This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 SAN SALVADOR 000103 
 
SIPDIS 
 
SENSITIVE 
 
FAA FOR ANNA SABELLA EAIR/API/AWH 
 
E.O. 12958: N/A 
TAGS: ECON EAIR ES
SUBJECT: TACA AIRLINES FINDS HOME FIELD ADVANTAGE IN THE 
SUPREME COURT OF EL SALVADOR 
 
 
¶1.  (U)  Sensitive but Unclassified.  Not for Internet 
Distribution. 
 
¶2.  (U)  Summary:  The Supreme Court of El Salvador has ruled 
that the Civil Aviation Authority (AAC) of El Salvador 
violated the constitutional rights of TACA International 
Airlines S.A. (TACA) in allowing Compania Panamena de 
Aviacion, S.A. (COPA) of Panama a second daily flight to El 
Salvador and revoked permission for the second flight.  The 
ruling stranded hundreds of passengers at the height of the 
holiday season.  The ruling came only three days after TACA 
filed suit, an extremely short time for the Supreme Court, 
and cast a shadow over the ability of AAC to act as an 
independent regulatory body.  End Summary. 
 
¶3.  (U)  In November 2004, Compania Panamena de Aviacion, 
S.A. (COPA) of Panama applied to the Salvadoran Civil 
Aviation Authority (AAC) for permission to add a second daily 
flight to El Salvador from Panama.  This second flight would 
be direct, their current flight operating via Managua.  The 
AAC granted permission for the second flight pending a public 
hearing, a requirement under Salvadoran civil aviation law. 
As required, COPA submitted a notice for the hearing in the 
Official Journal, as well as in La Prensa Grafica, one of the 
two largest newspapers in El Salvador.  The Official Journal 
prints entries several days after receipt, and so the entry 
was not published until the day of the hearing.  The 
advertisement of the hearing in La Prensa Grafica was 
published on Saturday, the 11th of December 2004, with the 
hearing scheduled for December 15th 2004.  TACA did not 
appear at the public hearing to oppose the decision, and AAC 
granted permission to COPA to fly the second route to begin 
after the 1st of December 2005. 
 
¶4.  (U)  On June 1, 2005, TACA submitted a complaint to the 
AAC board of directors, saying COPA was using non competitive 
practices on the route.  The AAC board rejected the complaint 
on November 1st, saying they could not determine if there 
were non competitive practices when COPA had not yet started 
flying the second route.  On December 6th TACA submitted a 
complaint to the Executive Director of the AAC, Renzo 
Zaghini, charging irregularities in the public hearing 
process.  They claimed the Official Journal was published the 
same day of the hearing, and the La Prensa Grafica 
announcement was on a Saturday, not a workday.  On December 
13 Zaghini informed TACA he had no legal authority to deny 
the new route based on TACA's allegations.  On December 6 
TACA also submitted a complaint to the AAC Board of 
Directors, saying they had not received the AAC's report on 
the result of an inspection of COPA's operations.  This 
request was denied on December 20th, as there is no law 
stating that the AAC must make public this information. 
¶5.  (U)  On December 12, 2005, TACA took a different route, 
and submitted a request for protection ("amparo") with the 
constitutional chamber of the Supreme Court of El Salvador. 
In an unusually fast decision for the Supreme Court, on 
December 15 it ruled that the decision by AAC to grant the 
permission for the flight may have been handled in an 
unconstitutional manner, and repealed the authorization for 
the flight by the AAC pending a final decision.  The ruling 
was issued only hours before the first flight was to depart 
Panama for El Salvador, but effectively canceled the second 
flight, stranding many passengers wishing to travel from 
Panama to El Salvador and vice versa.  Eduardo Aguilar, 
General Manager of COPA in El Salvador, told econoff that 
almost 500 people were affected in the days leading up to the 
Christmas holidays. 
 
¶6.  (SBU)  On December 16, the AAC asked the Supreme Court to 
allow the COPA service to continue pending the Court's final 
decision, on the grounds that the suspension of service was 
having a detrimental affect on the public, particularly 
during the runup to the holidays.  The Supreme Court to date 
has not answered the request.  In the words of Renzo Zaghini, 
the answer could come in 'One day or 25 years'.  Zaghini was 
upset by the Court decision on TACA's amparo request, which 
he saw as interference in a regulatory matter.  In addition, 
on January 12 AAC will have to renew COPA's operational 
permit and must decide if it should be renewed for one or two 
daily flights, possibly without having received a final 
decision by the Supreme Court. 
 
¶7.  (SBU)  Comment.  COPA is a Panamanian company but is 49 
percent owned by Continental Airlines.  Continental has  not 
specifically asked for advocacy on this issue, but Embassy El 
Salvador is interested in the ramifications of the case on 
both civil aviation and the general investment climate.  The 
decision of the Supreme Court to suspend the authorization 
for the flight appears to be an end run around the authority 
of the AAC.  The AAC and Zaghini in particular have a very 
good reputation within the aviation industry in El Salvador, 
and, we believe, with the Department of Transportation in the 
United States.   COPA's Eduardo Aguilar characterized AAC as 
very impartial, going as far as returning a large number of 
'fly for free' cards offered by TACA that would have allowed 
AAC employees to fly anywhere TACA flys.  Zaghini said the 
AAC has earned a reputation for resisting political pressure 
from the public sector, and by going to the Supreme Court, 
TACA has created a 'ridiculous' situation.  The government of 
El Salvador has promoted the country as good for investment, 
and surveys have indeed borne out this claim.   However, TACA 
is one of the most well known corporate entities in El 
Salvador, and one that has good connections at all levels of 
government.  There is no direct evidence of TACA using their 
influence in this case, but their appeal to the Supreme Court 
and the speed of the response is an avenue that few companies 
in El Salvador would be able to use so effectively. 
Barclay