No, not at all. Philippines Airlines was not downgraded (nor other airlines there). It's the country itself because their national airworthiness authorities (ATO) is not at the required level. That's very different.
If you look at PAL fleet, their 747 are registered in the US and followed by FAA. Their A330 and A340 are registered in France and followed by the French DGAC for EASA. PAL as the required agreements required both by FAA and EASA for commercial use of these aircraft.
They are both maintained by Lufthansa Techniks (MRO of Deutsche Lufthansa AG, well known airline...) under the usual regulations FAA FAR 145 and EASA part 145.
All these agreements are audited and renewed regularly both by FAA and EASA (every year for maintenance, every 6 months for commercial use of the aircraft). Of course Pilots and mechanics should have the good licences and rating under validity, it's checked during these audits too.
So PAL is perfectly following the regulations and have the good agreements to fly.
Unfortunately, the Philippines administration Air Transportation Office was audited by FAA and didn't answer on time to the audit findings (or didn't gave acceptable answers). Then the FAA downgrade the Philippines as their NAA were judged unable to carefully follow RP airlines, airports and ATC.
That's why now Mrs Arroyo is taking the lead on this. She fired the ATO director, request the house to pass the bill for creating the Philippines CAA (to replace the ATO, it's a request of the FAA too regarding the growing business of airlines in the Philippines) and put in place all necessary things (corrective actions, skilled people, budgets, local regulations, ...) to fulfill the FAA findings and close them for the country to go back to level 1. They hired 6 experts from ICAO to help for this.
Usually it should be done in 6 months...
