The Philippine government has secured an agreement with Thailand allowing foreign-owned but locally incorporated carriers, such as the local unit of AirAsia, to continue operating there, the Civil Aeronautics Board (CAB) said.

CAB Executive Director Carmelo Arcilla said he signed a third-country codesharing agreement with his Thai counterpart for Manila-Bangkok flights last week.

This agreement enables airlines from Thailand and the Philippines to sell flights operated by a third-country airline.

As part of the deal, both countries sought to amend their existing air services agreement to address the predicament of Philippines AirAsia Inc., the local arm of Malaysia-based low-cost carrier AirAsia, which operates as AirAsia Philippines.

Under the current air service framework, only airlines substantially owned and controlled by Philippine nationals are permitted to operate in Thailand.

This, according to Arcilla, is the norm for many of the Philippines’ bilateral air services agreements with other countries.

“Philippines AirAsia would not be compliant with that kind of clause,” the official told reporters.

“They were notified already by Thailand that we cannot allow you to continue to operate because your ownership structure is not compliant with our agreement,” he added.

While the airline is 100 percent foreign-owned, Arcilla said AirAsia Philippines is still considered a Philippine carrier since it is incorporated in the country and has its principal place of business here.

He added that this makes it a subject to the regulatory authority of local agencies, such as the CAB, which regulates the economic aspect of air transportation.

Following last week’s resolution of the issue, both Thailand and the Philippines agreed to amend their initial agreement to allow the operations of airlines to be based not on “substantial compliance” but on the place of incorporation, principal place of business, and effective regulatory control of local agencies.

Arcilla said this marks the Philippines’ fourth agreement aimed at easing restrictions on airline ownership.

Before Thailand, the government had secured similar deals with Singapore, Hong Kong, and Cambodia.

Maintaining its flight schedule to Thailand is a major development for AirAsia Philippines, which is planning for a strong international push in the near term.

From a current fleet of 15 aircraft, the airline is targeting to add up to 20 new jets within the next five years to further expand its operations abroad.

AirAsia Philippines is targeting to serve as many as 7.5 million passengers this year. Based on data from January to June, it has now carried over three million passengers.