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The Demise of the Philippine Aerospace Development Corporation

March 14, 2014

The Philippine Aerospace Development Corporation (PADC) was founded on the vision of then Executive
Secretary Alejandro Melchor of President Ferdinand E. Marcos. Secretary Melchor convinced President
Marcos to pursue a development program for the country’s aviation industry.

By Virtue of Presidential Decree no.: 286 signed by President Marcos on September 5, 1973, the creation
of a Philippine Aerospace Development Corporation and appropriating funds thereof was authorized.

The PADC was tasked by itself or through its subsidiaries to undertake all manner of activities,
businesses or development of a reliable aviation and aerospace industry that shall include but not
limited to:

(a) The design, assembly, manufacture, and sale of all forms of aircraft and
aviation/aerospace devices, equipment or contraptions, and studies or researches for
innovations and improvements thereon.

(b) The development of local capabilities in the maintenance, repair/overhaul, and

modification of aerospace and associated flight and ground equipment and components
thereof in order to provide technical services and overhaul support to government
agencies owning aerospace equipment, the Philippine Air Force, the national airline,
foreign airline companies, foreign air forces and to the aviation industry in general.

(c) The operation and provision of air transport services, whether for cargo or
passengers on a scheduled, or charter basis on domestic and/or international scale.


The data contained in the pages of this document marked “JOJO BANZON PROPRIETARY/CONFIDENTIAL INFORMATION” have
been submitted in confidence, and contain trade secrets and/or privileged or confidential commercial or financial information .
Public disclosure of any information marked as indicated above is prohibited by the Trade Secrets Act (18 U.S.C. § 1905) and the
Economic Espionage Act of 1996 (18 U.S.C. § 1831 et. seq.) and is not to be made available without the prior written permission
PADC received a total amount of ₱257,667,400.00 as an initial investment. The Development Bank of
the Philippines (DBP) and Government Service Insurance Service (GSIS) contributed ₱20,000,000.00 each
and the rest in the amount of ₱217,667,400.00 comes from the National (Treasury) Government fund.
According to the Philippine Consumer Price Index between 1974 and 2013, the total initial investment
received by PADC in 1974 is equivalent to more than five (5) billion pesos in today’s money.

Immediately after PADCs incorporation, a licensing agreement with Messerschmitt-Bolkow-Blohm of

Germany was signed for the assembly and manufacture of BO-105C light utility helicopter. PADC
completed eight (8) units of BO-105C, assembled from a knocked down kits by the end of 1974.

While PADC was busy assembling the BO-105C a new license agreement was signed with Fairey Britten-
Norman (FB-N) of Bembridge, United Kingdom thru their licensed Far Eastern Distributor Brian
Woodford, Managing Director of Helio-Orient of Singapore for the progressive production of 100 units
of the BN-2A Islander aircraft in the Philippines with FB-N buying back the 25 units.

These same BN-2A Islander aircraft were used by PADC’s subsidiary Philippine Aerotransport Inc (PATI)
that runs Rural Air Service, providing air links to remote communities and islands. PATI ceases
operations though by mid 1978 when the Philippine Air Lines absorbed their operations.

In 1988, the Philippine Air Force/Philippine Government signed an agreement with Agusta S.p.A of Italy
for the delivery of 18 units of SF260 TP Military Trainer aircraft and 24 units of S211 Military Jet
Trainer/Light Attack Aircraft. PADC, being the government arm for aviation was able to secure the
assembly of these aircraft plus additional manhours of works as a countertrade agreement with Agusta.

The PADC also received Lancair aircraft kits in 1995 for assembly into flyable condition. These Lancairs
belongs to the newly reorganized Philippine National Police for its anti-crime operations.

Late 1995, the Department of Science and Technology (DOST) partnered with the Department of
Transportation and Communications (DOTC)/PADC (PADC was an attached agency of DOTC) for the
design and manufacture of a light utility aircraft. A budget of ₱50 million was earned mark for this R&D
project – a first in the 19 years of PADCs existence.

The project was considered gargantuan that the most talented and select aeronautical engineers (this
author included) and aviation professionals of the land were summoned by then PADC President
Prudencio Reyes to participate in such undertaking. A special committee was formed and countless
meetings and brainstorming were held.

By mid 1996, Prudencio Reyes was replaced by Capt. Panfilo Villaruel as the new PADC president. It was
then that the committee was disbanded and the project was shelved in favor of another.

Meanwhile, due to the good working relationship of PADC with Agusta S.p.A., an agreement was
entered for the co-production of the SF.600 Canguro feederliner, a ten seater twin engine, high wing

Jojo Banzon Proprietary/Confidential Information (see page 1)

Two (2) SF.600 Canguro were assembled by PADC but the co-production agreement did not move
forward. The 2 Canguros were later sold to PNP and the Philippine Coast Guard.

PADC unveiled their new RP-X Alpha Hummingbird Helicopter project under the management of Capt.
Villaruel by May of 1998. Accordingly, the Hummingbird was the first helicopter designed and
manufactured in the Philippines.

However, the project was immediately cancelled after it’s launching due to the following reasons:

1. Unable to substantiate the drawings, aerodynamics and structural design/stress

analysis requirements of the Air Transportation Office (now Civil Aeronautics Board)
to register the Hummingbird.

2. Impending lawsuits by Eurocopter (now Airbus Helicopter Philippines) due to patent

infringement should PADC continue with the Hummingbird program.

3. The need to immediately return the borrowed major components of Hummingbird

from the airworthy BO-105 (with registration number RP-C163)

Although far from being flyable at the time, another aircraft project, dubbed as the Defiant 500
Centennial aircraft, was affected by the Hummingbird controversies and was cancelled as well. Captain
Villaruel left PADC by July of 1998.

It is interesting to note that PADC spent a total amount of ₱34,352,988.00 for the research and
development of the RP-X Alpha Hummingbird Helicopter and the Defiant 500 Centennial aircraft.

To date, the PADC has assembled 44 units of BO-105 Helicopter, 67 units of BN Islander aircraft, 18 units
of SF 260 TP Military Trainer airc raft, 24 units of S211 Military Jet Trainer/Light Attack Aircraft. 6 units of
Lancair ES two seater light aircraft, 2 units of Lancair IV four seater light aircraft and 2 units of Canguro
Feederliner aircraft.

PADC has also developed capabilities for the installations, inspection, repair and overhaul of the
following items including its accessories:

1. Aircraft piston engines (Textron Lycoming/Continental)

2. Allison Model 250 Turboshaft engine (now Rolls-Royce M250)
3. Various propellers
4. Landing Gears
5. Avionics and Instruments
6. Various airframe
7. Others.

Despite the various activities undertaken by PADC over 40 years of its existence, the establishment of a
self reliant aviation industry as first envisioned by Alejandro Melchor is still not established. PADC has
failed to truly implement its number one mandate, to design and manufacture aircraft.

Jojo Banzon. Proprietary/Confidential Information (see page 1)

It even failed to secure most of the local businesses in the field of aircraft repair and maintenance to
save foreign exchange reserves and for the utilization of local skilled manpower. Various aircraft,
government and privately owned, are sent overseas for Inspections and Repair (IRAN) even though
PADC has the in-house capability to do such job. The Presidential Fokker F-27 aircraft operated by the
Philippine Air Force was a classic example. This aircraft was sent to Singapore in the 90’s for IRAN, even
though PADC had already IRAN two (2) Fokker F-27 the prior years. In 2007, while PADC have the full
capability to manufacture BN Islander aircraft, two (2) Philippine Navy BN Islanders were
refurbished/upgraded by Hawker Pacific Ltd of Australia

According to the Commission on Audit, majority of PADC revenue came from sources like building rental
and hangarage fees. Revenues from aircraft related products comprise only a fraction thereof.

In 2010 & 2014, Cagayan de Oro Congressman Rufus B. Rodriguez filed House Bill no. 2867 and 3807,
respectively, seeking to abolish numerous underperforming Government Owned and Controlled
Corporation including PADC.

While PADC enjoys an exemption from all national and local taxes, duties, and fees, tariff, compensating tax
and all other taxes as per P.D. 1901, the Commission on Audit found out on its 2012 audit that PADC has been
losing millions in its operations, and thus recommended that management should consider closing down.

Last February 3, 2014, the Governance Commission for GOCCs released a statement stating that they
recommended to President Benigno S. Aquino III closing some of the GOCC including again the PADC.

Time is ticking, according to Section 1 of P.D. 286, PADC shall have a succession period of 50 years from
September 5, 1973 or until September 5, 2023. Without any program to spearhead the local aviation
industry, losing money year after year, various government agencies against its existence, PADC is in
imminent danger of either (1) closing down before reaching 2023 or (2) the government will let its
operation ceases upon reaching its maturity date.

And when that PADC dark time comes, PADC will not only fail the great vision that Secretary Melchor
once had but also the hope of the whole Filipino nation…..

Jojo Banzon


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Jojo Banzon Proprietary/Confidential Information (see page 1)