Aircraft Leasing in the Philippines (2026): Navigating EO No. 113 (13th FINL) for Lessors & Investors

Aircraft leasing in the Philippines entered a new compliance era on April 16, 2026, when the President promulgated Executive Order No. 113, s. 2026, introducing the Thirteenth Regular Foreign Investment Negative List (13th RFINL). For foreign lessors, lenders, and aviation investors, the immediate question is whether existing and planned lease structures, ownership arrangements, and aircraft registrations remain lawful, or require restructuring. This guide provides a regulator-by-regulator implementation roadmap, sample clauses, and a red-flag matrix so deal teams can close transactions with confidence under the updated framework.

Key Takeaways

• EO No. 113 took effect on April 16, 2026. Only activities expressly listed in the attached 13th RFINL are reserved to Philippine nationals; all other activities remain open to 100 % foreign equity under RA 7042, as amended.
• Aircraft leasing itself is not a reserved activity on the 13th RFINL. Foreign lessors may continue to own aircraft and lease them to Philippine operators, subject to CAAP, CAB, and BIR requirements.
• Domestic air transport operations remain constitutionally restricted to entities at least 60 % Filipino-owned, per the 1987 Constitution and the Philippine Air Commerce Act.
• CAAP Advisory Circular 09-006 governs the application and process for all aircraft leasing arrangements involving Philippine-registered operators.
• The Philippine Competition Commission (PCC) may require merger-clearance notifications for large aircraft asset purchases that breach compulsory notification thresholds.
• Anti-dummy exposure remains a critical risk. Structures that allow a foreign party to exercise operational control over a Philippine airline, even through contractual covenants in a lease, can trigger criminal liability under the Anti-Dummy Law (Commonwealth Act No. 108, as amended).

What Changed: EO No. 113 (13th RFINL), Plain-Language Summary

Executive Order No. 113, s. 2026, promulgated April 16, 2026, replaced the 12th Regular Foreign Investment Negative List and updated the catalogue of economic activities in which foreign ownership is restricted or prohibited in the Philippines. For aviation deal teams, the practical question is whether the new list altered the ownership or operational parameters that apply to aircraft leasing in the Philippines.

Timeline and Authoritative References

The EO was signed on April 13, 2026, and took effect upon publication in the Official Gazette on April 16, 2026. The full text is accessible via the Supreme Court E-Library. Section 1 of EO No. 113 provides that “only the investment areas and/or activities listed in the attached 13th RFINL shall be reserved to Philippine nationals, subject to the exceptions and conditions indicated therein.”

Aviation-Relevant Sectors and Ownership Caps

The 13th RFINL retains the longstanding constitutional and statutory restrictions that most directly affect aviation investment in the Philippines. The 1987 Constitution limits foreign ownership in public utilities and the operation of domestic air transport to 40 % foreign equity. The Philippine Air Commerce Act further requires that airlines operating domestic routes be at least 60 % Filipino-owned. These provisions were carried forward without material change into the 13th RFINL.

Critically, the act of leasing aircraft to a Philippine operator, as opposed to operating the airline itself, is not listed as a reserved activity. This distinction is the structural foundation on which cross-border aircraft leasing in the Philippines has been built, and it remains intact under EO No. 113. Industry observers expect this to sustain the continued growth of foreign lessor participation in Philippine aviation.

However, the 13th RFINL did update certain List B restrictions that may peripherally affect aviation investors, including activities regulated for reasons of security, defence, and public health, so counsel should verify the full list against the specific transaction structure in question.

Can Foreign Lessors Own, Register, or Operate Aircraft in the Philippines?

Foreign aircraft lessors can lawfully own aircraft and lease them to Philippine operators under the 13th RFINL framework, but ownership, registration, and operational control are governed by distinct legal regimes, and conflating them is a common source of compliance risk in aircraft leasing in the Philippines.

Ownership vs. Registration, The Legal Distinction

Under Philippine law, there is no prohibition on a foreign entity holding legal title to an aircraft. A foreign lessor incorporated in Ireland, Singapore, or the Cayman Islands may own an aircraft and lease it to a Philippine carrier under a dry lease or finance lease without breaching the Foreign Investment restrictions, because the act of owning and leasing the asset does not constitute the operation of an airline.

Registration, however, follows CAAP rules. An aircraft operated by a Philippine air operator’s certificate (AOC) holder must typically be registered with the CAAP. The registration reflects the operator, not necessarily the owner. The foreign lessor’s ownership interest is protected through the lease agreement, security filings, and, where applicable, registration on the International Registry under the Cape Town Convention, which the Philippines has not yet ratified. This gap makes contractual protections and local security filings especially important for foreign lessors.

CAAP and CAB Rules for Leased Aircraft Registration

The Civil Aviation Authority of the Philippines (CAAP) issued Advisory Circular 09-006, which sets out the application and process for aircraft leasing arrangements. Under AC 09-006, a Philippine AOC holder seeking to operate a leased aircraft must submit the lease agreement and supporting documentation to CAAP for review and approval before the aircraft enters service.

The Civil Aeronautics Board (CAB) separately regulates the economic aspects of air transportation, including route authorities and tariffs. For aircraft imported under a lease, CAB endorsement may also be required depending on the route structure and the lessee’s operating authorities. Counsel should coordinate simultaneous filings with both agencies to avoid timeline gaps.

Practical Consequences for Title, Repossession, and Enforcement

Because the Philippines has not ratified the Cape Town Convention, foreign lessors cannot rely on the Convention’s self-help repossession or expedited court remedies. Repossession of a leased aircraft in the event of lessee default requires resort to Philippine courts or contractual remedies enforceable under local law. Early indications suggest that practitioners are increasingly using irrevocable deregistration and export request authorisations (IDERAs), adapted from Cape Town Convention practice, as a contractual workaround, though their enforceability under Philippine law remains untested.

Structuring Leases and Sales to Comply with the 13th FINL and Avoid Anti-Dummy Exposure

Structuring an aircraft lease or sale in the Philippines requires careful navigation of the 13th foreign investment negative list, the constitutional ownership cap on airlines, and the criminal provisions of the Anti-Dummy Law. A lessor that inadvertently exercises, or is deemed to exercise, operational control over a Philippine airline through contractual covenants risks prosecution under Commonwealth Act No. 108, as amended.

Structures That Commonly Appear

The most common types of aircraft leasing in the Philippines are operating leases (dry leases), wet leases, finance leases, and sale-and-leaseback arrangements. In a dry lease, the foreign lessor provides the aircraft without crew or operational support. In a wet lease, the lessor supplies the aircraft with crew, maintenance, and insurance. Finance leases transfer substantially all risks and rewards of ownership to the lessee. Each structure carries different regulatory, tax, and anti-dummy implications.

Ownership-Avoidance Traps and Anti-Dummy Risk

The anti-dummy law in the Philippines criminalises arrangements in which a foreign national or entity exercises, or is permitted to exercise, rights or privileges reserved to Philippine nationals. In the aviation context, this means a foreign aircraft lessor must not exercise operational control over the Philippine airline-lessee, even indirectly through covenants in the lease agreement.

Common fact patterns that trigger anti-dummy risk include: lease covenants that give the lessor approval rights over the lessee’s route network, scheduling, or crew deployment; board representation or veto rights that effectively control airline operations; and profit-sharing arrangements that convert what should be a fixed rental stream into equity-like returns tied to airline revenue. Penalties for violations include imprisonment and fines, and the transaction may be declared void.

Practical Structuring Patterns for Foreign Lessors

To mitigate risk, aviation investment in the Philippines should be structured so that the foreign lessor’s rights are confined to asset-protection covenants, maintenance standards, insurance requirements, return conditions, rather than operational-control provisions. Several practical patterns have emerged:

• Philippine-incorporated lessee SPV. A Philippine entity, at least 60 % Filipino-owned, acts as the lessee and holds the AOC. The foreign lessor deals exclusively with the SPV and has no governance role in airline operations.
• International registry prioritisation. Although the Philippines has not ratified the Cape Town Convention, parties may still register interests on the International Registry as a matter of contractual practice, which provides transparency and some persuasive protection in cross-border disputes.
• Custodial agent arrangements. A local custodial agent or trustee holds certain documents (such as deregistration powers of attorney) on behalf of the foreign lessor, enabling faster action in default scenarios without requiring the lessor to have a direct operational presence.
• Clear lease-term boundaries. The lease agreement should expressly disclaim any foreign control over airline operations and include anti-dummy representations from both parties.

Sample Contract Clauses and Checklist

The following five-point “lessor compliance covenant” framework is offered as a sample only, parties should seek legal advice tailored to their specific transaction:

1. Anti-dummy representation. “The Lessee represents and warrants that no provision of this Lease confers upon the Lessor, directly or indirectly, any right to manage, direct, or control the Lessee’s air transport operations.”
2. Operational independence covenant. “The Lessee shall at all times maintain independent operational control over the Aircraft, including crew assignment, route selection, and scheduling.”
3. FINL compliance warranty. “Each party warrants that the transactions contemplated by this Lease do not contravene the 13th Regular Foreign Investment Negative List (EO No. 113, s. 2026) or any applicable ownership restriction.”
4. Deregistration and export cooperation. “Upon termination, the Lessee shall cooperate with the Lessor in procuring deregistration of the Aircraft from the CAAP registry and export clearance within [30] business days.”
5. Maintenance and return conditions. “The Lessee shall maintain the Aircraft in accordance with CAAP airworthiness standards and return the Aircraft in the condition specified in Annex [X].”

Regulator-by-Regulator Compliance Checklist for Aircraft Leasing in the Philippines

Foreign investment compliance in the Philippines for aircraft transactions requires interaction with multiple regulators. The following checklist maps the key agencies, required approvals, and practical timelines for each.

CAAP, Advisory Circular 09-006

CAAP is the primary aviation safety and standards regulator. Under AC 09-006, the Philippine AOC holder (lessee) must submit a formal application to CAAP before operating any leased aircraft. Required documents typically include the executed lease agreement, the aircraft’s certificate of airworthiness, maintenance records, insurance certificates, and evidence that the lessee has the operational capability to manage the aircraft type. CAAP reviews the application for safety and regulatory compliance. Practical tip: engage CAAP early, pre-submission consultations can identify documentation gaps before the formal review begins, reducing cycle time.

PCC / Competition Clearance

The Philippine Competition Commission (PCC) administers the Philippine Competition Act (RA 10667). Large aircraft asset purchases, particularly platform-level acquisitions or portfolio transactions that breach PCC compulsory notification thresholds, may require merger clearance. In December 2025, the PCC granted clearance to CL Financing Gold for an aircraft asset purchase, reinforcing the PCC’s role in ensuring that consolidation in specialised global industries such as aviation leasing proceeds without harming competition. Deal teams should compute the Size of Party and Size of Transaction tests against PCC thresholds at the letter-of-intent stage.

BIR / Tax Considerations

The Bureau of Internal Revenue (BIR) classifies aircraft leases as either operating leases or finance leases, with materially different VAT and withholding tax consequences. Operating lease rentals paid to a non-resident foreign lessor are generally subject to a final withholding tax, the rate of which may be reduced under an applicable tax treaty. Finance leases may be treated as instalment sales for tax purposes. Counsel should confirm the applicable BIR Revenue Regulation and treaty rate before signing.

AML / KYC Due Diligence

Philippine covered institutions must conduct enhanced due diligence on foreign lessors and their beneficial owners under the Anti-Money Laundering Act (RA 9160, as amended). This includes verifying the ultimate beneficial ownership chain of the lessor entity.

Lender and Investor Protections, Due Diligence, Security, and Enforcement

For lenders financing aircraft destined for Philippine operators, the interplay between FINL restrictions and security enforcement is a central due diligence concern. The likely practical effect of the Philippines’ non-ratification of the Cape Town Convention is that lenders must rely more heavily on local-law security instruments and contractual protections.

Structuring Security Over Aircraft

A chattel mortgage over an aircraft registered with the CAAP is the most common form of security under Philippine law. The mortgage must be registered with the appropriate registry to be enforceable against third parties. Lenders should also consider obtaining a power of attorney from the lessee authorising deregistration and export of the aircraft upon default, though the enforceability of such powers, absent Cape Town Convention backing, depends on Philippine court recognition. Assignment of the lessee’s insurance proceeds and maintenance reserves to the lender provides additional credit support.

Practical Lender Clauses and Cross-Border Recognition

Lenders typically require step-in rights allowing them to assume the lessor’s position under the lease if the lessor defaults on the financing. These clauses should be drafted to comply with the foreign ownership aviation Philippines restrictions, a lender that “steps in” must not thereby acquire operational control over the Philippine airline. Escrow arrangements for deregistration documents, quiet enjoyment letters from the lender to the lessee, and tri-party agreements (lessor–lessee–lender) are standard market practice. For cross-border recognition, parties commonly select English or New York law as the governing law of the financing documents, while the lease itself may be governed by Philippine law.

Practical Worked Examples

The following illustrative scenarios demonstrate how aircraft leasing in the Philippines operates in practice under the 13th RFINL framework.

Example A: Dry Lease to a Philippine Flag Carrier

An Irish aircraft lessor enters into a 12-year dry lease with a Philippine flag carrier (62 % Filipino-owned). The lessor retains legal title. The carrier registers the aircraft with CAAP and submits the lease for AC 09-006 approval. The lease contains standard return-condition and maintenance covenants but no route-approval or scheduling rights for the lessor. This structure is compliant: the lessor does not engage in air transport operations, and no FINL activity is triggered.

Example B: Finance Lease with Foreign Lessor Holding Title

A Singapore-based lessor enters a finance lease structured as a hire-purchase arrangement with a Philippine regional airline. Upon final payment, title transfers to the airline. During the lease term, the lessor holds legal title but has no operational role. If the airline defaults mid-term, the lessor must pursue repossession through Philippine courts (absent Cape Town Convention remedies). The lessor should have pre-positioned a chattel mortgage, irrevocable deregistration authorisation, and a local custodial agent to accelerate recovery.

Example C: Sale-and-Leaseback with a Philippine Lessor SPV

A Philippine airline sells three aircraft to a newly incorporated Philippine lessor SPV (40 % foreign-owned, 60 % Filipino-owned) and immediately leases them back under operating leases. The SPV must clear CAAP approval for each lease, register chattel mortgages for its financiers, and file BIR applications for the correct tax classification. If the SPV’s foreign equity were to exceed 40 % due to a subsequent share transfer, the SPV’s ability to hold the aircraft and perform the leases would need to be reassessed under the FINL and the constitutional ownership cap.

Quick Compliance Checklist and Red-Flag Matrix

The following ten-point checklist is designed for counsel, commercial teams, and treasury professionals managing aircraft leasing transactions in the Philippines under the 13th RFINL.

1. Confirm the lessee’s Filipino ownership ratio meets or exceeds the constitutional 60 % threshold (if the lessee is an airline).
2. Verify that the specific transaction activity is not listed on the 13th RFINL as a reserved activity.
3. Review all lease covenants for provisions that could be construed as conferring operational control on the foreign lessor.
4. Submit the lease agreement to CAAP under AC 09-006 before the aircraft enters service.
5. Assess whether PCC compulsory notification thresholds are triggered.
6. Confirm BIR tax classification (operating lease vs. finance lease) and applicable withholding tax / treaty rate.
7. Execute and file chattel mortgage and security documents with the appropriate registry.
8. Obtain irrevocable deregistration and export authorisations (IDERA-equivalent) from the lessee.
9. Conduct AML/KYC due diligence on all foreign parties in the ownership chain.
10. Calendar all renewal, reporting, and re-verification deadlines (CAAP, CAB, BIR, PCC).

Conclusion

Executive Order No. 113 has not fundamentally altered the legal landscape for aircraft leasing in the Philippines, but it has reinforced the need for rigorous compliance architecture around every lease, financing, and acquisition. Foreign lessors can still own aircraft, lease them to Philippine operators, and protect their interests through well-structured agreements, provided they stay within the bright lines drawn by the FINL, the Anti-Dummy Law, and CAAP’s regulatory framework. The critical steps are clear: verify the 13th RFINL against the specific transaction, strip operational-control provisions from lease documentation, file proactively with CAAP under AC 09-006, and build deregistration and enforcement mechanisms into every deal from day one.

For counsel and commercial teams navigating aircraft leasing in the Philippines under EO No. 113, early regulator engagement and tailored legal advice remain essential.

Sources

1. Executive Order No. 113, s. 2026, Supreme Court E-Library
2. Civil Aviation Authority of the Philippines, AC 09
3. Foreign Ownership Requirements Philippines, Global Law Experts
4. Chambers Practice Guides, Aviation Finance & Leasing 2025 (Philippines)
5. ICLG, Aviation Finance & Leasing (Philippines)
6. Philippine Competition Commission, CL Financing Gold Clearance
7. Mondaq, Aviation Finance Comparative Guide (Philippines)
8. Philippine News Agency, Gov’t Outlines Foreign Ownership Limits
9. 13th Foreign Investment Negative List Philippines, Global Law Experts