

Destination alternate. An alternate aerodrome to which an aircraft may proceed should

it become impossible or inadvisable to land at the aerodrome of intended landing

Approach control unit (ACU). A unit established to provide air traffic control service to
controlled flights arriving at, or departing from, one or more airports.

Non-precision approach and landing operations. An instrument approach and

landing which utilizes lateral guidance but does not utilize vertical guidance.

Approach and landing operations with vertical guidance. An instrument approach

and landing which utilizes lateral and vertical guidance but does not meet the
requirements established for precision approach and landing operations.

Precision approach and landing operations. An instrument approach and landing

using precision lateral and vertical guidance with minima as determined by the category
of operation.

Categories of precision approach and landing operations:

Category I (CAT I) operation. A precision instrument approach and landing with a

decision height not lower than 60 m (200 ft) and with either a visibility not less than 800
m or a runway visual range not less than 550 m.

Category II (CAT II) operation. A precision instrument approach and landing with a
decision height lower than 60 m (200 ft), but not lower than 30 m (100 ft), and a runway
visual range not less than 350 m.

Category IIIA (CAT IIIA) operation. A precision instrument approach and landing with:

a) a decision height lower than 30 m (100 ft) or no decision height; and

b) a runway visual range not less than 200 m.

Category IIIB (CAT IIIB) operation. A precision instrument approach and landing with:

a) a decision height lower than 15 m (50 ft) or no decision height; and

b) a runway visual range less than 200 m but not less than 50 m. Category IIIC (CAT
IIIC) operation. A precision instrument approach and landing with no decision height
and no runway visual range limitations.

Approved maintenance organization (AMO). An organization approved by the

Philippine authority, in accordance with the requirements of Annex 6, Part I, Chapter 8 -
Aeroplane Maintenance, to perform maintenance of aircraft or parts thereof and
operating under supervision approved by the Philippine Republic.

Approved training organization (ATO). An organization approved by the Authority in

accordance with the requirements of CAR Part 3 to perform training (e.g.: flight crew
training) and operating under the supervision of the Authority (Civil Aviation Authority of
the Philippines).

Apron. A defined area, on a land airport, intended to accommodate aircraft for

purposes of loading or unloading passengers, mail or cargo, fuelling, parking or
maintenance.

Area navigation (RNAV). A method of navigation which permits aircraft operation on

any desired flight path within the coverage of station-referenced navigation aids or
within the limits of the capability of self contained aids, or a combination of these.

Automatic dependent surveillance (ADS). A surveillance technique in which aircraft

automatically provide, via a data link, data derived from on-board navigation and
position-fixing systems, including aircraft identification, four-dimensional position and
additional data as appropriate.

Decision altitude (DA) or decision height (DH). A specified altitude or height in the
precision approach or approach with vertical guidance at which a missed approach
must be initiated if the required visual reference to continue the approach has not been
established.

Defined point after take-off (DPATO). The point, within the take-off and initial climb
phase, before which the helicopter's ability to continue the flight safely, with one engine
inoperative, is not assured and a forced landing may be required.

Defined point before landing (DPBL). The point, within the approach and landing
phase, after which the helicopter's ability to continue the flight safely, with one engine
inoperative, is not assured and a forced landing may be required.

En-route phase. That part of the flight from the end of the take-off and initial climb
phase to the commencement of the approach and landing phase.

Factor of safety. A design factor used to provide for the possibility of loads greater than
those assumed, and for uncertainties in design and fabrication.

Final approach and take-off area (FATO). A defined area over which the final phase
of the approach manoeuvre to hover or landing is completed and from which the take-
off manoeuvre is commenced.

Final approach. That part of an instrument approach procedure which commences at

the specified final approach fix or point, or where such a fix or point is not specified,
(a) at the end of the last procedure turn, base turn or inbound turn of a racetrack
procedure, if specified; or

(b) at the point of interception of the last track specified in the approach procedure; and
ends at a point in the vicinity of an aerodrome from which

(1) a landing can be made; or

(2) a missed approach procedure is initiated.

Flight Data Analysis. A process of analysing recorded flight data in order to improve
the safety of flight operations.

Flight manual (FM). A manual, associated with the certificate of airworthiness,

containing limitations within which the aircraft is to be considered airworthy, and
instructions and information necessary to the flight crew members for the safe operation
of the aircraft.

Flight operations officer/flight dispatcher. A person designated by the operator to

engage in the control and supervision of flight operations, whether licensed or not,
suitably qualified in accordance with Annex 1, who supports, briefs, and/or assists the
pilot-in-command in the safe conduct of the flight.

Flight time — airplanes. The total time from the moment an airplane first moves for the
purpose of taking off until the moment it finally comes to rest at the end of the flight.

General aviation operation. An aircraft operation other than a commercial air transport
operation or an aerial work operation.

Ground handling. Services necessary for an aircraft=s arrival at, and departure from,
an airport, other than air traffic services.

Heading. The direction in which the longitudinal axis of an aircraft is pointed, usually
expressed in degrees from North (true, magnetic, compass or grid).

Instrument ground time. Time during which a pilot is practicing, on the ground,
simulated instrument flight in a flight simulation training device approved by the
Licensing Authority.

Landing decision point (LDP). The point used in determining landing performance
from which, a power-unit failure occurring at this point, the landing may be safely
continued or a balked landing initiated.

Maintenance program. A document which describes the specific scheduled

maintenance tasks and their frequency of completion and related procedures, such as a
reliability program, necessary for the safe operation of those aircraft to which it applies.
Maintenance release. A certification confirming that the maintenance work to which it
relates has been complied with in accordance with the applicable standards of
airworthiness, using approved data.

Minimum equipment list (MEL). A list which provides for the operation of aircraft,
subject to specified conditions, with particular equipment inoperative, prepared by an
operator in conformity with, or more restrictive than, the MMEL established for the
aircraft type.

Master minimum equipment list (MMEL). A list established for a particular aircraft
type by the organization responsible for the type design with the approval of the State of
Design containing items, one or more of which is permitted to be unserviceable at the
commencement of a flight.

NOTAM. A notice distributed by means of telecommunication containing information

concerning the establishment, condition or change in any aeronautical facility, service,
procedure or hazard, the timely knowledge of which is essential to personnel concerned
with flight operations.

Operations manual (OM). A manual containing procedures, instructions and guidance

for use by operational personnel in the execution of their duties.

Return to Service (RTS). A document signed by an authorized representative of an

approved maintenance organization (AMO) in respect of an inspection, repair or
modification on a complete aircraft, engine or propeller after it has received a
Maintenance Release for the maintenance performed at an AMO.

State of Design. The State having jurisdiction over the organization responsible for the
type design.

State of Manufacture. The State having jurisdiction over the organization responsible
for the final assembly of the aircraft.

State of Registry. The State on whose register the aircraft is entered.

State of the Operator. The State in which the operator's principal place of business is
located or, if there is no such place of business, the operator's permanent residence.

Take-off and initial climb phase. That part of the flight from the start of take-off to 300
m (1,000 ft) above the elevation of the FATO, if the flight is planned to exceed this
height, or to the end of the climb in the other cases.

Type Certificate. A document issued by a Contracting State to define the design of an

aircraft type and to certify that this design meets the appropriate airworthiness
requirements of that State.

VFR. The symbol used to designate the visual flight rules.

3.1.1.2

(1) Accountable manager. The manager who has corporate Authority for ensuring that
all training commitments can be financed and carried out to the standard required by the
Authority and any additional requirements defined by the ATO. The accountable
manager may delegate in writing to another person within the organization, the day to
day management but not the overall approval management responsibility.

The examples of an accountable manager are: the CEO, President, Managing Director,
Director General, General Manager, etc.

(2) Procedures manual. A manual containing procedures, instructions and guidance

for use by personnel of the Aviation Training Organization in the execution of their
duties in meeting the requirements of the certificate.

(3) Quality manager. The manager, acceptable to the Authority, responsible for the
management of the Quality system, monitoring function and requesting corrective
actions.

(4) Training manual. A manual containing the training goals, objectives, standards
syllabi, and curriculum for each phase of the approved training course. ICAO Doc 7192,
Part D-1.

(5) Training specifications. A document issued to an Aviation Training Organization

certificate holder by the Republic of the Philippines that specifies training program
requirements and authorizes the conduct of training, checking, and testing with any
limitations thereof.

3.1.2.2 APPLICATION FOR ISSUANCE OR AMENDMENT OF AN ATO

CERTIFICATE

(a) An applicant for an ATO certificate and training specifications shall apply at least 120
calendar
days before the beginning of any proposed training.

4.3.1.3 NATIONALITY AND REGISTRATION MARKS TO BE USED

(c) The nationality mark for Philippine registered aircraft is RP.

(d) The registration mark shall be a combination of letters and numbers assigned by the
Authority.

(e) The nationality and registration marks borne by aircraft shall consist of the following:

(1) The Roman capital letters "RP" immediately preceding identification number
for aircraft used solely for governmental purposes, and or belonging to the
 Philippine government, provinces, municipalities, or political subdivisions (except
those belonging to the Philippine Army).

(2) The Roman capital letters "RP-C" will classify aircraft, except gliders, as
complying fully with the airworthiness requirements as the case may be for the
purpose of carrying persons or property, for or without hire.

(3) Gliders complying fully with airworthiness requirements shall display the
Roman capital letters "RP-G" immediately preceding the license number or
numbers.

(4) The Roman capital letters "RP-R" will classify an aircraft as complying in
some limited respect with the airworthiness requirements as the case may be,
provided each deficiency is compensated for by means of suitable operation
limitations. The certificate of an aircraft in this classification will specify the use or
uses, for such aircraft is deemed airworthy by such use or uses, shall exclude
carrying of passengers, and shall be for industrial purposes only.

(5) The Roman capital letters "RP-X" will classify an aircraft as one which has
applied for an experimental certificate.

4.3.1.5 SIZE OF MARKS

(a) Each operator of an aircraft shall display marks on the aircraft meeting the size
requirements of this section.

(b) Height. The character marks shall be of equal height and on-

(1) Heavier-than-air aircraft, shall be at least:

(i) 50 centimeters high if on the wings; and

(ii) 30 centimeters high if on the fuselage (or equivalent structure) and vertical tail
surfaces.

(2) Lighter-than-air aircraft other than unmanned free balloons, shall be at least 50
centimeters high.

(3) Unmanned free balloons, shall be determined by the Authority taking into
consideration the size of the surface to which the identification plate is affixed.

(c) Width. Characters must be two-thirds as wide as they are high, except the number
"1", which must be one-sixth as wide as it is high, and the letters "M" and "W" which
may be as wide as they are high.

(d) Thickness. Characters shall be formed by solid lines one-sixth as thick as the
character is high.
(e) Spacing. The space between each character may not be less than one-fourth of the
character width.

(f) Uniformity. The marks required by this Part for fixed-wing aircraft must have the
same height, width, thickness, and spacing on both sides of the aircraft.

(g) Each operator of an aircraft penetrating an ADIZ or DEWIZ shall display on that
aircraft temporary or permanent nationality and registration marks at least 30
centimeters high.

4.3.1.7 LOCATION OF MARKS ON FIXED-WING AIRCRAFT

(a) Fuselage/Tail: The aircraft shall display the required marks on either the vertical tail
surfaces or the sides of the fuselage.

(b) The marks required by paragraph (a) of this section shall be displayed as follows:

(1) If displayed on the vertical tail surfaces, horizontally on both surfaces, horizontally on
both surfaces of a single vertical tail or on the outer surfaces of a multi-vertical tail.

(2) If displayed on the fuselage surfaces, horizontally on both sides of the fuselage
between the trailing edge of the wing and the leading edge of the horizontal stabilizer.

(3) If engine pods or other appurtenances are located in the area described in
paragraph (b)(2) and are an integral part of the aircraft, the operator may place the
marks on those pods or appurtenances.

(c) Wings: the marks shall appear once on the lower surface of the wing structure as
follows:

(1) Shall be located on the left half of the lower surface of the wing structure unless they
extend across the whole of the lower surface of the wing structure. So far as is possible,
the marks shall be located equidistant from the leading and trailing edges of the wings.

(2) The tops of the letters and numbers shall be toward the leading edge of the wing.

5.3.1.2 ISSUANCE OF A SUPPLEMENTAL TYPE CERTIFICATE

(a) Any person who alters a product by introducing a major change in type design, not
great enough to require a new application for a type certificate, shall apply for a
Supplemental Type Certificate to the regulatory agency of the State of Design that
approved the type certificate for that product, or to the State of Registry of the aircraft.
The applicant shall apply in accordance with the procedures prescribed by that State.

5.4.1.3 CLASSIFICATIONS OF CERTIFICATE OF AIRWORTHINESS

(a) Standard Certificate of Airworthiness will be issued for aircraft in the specific
category and model designated by the State of Design in the type certificate.
(b) The Authority may issue a Special Certificate of Airworthiness in the form of a
restricted certificate or special flight permit.

5.4.1.8 ISSUE OF STANDARD CERTIFICATE OF AIRWORTHINESS

(a) An applicant for a standard Certificate of Airworthiness for an import aircraft type
certificated in accordance with this Part is entitled to a Certificate of Airworthiness if the
country in which the aircraft was manufactured or previously registered certifies, and the
Authority finds, that:

(1) The applicant presents evidence to the Authority that the aircraft conforms to a type
design approved under a type certificate or a supplemental type certificate and to the
applicable Airworthiness Directives of the State of Manufacture;

(2) The aircraft has been inspected in accordance with the performance rules of this
regulation for inspections and found airworthy by persons Authorized by the Authority to
make such determinations within the last 30 calendar days; and

(3) The Authority finds after an inspection that the aircraft conforms to type design and
is in condition for safe operation

(b) The Authority may validate a Certificate of Airworthiness issued by another

Contracting State upon registration of the aircraft in Republic of the Philippines for the
period specified in that certificate.

5.4.1.9 AIRWORTHINESS DIRECTIVES

(a) Upon registration of an aircraft in the Republic of the Philippines, the Authority will
notify the State of Design of the aircraft of the registration in the Republic of the
Philippines, and request that the Authority receives any and all airworthiness directives
addressing that aircraft, airframe, aircraft engine, propeller, appliance, or component
part.

(b) Whenever the State of Design considers that a condition in an aircraft, airframe,
aircraft engine, propeller, appliance, or component part is unsafe as shown by the
issuance of an airworthiness directive by that State, the requirements of such directives
shall apply to the Republic of the Philippines registered civil aircraft of the type identified
in that airworthiness directive.

5.1.1.2 DEFINITIONS

(a) For the purpose of Part 5, the following definitions shall apply—

(1) Continuing Airworthiness. The set of processes by which an aircraft, engine,

propeller or part complies with the applicable airworthiness requirements and remains in
a condition for safe operation throughout its operating life. (21 March 2011)
(2) Major modification. Major modification means an alteration not listed in the aircraft,
aircraft engine, or propeller specifications – (1) that might appreciably affect weight,
balance, structural strength, performance, power-plant, operations, flight characteristics,
or other qualities affecting airworthiness; or (2) that is not done according to accepted
practices or cannot be done by elementary operations. Described in IS: 5.1.1.2(a)(1).

(3) Maintenance release. A certification confirming that the maintenance work to which it
relates has been complied with in accordance with the applicable standards of
airworthiness, using approved data.

(4) Major repair. Major repair means a repair: (1) that if improperly done might
appreciably affect weight, balance, structural strength, performance, power-plant,
operations, flight characteristics, or other qualities affecting airworthiness; or (2) that is
not done according to accepted practices or cannot be done by elementary operations.
(5) Modification. The alteration of an aircraft/aeronautical product in conformity with an
approved standard.

(6) Preventative maintenance. Simple or minor preservation operations and the

replacement of small standard parts, not involving complex assembly operations.

(7) Overhaul. The restoration of an aircraft/aeronautical product using methods,

techniques, and practices acceptable to the Authority, including disassembly, cleaning,
and inspection as permitted, repair as necessary, and reassembly; and tested in
accordance with approved standards and technical data, or in accordance with current
standards and technical data acceptable to the Authority, which have been developed
and documented by the State of Design, holder of the type certificate, supplemental
type certificate, or a material, part, process, or appliance approval under Parts
Manufacturing Authorization (PMA) or Technical Standard Order (TSO).

(8) Rebuild. The restoration of an aircraft/aeronautical product by using methods,

techniques, and practices acceptable to the Authority, when it has been disassembled,
cleaned, inspected as permitted, repaired as necessary, reassembled, and tested to the
same tolerances and limits as a new item, using either new parts or used parts that
conform to new part tolerances and limits. This work will be performed by only the
manufacturer or an organization approved by the manufacturer, and Authorized by the
State of Registry.

(9) Return to Service (RTS). A document signed by an authorized representative of an

approved maintenance organization (AMO) in respect of an inspection, repair or
modification on a complete aircraft, engine or propeller after it has received a
Maintenance Release for the maintenance performed at an AMO.
5.4.1.11.4 SPECIAL FLIGHT PERMITS

(a) A special flight permit may be issued for an aircraft that may not currently meet
applicable airworthiness requirements but is capable of safe flight, for the following
purposes:

(1) Flying the aircraft to a base where repairs, alterations, or maintenance are to be
performed, or to a point of storage.

(2) Delivering or exporting the aircraft.

(3) Production flight testing new production aircraft.

(4) Evacuating aircraft from areas of impending danger.

(5) Conducting customer demonstration flights in new production aircraft that have
satisfactorily completed production flight tests.

(b) A special flight permit may also be issued to authorize the operation of an aircraft at
a weight in excess of its maximum certificated takeoff weight for flight beyond the
normal range over water, or over land areas where adequate landing facilities or
appropriate fuel is not available. The excess weight that may be authorized under this
paragraph is limited to the additional fuel, fuel carrying facilities, and navigation
equipment necessary for the flight.

5.6.1.3 PERSONS AUTHORIZED TO PERFORM MAINTENANCE

(a) No person may perform any task defined as maintenance on an aircraft or

aeronautical products, except as provided in the following—

(1) A pilot licensed by the Authority may perform elementary work as specified in IS:
5.6.1.3 (a).

(2) A person working under the supervision of a aviation maintenance technician, may
perform the maintenance, preventive maintenance, and modifications that the
supervisory aviation maintenance technician is Authorized to perform—

(i) If the supervisor personally observes the work being done to the extent necessary to
ensure that it is being done properly, and

(ii) If the supervisor is readily available, in person, for consultation.

(3) A licensed aviation maintenance technician may perform or supervise the

maintenance or modification of an aircraft or aeronautical product for which he or she is
rated subject to the limitation of Part 2, Section 2.4.4 of these regulations.

(4) An AMO may perform aircraft maintenance within the limits specified by the
Authority.
(5) No AOC holder may perform aircraft maintenance unless approved under Part 6 of
these regulations.

(6) A manufacturer holding an AMO may—

(i) Rebuild or alter any aeronautical product manufactured by that manufacturer under a
type or production certificate;

5.6.1.4 AUTHORIZED PERSONNEL TO APPROVE FOR RETURN TO SERVICE

(a) No person or entity, other than the Authority, may approve an aircraft, airframe,
aircraft engine, propeller, appliance, or component part for return to service after it has
undergone maintenance, preventive maintenance, rebuilding, or modification, except as
provided in the following:

(1) A pilot licensed by the Authority may return his or her aircraft to service after
performing Authorized preventive maintenance.

(2) A licensed aviation maintenance technician may approve aircraft and aeronautical
products for return to service after he or she has performed, supervised, or inspected its
maintenance subject to the limitation of Part 2, Section 2.4.4 of these regulations.

(3) An AMO may approve aircraft and aeronautical products for return to service as
provided in the specifications approved by the Authority.

5.6.1.5 PERSONS AUTHORIZED TO PERFORM INSPECTIONS

(a) No person, other than the Authority, may perform the inspections required by
Subpart 8.2.1.7 for aircraft and aeronautical products prior to or after it has undergone
maintenance, preventive maintenance, rebuilding, or modification, except as provided in
the following:

(1) An aviation maintenance technician may conduct the required inspections of aircraft
and aeronautical products for which he or she is rated and current, except on aircraft
involved in commercial operations.

(2) An AMO may perform the required inspections of aircraft and aeronautical products
as provided in the specifications approved by the Authority.

5.7.1.3 APPROVAL FOR RETURN TO SERVICE AFTER MAINTENANCE

PREVENTIVE MAINTENANCE, REBUILDING, OR MODIFICATION

(a) No person may approve for return to service any aeronautical product that has
undergone maintenance, preventive maintenance, rebuilding, or modification unless—

(1) The appropriate maintenance record entry has been made;

(2) The repair or modification form Authorized by or furnished by the Authority has been
executed in a manner prescribed by the Authority;

(3) If a repair or modification results in any change in the aircraft operating limitations or
flight data contained in the approved aircraft flight manual, those operating limitations or
flight data are appropriately revised and set forth as prescribed.
 INTERNATIONAL ORGANIZATIONS AND LAWS

ICAO – INTERNATIONAL CIVIL AVIATION ORGANIZATION

FAA – FEDERAL AVIATION REGULATION
EASA – EUROPEAN AVIATION SAFETY AGENCY
ATA – AIR TRANSPORTATION ASSOCIATION OF AMERICA

WARSAW CONVENTION – 12 October 1929, the convention where the uniform rules
governing air carrier‘s liabilities in respect of passengers and goods carried in most
international flights were established.

CHICAGO CONVENTION - December 7, 1944, established the International Civil

Aviation Organization (ICAO). The document was signed on in Chicago, U.S., by 52
signatory states.

ROME CONVENTION – 7 October 1952, convention on damage caused by foreign

aircraft to third parties on the surface.

GUADALAJARA CONVENTION – 18 Spetember 1961, Convention Suppelementary to

the Warsaw Convention for the Unification of Certain Rules Relating to International
Carriage by Air Performed by a Person other than the Contracting Carrier

TOKYO CONVIENTION – 14 September 1963, Convention on Offences and Certain

Other Acts Committed On Board Aircraft, a convention held that provides that the state
of aircraft registry has jurisdiction over the crime commited on board the aircraft.

HAGUE CONVENTION – 16 December 1970, convention on hi-jacking or unlawful

seizure of aircraft hijacker is often referred to as serial piracy.

FREEDOMS OF THE AIR:

1st: right to fly over a foreign country without landing. (A-C, flying over B)
2nd: allows technical stops without the embarking or disembarking of passengers or
cargo. (A-C, refueling at B)
3rd: the right to fly from one's own country to another. (A-B)
4th: the right to fly from another country to one's own, (B-A)
5th: the right to fly between two foreign countries during flights while the flight originates
or ends in one's own country. (C-B-A, or A-B-C)
6th: the right to fly from a foreign country to another one while stopping in one's own
country for non-technical reasons. (B-A-C)
7th: the right to fly between two foreign countries while not offering flights to one's own
country. (B-C)
8th: the right to fly between two or more airports in a foreign country while continuing
service to one's own country. (B1-B2-A)
9th: the right to fly inside a foreign country without continuing service to one's own
country. (B1-B2)

*assume A=Home Country, B&C=Foreign Country, - indicating direction (to)

 ENGINEERING MANAGEMENT

MANAGEMENT

Is the art of getting things done through and with people in formally organized groups.
It is the art of creating the environment in which people can perform as individuals and
yet cooperate towards attainment of group's goals. It is the art of removing hindrances
to high performance, a way of optimizing efficiency to reach goals.

MANAGERIAL SKILLS

Technical skills involve process or technique knowledge and proficiency. Managers

use the processes, techniques and tools of a specific area skill.

Human skills involve the ability to interact effectively with people. Managers
interact and cooperate with employees.

Conceptual skills involve the formulation of ideas. Managers understand abstract

relationships, develop ideas and solve problems creatively.

PRODUCTIVITY

is the amount of output created in terms of goods produced or services rendered per
unit input used.

LEADERSHIP, ENTREPRENUERSHIP AND STRATEGY

Leadership

Defined as the social and informal sources of influence that you use to inspire action
taken by others. It means mobilizing others to want to struggle toward a common goal.

Entrepreneurship

Entrepreneurship is defined as the recognition of opportunities (needs, wants, problems,

and challenges) and the use or creation of resources to implement innovative ideas for
new, thoughtfully planned ventures.

Strategy

Is the central, integrated, externally-oriented concept of how an organization will

achieve its objectives.
LEVELS OF MANAGEMENT

Top Management

Top Management is the head of an organization. It consists of the Board of Directors

and the Chief Executive or Managing Director. In the operation of an organization, top
management is the final source of authority. It establishes policies, plans and
objectives.

Middle Management

Middle management generally consists of heads of functional departments. It is

concerned with the task of implementing the policies and plans laid down by the top
management. Also serves as link from the top management to lower management.

Lower Management (Supervisory Level)

Supervisory management is the lowest level in the hierarchy of management. It consists

of supervisors, foremen, accounts officers, sales officers and so on. They are directly
concerned with the control of the performance of the operative employees. They assign
specific jobs to the workers, evaluate their performance and report to the middle level
management.

Types of Managers

Lline manager leads a function that contributes directly to the products or services the
organization creates.

Staff manager, in contrast, leads a function that creates indirect inputs.

Project manager has the responsibility for the planning, execution, and closing of any
project.

General manager is someone who is responsible for managing a clearly identifiable

revenue-producing unit, such as a store, business unit, or product line. General
managers typically must make decisions across different functions and have rewards
tied to the performance of the entire unit

P-O-L-C FRAMEWORK

PLANNING

Planning is the function of management that involves setting objectives and

determining a course of action for achieving those objectives. Planning requires that
managers be aware of environmental conditions facing their organization and forecast
future conditions. It also requires that managers be good decision makers.

There are many different types of plans and planning.

Strategic planning involves analyzing competitive opportunities and threats, as well as

the strengths and weaknesses of the organization, and then determining how to position
the organization to compete effectively in their environment. Strategic planning has a
long time frame, often three years or more. Strategic planning generally includes the
entire organization and includes formulation of objectives. Strategic planning is often
based on the organization‘s mission, which is its fundamental reason for existence. An
organization‘s top management most often conducts strategic planning.

Tactical planning is intermediate-range (one to three years) planning that is designed

to develop relatively concrete and specific means to implement the strategic plan.
Middle-level managers often engage in tactical planning. Operational planning generally
assumes the existence of organization-wide or subunit goals and objectives and
specifies ways to achieve them.

Operational planning is short-range (less than a year) planning that is designed to

develop specific action steps that support the strategic and tactical plans.

ORGANIZING

Organizing is the function of management that involves developing an organizational

structure and allocating human resources to ensure the accomplishment of objectives.
The structure of the organization is the framework within which effort is coordinated.
The structure is usually represented by an organization chart, which provides a graphic
representation of the chain of command within an organization. Decisions made about
the structure of an organization are generally referred to as organizational design
decisions.
Organizing also involves the design of individual jobs within the organization. Decisions
must be made about the duties and responsibilities of individual jobs, as well as the
manner in which the duties should be carried out. Decisions made about the nature of
jobs within the organization are generally called ―job design‖ decisions. Organizing at
the level of the organization involves deciding how best to departmentalize, or cluster,
jobs into departments to coordinate effort effectively. There are many different ways to
departmentalize, including organizing by function, product, geography, or customer.
Many larger organizations use multiple methods of departmentalization. Organizing at
the level of a particular job involves how best to design individual jobs to most
effectively use human resources. Traditionally, job design was based on principles of
division of labor and specialization, which assumed that the more narrow the job
content, the more proficient the individual performing the job could become.

LEADING

Leading involves the social and informal sources of influence that you use to inspire
action taken by others. If managers are effective leaders, their subordinates will be
enthusiastic about exerting effort to attain organizational objectives. The behavioral
sciences have made many contributions to understanding this function of management.
Personality research and studies of job attitudes provide important information as to
how managers can most effectively lead subordinates. For example, this research tells
us that to become effective at leading, managers must first understand their
subordinates‘ personalities, values, attitudes, and emotions.

CONTROLLING

Controlling involves ensuring that performance does not deviate from standards.
Controlling consists of three steps, which include (1) establishing performance
standards, (2) comparing actual performance against standards, and (3) taking
corrective action when necessary. Performance standards are often stated in monetary
terms such as revenue, costs, or profits but may also be stated in other terms, such as
units produced, number of defective products, or levels of quality or customer service.
The measurement of performance can be done in several ways, depending on the
performance standards, including financial statements, sales reports, production results,
customer satisfaction, and formal performance appraisals. Managers at all levels
engage in the managerial function of controlling to some degree.
 AIR TRANSPORT ECONOMICS

AIR TRANSPORT INDUSTRY

PRODUCERS:

MANUFACTURERS – Airframe/Engines, Mechanical Systems, Aircraft Parts, Materials

etc.

GOVERNMENT – Legislative Bodies, Regulatory Bodies, Customs, Immigration.

AVIATION SERVICES – Insurance/Leasing/Sales, Distribution, Suppliers, Aircraft

Maintenance/Fuel and Oil, Consultants.

AIRLINES – Major/Regional/Charter, Operators/Air Cargo, General Aviation Etc.

AIRPORT SERVICES – Major Airports, Maintenance/Catering, ATC Services etc.

CONSUMERS:

PASSENGERS – Human

FREIGHT – Mail, Cargo Forwarders etc.

Legacy Airlines – more expensive and higher comfort airlines.

Low Cost Carrier - is an airline that generally has lower fares and fewer comforts.

Hub and Spoke Operation – large airport to smaller airport operations.

Commonality - operating a standardized fleet of aircraft that share common parts,

training requirements, or other characteristics.

Wet Lease - is a leasing arrangement whereby one airline (lessor) provides an aircraft,
complete crew, maintenance, and insurance (ACMI) to an airline [or other type of
business acting as abroker of air travel] (the lessee), which pays by hours operated.

Dry Lease - is a leasing arrangement whereby an aircraft financing entity, such

as GECAS and ILFC (lessor), provides an aircraft without insurance, crew, ground staff,
supporting equipment, maintenance, etc.

AIRLINE FORECASTING

FORECAST - is the process of making statements about events whose actual

outcomes (typically) have not yet been observed.
 ENGINEERING ECONOMICS

BASIC DEFINITIONS

Banknote - a promissory note issued by a bank that is payable to the bearer on

demand and is acceptable as money.

Bond - A financial security which represents the promise of its issuer (usually a
company or a government) to repay a loan over a specified time period, at a specified
rate of interest. The bond can then be bought and sold to other investors, over and over
again.

Capital expenditure - money spent on capital assets such as property, machines and
furniture. Also called capital investment, capital outlay.

Capital Gain - is a form of profit earned on an investment by re-selling an asset for

more than it cost to buy. Assets which may be purchased for this purpose include
stocks, bonds, and other financial assets; real estate; commodities; or fine art.

Capital stock the total value of physical stock and fixed assets in a country or firm.

Deflation - reduction in economic activity, resulting in falls in output, wages, prices and
similar effects, either caused by a fall in demand or created when a government
reduces money supply or lowers interest rates

Depreciation - loss of value of a currency when compared to other currencies. the

writing down of the capital value of an asset over a period of time in a company‘s
accounts.

Discount rate - the percentage used in a discounting calculation, such as to find the
present value of future income.

Economic Return - Interest rate at which the cost and benefits of a project, discounted
over its life, are equal. ERR differs from the financial rate of return in that it takes
into account the effects of factors such as price controls, subsidies, and tax breaks to
compute the actual cost the project to the economy.

Equity - A stock or any other security representing an ownership interest.

Gross margin - the percentage difference between the unit manufacturing cost and the
received price

Gross profit - profit calculated as sales income less the cost of sales

Inflation - a situation in which prices rise to keep up with increased production costs,
with the result that the purchasing power of money falls Inflation affects businesses, in
that as their costs rise, so their profits may fall and it is necessary to take this into
account when pricing products
Interest rate - is the rate at which interest is paid by borrowers for the use of money that
they borrow from a lender.

Loan - an amount of money which has been lent.

Market – refers to the place where sellers and buyers come together.

Net income - the total earnings of a business after tax and other deductions. Also
called net earnings

Net profit - the result where income from sales is more than all expenditure. Also called
profit after tax

Profit - money gained from a sale which is more than the money spent. This is the
surplus left over after a company sells its output, and pays off the cost of production
(including labour costs, raw materials, and a proportional share of its capital equipment).

Return of capital (ROC) - refers to principal payments back to "capital owners"

(shareholders, partners, unitholders) that exceed the growth (net income/taxable
income) of a business or investment.

Rate of Return (ROR) - measures a gain or loss on an investment. Is the interest

earned on the unpaid balance of an amortized loan.

Stock - the quantity of goods for sale or kept available for use 2. The total number of
shares issued by a company 3. a share of capital held by an individual investor.

Tariff - a tax to be paid on imported goods.

Yield - is the rate of return received from investing in the bond

ECONOMICS PROPER

MARKET STRUCTURES:

Perfect competition - a theoretical market structure that features no barriers to entry,

an unlimited number of producers and consumers, and a perfectly elastic demand
curve.

Oligopoly - in which a market is by a small number of firms that together control the
majority of the market share.

Oligopsony- a market where many sellers can be present but meet only a few buyers.

Monopoly - where there is only one provider of a product or service.

Monopsony - when there is only one buyer in a market.

METHODS OF COMPUTING DEPRECIATION

Straight-line depreciation - is the simplest and most often used method. In this
method, the company estimates the salvage value(scrap value) of the asset at the end
of the period during which it will be used to generate revenues (useful life).

Declining-balance method - the salvage value is not considered in determining the

annual depreciation, but the book value of the asset being depreciated is never brought
below its salvage value, regardless of the method used.

Annuity depreciation - methods are not based on time, but on a level of Annuity. This
could be miles driven for a vehicle, or a cycle count for a machine. When the asset is
acquired, its life is estimated in terms of this level of activity.

Sum-of-years-digits (SYD)- is a depreciation method that results in a more accelerated

write-off than the straight line method, and typically also more accelerated than the
declining balance method. Under this method the annual depreciation is determined by
multiplying the depreciable cost by a schedule of fractions.

FACTORS OF PRODUCTION

Land - comprises all naturally occurring resources whose supply is inherently fixed.

Capital - property, assets and finished goods used in a business. It is one of the four
factors of production.

Labor — human effort used in production which also includes technical and marketing
expertise. Deals with everybody that works within the company.
Enterprise – the entrepreneur.

TYPES OF BUSINESS ORGANIZATIONS

Sole Proprietorship - The vast majority of small businesses start out as sole
proprietorships. These firms are owned by one person, usually the individual who has
day-to-day responsibility for running the business. Sole proprietorships own all the
assets of the business and the profits generated by it.
Partnerships - In a Partnership, two or more people share ownership of a single
business. Like proprietorships, the law does not distinguish between the business and
its owners. The Partners should have a legal agreement that sets forth how decisions
will be made, profits will be shared, disputes will be resolved, how future partners will be
admitted to the partnership, how partners can be bought out, or what steps will be taken
to dissolve the partnership when needed.
Corporation - A corporation is a form of business established as an independent legal
entity, separate from the individuals who own it. A major benefit, for the owners, of this
form of business is that it provides for limited liability for its owners: potential losses
resulting from their ownership of the company (should it lose money, face legal
difficulties, or experience other problems) are limited to the amount initially invested by
the owners. The owners‘ other personal wealth is kept separate and protected from
claims against the corporation.
Cartel - is a formal (explicit) "agreement" among competing firms. It is a formal
organization of producers and manufacturers that agree to fix prices, marketing, and
production.
TYPES OF ASSETS
Tangible assets - are those that have a physical substance, such as
currencies, buildings, real estate, vehicles, inventories, equipment, and precious metals
Intangible assets - have been argued to be one possible contributor to the disparity
between company value as per their accounting records, and company value as per
their market capitalisation.
Fixed assets - also known as a non-current asset or as property, plant, and
equipment (PP&E), is a term used in accounting for assets and property that cannot
easily be converted intocash. This can be compared with current assets such as cash or
bank accounts, which are described as liquid assets.

TYPES OF BONDS
Performance Bond - is a surety bond issued by an insurance company or a bank to
guarantee satisfactory completion of a project by a contractor.
Coupon Bond - A debt obligation with coupons attached that represent semiannual
interest payments. Also known as a "bearer bond."
Collateral Trust Bond - in which the security consists of intangible property,
Joint Bond - A bond that is guaranteed by a party other than the issuer. A joint bond is
an issue which is essentially a liability to multiple parties.
Mortgage Bond - is a bond backed by a pool of mortgages on a real estate asset such
as a house
Equipment Obligation Bond – bond whose guaranty is in line on railroad equipment,
such as freight and passenger cars.
Debenture Bond- type of bond where the orporation pedges securities which it owns
such as stock or bonds of one of its subsidiaries.
Registered Bond- type of bond where the corporation‘s owners name are recorded and
the interest is paid periodically to the owners with their asking for it.

TYPES OF VALUE
Book value - the value at which an asset is carried on a balance sheet; equals cost
minus accumulated depreciation

Fair value - is a rational and unbiased estimate of the potential market price of a good,
service, or asset.

Salvage/scrap value - the remaining value of an asset after it has been fully
depreciated.

Market value - The value of a product, building etc based on the price that people are
willing to pay for it, rather than the cost of producing it or building it; the total value of all
the SHAREs on a STOCK MARKET, or the value of a particular company's shares.

Goodwill value - is the value of an asset owned that is intangible but has a quantifiable
"prudent value" in a business, such as a reputation the firm enjoys with its clients.

TYPES OF STOCK
Common Stock - A security that represents ownership in a corporation. Holders of
common stock exercise control by electing a board of directors and voting on
corporate policy. Common stockholders are on the bottom of the priority ladder for
ownership structure.

Authorized Stock - The maximum number of shares that a corporation is legally

permitted to issue, as specified in its articles of incorporation. This figure is usually
listed in the capital accounts section of the balance sheet.

Preferred Stock - A class of ownership in a corporation that has a higher claim on

the assets and earnings than common stock. Preferred stock generally has a
dividend that must be paid out before dividends to common stockholders and the
shares usually do not have voting rights.

TYPES OF FINANCIAL STATEMENT

Balance Sheet - shows the health of a business from day one to the date on the
balance sheet. Balance Sheets are always dated on the late day of the reporting period.

Statement Of Cash Flows - shows the ins and outs of cash during the reporting period.

Income Statement - shows all items of income and expense for your arts or crafts
business.

Statement of Changes in Equity ( Statement of Retained Earnings) – details the

movement in the owner‘s equity over a period.
Engineering Economics
INTEREST
It is the amount of money earned by a given capital.
Borrower’s viewpoint: Amount of money paid for the use of a borrowed capital.
Lender’s viewpoint: Income generated by the capital that was lent.

CASH FLOW DIAGRAM

Cash flow diagrams may be drawn to help visualize and simplify problems having diverse receipts and
disbursements.

Cash Flow Diagram Conventions

• The horizontal (time) axis is marked off in equal increments, one per period up to the duration
of the project.
• All disbursement and receipts (cash flow) are assumed to take place at the end of the year in
which they occur. This is known as the year-end convention. The exception is the initial cost
(purchase cost) which occur at t=0
• Two or more transfers in the same period placed end to end may be combined into one.
• Receipts and disbursement are represented by arrows on opposite sides of the horizontal time
axis.

Ex: An electronic equipment costs P30, 000. Maintenance cost is P3, 000 per year. The device will
generate revenues of P15,000 each year for 5 years after which the salvage value is expected to be
P12,000. Draw and simplify the cash flow diagram.

The following shows the cash flow diagram for each transaction:

The simplified cash flow diagram is as follows:

SIMPLE INTEREST
In simple interest, the interest earned by the principal is computed at the end of the investment period,
and thus, it varies directly with time.

Ordinary and Exact Simple Interest

In ordinary simple interest, the interest is computed on the basis of one banker’s year.
1 banker’s year = 12 months
 (30 days each month) = 360 days
In exact simple interest, the interest is based on the exact number of days of the year, where there are
365 days for an ordinary year and 366 days for leap years.

Leap year occurs every 4 years. These are years that are exactly divisible by four, except century marks
(1800, 1900, etc.) but not including those that are exactly divisible by 400 (2000, 2400, etc.)

Elements of simple interest

P = principal or present worth

I = interest earned
F = future worth = P + I
r = simple interest rate (per year)
t = time in years or fraction of a year

Note: P may stand for the amount borrowed or invested, while F may stand for the amount tobe paid or
amount accumulated.

Value of t:

Example:
4 years; t = 4
3 months; t = 3/12 = ¼
90 days
Ordinary simple interest, t = 90/360
Exact simple interest, t = 90/365
Or 90/366 for leap years
2 years & 4 months;
t = 2 + 4/12 = 2.333

SAMPLE PROBLEMS FOR SIMPLE INTEREST

Find the interest on P6800.00 for 3 years at 11% simple interest.

A man borrowed P10,000.00 from his friend and agrees to pay at the end of 90 days under 8% simple
interest rate. What is the required amount?

What is the principle amount if the amount of interest at the end of 2½ year is P4500 for a simple
interest of 6% per annum?
How long must a 40,000 note bearing 4% simple interest run to amount to P41,350.00

COMPOUND INTEREST
In compound interest, the interest is computed every end of each interest period (compounding period),
and the interest earned for that period is added to the principal (interest plus principal).
To demonstrate these consider an investment of P1000 to earn 10% per year for three years. The
following diagram shows how the money grows.

Elements of compound interest

P = present worth or principal
F = future worth or compound amount
i = effective interest per compounding period (per interest period)
= r/m
n = total number of compounding
n=txm
I = interest earned
=F–P
r = nominal interest rate
ER = effective interest
t = number of years of investment
m = number of compounding per year

After n periods, the compound amount F is:

The expression (1+i)n, also denoted as (F/P, i, n) is called the single payment compound-amount factor.

The present worth of F is

The expression 1/(1+i)n, also denoted as (P/F, i, n) is called the single payment present-amount factor.

Values of i and n:
The values of i and n can be demonstrated from the following example:

Nominal interest rate, r = 12%

Number of years of investment, t = 5 years

Compounded annually (m = 1) n = 5(4) = 20

i = 0.12/1 = 0.12 Compounded monthly (m = 12)
n = 5(1) = 5 i = 0.12/12 = 0.01
Compounded semi-annually (m = 2) n = 5(12) = 60
i = 0.12/2 = 0.06 Compounded bi-monthly (m = 6)
n = 5(2) = 10 i = 0.12/6 = 0.02
Compounded quarterly (m = 4) n = 5(6) = 30
i = 0.12/4 = 0.03
Continuous compounding (m → ∞)
Interest may be compounded daily, hourly, per minute, etc. As a limit, interest may be considered to be
compounded an infinite number of times per year (m → ∞)
The future worth of P at an interest rate of r compounded continuously for t years is:

Nominal and effective rates of interest

Nominal rate is the rate quoted in describing a given variety of compound interest. Consider a bank
deposited of P1000 to earn 6% compounded quarterly. After one year, the compound amount F is:
F = P (1 + i)n
= 1000 (1 + 0.06/4)1 x 4
F = P 1061.36
Notice that the interest earned is P61.36 representing 6.136% of P 1000 (not 6% of P1000). For this case,
6% (compounded quarterly) is called the nominal rate and 6.136% is the effective rate.
Thus the effective rate of interest (ER) is the actual interest earned in one year period.
This can be computed from the following:

Thus, the effective rate of 6% compounded quarterly is, ER = (1 + 0.06/4) 4 – 1 = 0.06136%

The effective rate of r (%) compounded continuously is:

Equivalent nominal rates

Two nominal rates are equal if they have the same effective rate.
Consider a nominal interest rate of 10% compounded quarterly. The equivalent nominal rate
compounded monthly is:

ERM = ERO
(1 + r/12)12 – 1 = (1 + 0.10/4)4 – 1
r = 0.09918 = 9.918%

Thus, 10% compounded quarterly will have the same effect as 9.918% compounded monthly.

SAMPLE PROBLEMS FOR COMPOUND INTEREST

Accumulate P5,000 for 10 years compounded (a) quarterly (b) semi-annually (c) monthly (d) annually.
How long will it take for an investment to double its amount if invested at an interest rate of 6%
compounded bi-monthly?
What is the effective rate for an interest rate of 12% compounded continuously?

How much must be invested on January 2, year 1, in order to accumulate P2,000.00 on January 1, year 6
at 6%?

ANNUITY
Annuity is a series of uniform payments made at equal intervals of time.
Annuities are established for the following purposes:
1. As payment of a debt by a series of equal payment at equal time intervals, also known as
amortization.
2. To accumulate a certain amount in the future by depositing equal amounts at equal time
intervals. These amounts are called sinking fund.
3. As a substitute periodic payment for a future lump sum payment.

Elements of Annuity
A = periodic payment
P = present worth of all periodic payments
F or S = future worth or sum of all the periodic payments after the last payment is made.
i = interest rate per payment
n = number of payments

Types of annuity

Ordinary annuity
In ordinary annuity, the payment is made at the end of each period starting from the first period, as the
diagram shown below:
0 1 2 3 4 n

A A A A A
F
P

The future worth if A is:

The factor [(1 + i)n – 1]/i is called equal-payment series compound-amount factor and is denoted as
(F/A,i,n)

The value of A if F is known is:

The factor i/[(1 + i)n – 1] is called equal-payment series sinking-fund factor and is denoted as (A/F, i, n)

The present worth of A is

The factor (1 + i)n / [(1 + i)n – 1] is called equal-payment series present-worth factor and is denoted as
(P/A, i, n)

The value of A with known P is

The factor (1 + i)ni / [(1 + i)n – 1] is called equal-payment series capital-recovery factor and is denoted as
(P/A, i, n)

SAMPLE PROBLEMS FOR ORDINARY ANNUITY

If money is worth 4% compounded monthly, what payment at the end of each quarter will replace
payments of P500.00 monthly?

What amount would have to be invested at the end of each year for the next 8 years at 4% compounded
semi-annually in order to have P5,000 at the end of the time?
 Deferred Annuity

In this type, the first payment is deferred a certain number of periods after the first.

0 1 2 3 4 5

A A A A
F
n =4
P’

P n=5

For the diagram shown above:

or

SAMPLE PROBLEM FOR DEFFERED ANNUITY

A man borrowed P200,000 from a bank at 12% compounded monthly, which is payable monthly for 10
years (120 payments). If the first payment is to be made after 3 months, how much is the monthly
payment?
Annuity Due

0 1 2 3 4 n

A A A A A A
F
n =6
P

n =5

The payment is made at the beginning of each period starting from the first period.
From the diagram shown:

or

SAMPLE PROBLEM FOR ANNUITY DUE

An avionics equipment cost P120,000 if paid in cash. Theequipment may also be purchased by
installment to be paid within 5 years. If money is worth 8%, determine the amount of each annual
payment, if all payments are made at the beginning of each year.

Perpetuity

Perpetuity is an annuity where the payment periods extend forever or the periodic payments continue
indefinitely.

If the payment is made at the end of each period starting from the first period, the present worth of
perpetuity A is:

SAMPLE PROBLEMS FOR PERPETUITY

If money is worth 8%, determine the present value of a perpetuity of P1,000 payable annually, with the
first payment due at the end of 5 years.

Find the present value in pesos, of a perpetuity of P15,000 payable semi-annually if the money is worth
8%, compounded quarterly.

CAPITALIZED COST AND ANNUAL COST

Capitalized cost is an application of perpetuity. The capitalized cost of a project or structure is the sum
of the first cost (FC) and the present worth of all future payments and replacements which is assumed to
continue forever.

If a project requires first cost (FC), annual operation and maintenance (OM) for n years, a salvage value
(SV) after every n years, and replenishment cost (RC) after every end of n years, then the capitalized cost
(K) is:

Capitalized cost, K

RC may be taken as equal to FC if not specified in the problem.

Capitalized cost may also be defined as the first cost plus the present worth of annual maintenance and
operation cost plus the present worth of depreciation assumed to continue forever.

The annual cost of a project is then:

Annual cost, AC = Ki

or AC = Annual interest on investment + Annual operation and maintenance + Annual depreciation cost

Example

A machine costs P300,000 new, and must be replaced at the end of each 15 years. If the annual
maintenance required is P5,000.00 find the capitalized cost, if money is worth 5% and the final salvage
value is P50,000

SAMPLE PROBLEMS FOR CAPITALIZED COST

Determine the capitalized cost of an equipment costing P2M with an annual maintenance of P200,000 if
money is worth 20% per annum.
An item is purchased for P100,000. Annual costs are P18,000. Using 18%, what is the capitalized cost of
perpetual service?

Cost comparison of Different Alternatives

If two or more different articles are available for the same purpose, they are equally economical if the
corresponding annual or capitalized costs are the same.

Example
A certain equipment costs P150,000, lasts for 6 years, and has a salvage value of P30,000. How much
could an investor afford to pay for another machine for the same purpose, whose life is 10 years and
salvage value is P40,000, if money is worth 5%?

DEPRECIATION

Depreciation is the decrease in the value of an asset, due to usage of passage of time. An asset may
depreciate physically or functionally.

Elements of depreciation

FC = First Cost
SV = Salvage Value
d = depreciation charge
n = life of the property in years
m = anytime before n
BVm = Book Value after m years
Dm = total depreciation for m years

The following diagram shows the cost of the property plotted against time

m
Cost

Dm
Cost Curve D
FC
BVm
SV

time

The book value at any time is:

Methods of computing Depreciation

Straight Line Depreciation

It is assumed that the cost of property varies linearly with time

Sinking Fund Method

Sum of the Years Digit Method (SOYD)

Constant percentage

Double declining Balance Method

SAMPLE PROBLEMS FOR DEPRECIATION

What is the value of an asset after 8 years of use if it depreciates from its original value of P120,000 to
its salvage value of 3% in 12 years?

A man bought an equipment which cost P524,000. Freight and installation expenses cost him P31,000. If
the life of the equipment is 15 years with an estimated salvage value of P120,000, find its book value
after 8 years.

An equipment costing 250,000 has an estimated life of 15 years with a book value of P30,000 at the end
of the period. Compute the depreciation charge and its book value after 10 years using (a) straight line
method (b) sinking fund method assuming i = 8% (c) declining balance method (d) sum of year’s digit
method.