COA: Aerospace GOCC losses reach P177.9 M

MANILA, Philippines — The Philippine Aerospace Development Corp. (PADC), a government-owned and controlled corporation (GOCC) established in 1973 tasked to develop and maximize the country’s aviation and aerospace industry, is losing money.

From 2013 to 2018, the Commission on Audit (COA) noted in a report released last week that the corporation’s financial losses reached P177.904 million. 

PADC is no longer performing its core mandate, the COA said. State auditors added that a review of PADC’s structure, policies, financial capability and business market would determine the sustainability and economic viability of its existence.

Interviews with PADC personnel, the COA said, disclosed that although the corporation was able to perform its core mandate, particularly in the 1980s and 1990s, revenue or earnings declined over the years, especially from 2013 to 2017, when its losses reached P149.615 million. 

“(Last year was) no different as PADC’s sales revenue totaled only P5.918 million, with cost of sales and operating expenses of P34.207 million, resulting in operating losses of P28.289 million,” the COA auditors said.

The COA report also said PADC’s existence is sustained by the three hangars being leased by Cebu Pacific and eight others located and installed in the properties of Manila International Airport Authority, which are leased to PADC. 

State auditors said rental income from the properties last year aggregated P43.448 million, which compensated for PADC’s current operational loss of P28.289 million, resulting in a positive net income for the corporation last year.

Other factors contributing to the loss of PADC’s revenue opportunities include absence of tax clearance due to cases filed by the Bureau of Internal Revenue (BIR) against the corporation in 2003 and 2004, which remain unsettled.

Tax clearance is a mandatory requirement of Republic Act 9184 in the conduct of public bidding, from which PADC has been barred.

The COA report added that PADC has poor facilities and no landline and internet connection until last February, has offices and rooms that are in poor condition and do not portray a reputable business image for the GOCC and no service vehicles.

State auditors revealed that PADC was blacklisted by the Philippine Navy last year for failure to deliver and comply with conditions of its contract.

“It is clear that PADC is no longer performing and carrying out its principal/core mandate,” the audit team concluded, pointing out that its abolition was raised in one of the meetings of the Governance Commission for GOCCs in January 2018.

One of PADC’s directors opposed the proposal and instead recommended its revitalization.

The COA report said PADC should perform a review of its structures, policies, business market and the viability of its continuous operation, submit the results to the governing board and initiate immediate action to address the problems contributing to its losses.

Responding to the COA’s findings and recommendations, PADC’s president and chief executive officer issued directives to his officers and personnel to propose a settlement of their tax liabilities and secure tax clearance from the BIR.

PADC said it would submit all the requirements to the Civil Aviation Authority of the Philippines for the renewal of its Approved Maintenance Organization Certificate.

It also told the COA that the blacklist order of the Navy has been shelved, adding PADC will be doing business with the Armed Forces of the Philippines (AFP) branch as well as the Philippine State College of Aeronautics.

“The supervision of PADC had been transferred to the Department of National Defense effective March 15, 2019, thus major developments are expected to happen, considering the number of air assets maintained by the AFP,” PADC added.