VZCZCXRO0400
RR RUEHGR
DE RUEHPO #0080/01 0391921
ZNR UUUUU ZZH
R 081921Z FEB 06
FM AMEMBASSY PARAMARIBO
TO RUEHC/SECSTATE WASHDC 8044
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHAO/AMCONSUL CURACAO 0946
RUEHTC/AMEMBASSY THE HAGUE 1514
RUEHKG/AMEMBASSY KINGSTON 0531
RUEHBR/AMEMBASSY BRASILIA 1401
RULSDMK/DOT WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 PARAMARIBO 000080 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/CAR: LLUFTIG, EB/TRA: JHORWITZ, EB/CBA: 
NSMITH-NISSLEY, TSA: LMCNEIR AND FAA: JWALTZ 
 
E.O 12958: N/A 
TAGS: EAIR ECON PBTS PGOV NS
SUBJECT: SURINAME SEEKS OPEN SKIES (SORT OF) 
 
REF: 04 PARAMARIBO 643 
 
PARAMARIBO 00000080  001.4 OF 003 
 
 
-------- 
Summary 
-------- 
 
¶1. Suriname's Minister of Transportation Amafo has 
indicated that an Open Skies Agreement with the United 
States is possible, but her comments suggest Suriname is 
anxious to preserve CARICOM's dominance on intra-Caribbean 
routes.  This pronouncement comes at a time when the 
national carrier, Suriname Airways (SLM), will be facing 
increased competition and mounting economic pressures to 
modernize and right size its operations, with uncertain 
prospects for competing successfully as more than a 
regional carrier. SLM is considering leasing both Airbus 
and Boeing aircraft to compete in its new business 
environment.  End summary. 
Open Skies 
 
¶2. CARICOM states are obligated to notify the CARICOM 
Secretariat before negotiating any bilateral agreements in 
 
SIPDIS 
order to prevent harm to other members.  Referring to that 
point in responding to a question about the possibility of 
Open Skies agreements with the United States, Minister of 
Transportation, Communication and Tourism, Alice Amafo gave 
an ambiguous reply:  "There will be an open sky agreement 
[with the U.S.], with each (CARICOM) country determining 
for itself how open this will be."  She continued, "since 
CARICOM can't coerce the U.S. to allow Caribbean carriers 
to operate flights between destinations in the U.S., 
CARICOM should ensure that U.S. airline companies don't 
operate on the Caribbean intra-regional air transport 
market." 
 
¶3. Suriname currently faces major changes in its aviation 
market.  As of May 1, the so-called "mid-Atlantic" route 
between Paramaribo and Amsterdam will be liberalized.  This 
will bring to an end decades of a duopoly arrangement 
between Suriname Airways and KLM on SLM's busiest and most 
profitable route. By the end of February, the governments 
of Suriname and the Netherlands can each introduce two new 
carriers on the route, bringing the total number to six 
possible carriers in this market.  The decision to 
liberalize this route was prompted by a directive from the 
Dutch Antitrust Authority (Nederlandse 
Mededingingsautoriteit  NMa), which required that the 
carriers not renew their tariff sharing arrangement when it 
expires at the end of February 2006. 
 
SLM's New Corporate Strategy 
 
¶4. In a recent meeting with Suriname Airways executives, 
SLM President Henk Jessurun told the Ambassador and econoff 
that SLM had in fact signed an open skies agreement with 
the Netherlands three years ago, but the older joint 
venture for sharing the mid-Atlantic route along with its 
accompanying high tariffs had effectively remained in 
force.  (Note: the Paramaribo - Amsterdam route is 
considered one of the most expensive in the world. End 
note.)  Because of a confluence of forces with the 
expiration of the joint venture agreement, the entering 
into force of the Dutch-Surinamese open skies agreement, 
and the examination of their joint venture as a possible 
"abuse of a dominant position," by Dutch Antitrust 
Authorities, a mutually amicable decision was made to let 
the joint venture expire and open the mid-Atlantic route to 
competition beginning May 2006. 
 
Lease of New Aircraft: Boeing vs. Airbus 
 
¶5. SLM has been flying its fully owned plane (Boeing 747- 
300) on the mid-Atlantic route since August 2004 (see 
reftel) but has decided, due to high fuel and maintenance 
costs, to replace the equipment within the next two years. 
The Director of Corporate Planning, Angela Landburg, has 
been in negotiations with both Airbus and Boeing to 
determine which aircraft will best serve SLM's major routes 
(mid-Atlantic and regional Caribbean/Northern Brazil). 
Future aircraft will be acquired under a lease agreement 
lasting 3 to 5 years and a decision is expected by March 
¶2006. SLM is in the process of re-examining its corporate 
strategy for 2007 to 2010, which sees its business as 
 
PARAMARIBO 00000080  002.4 OF 003 
 
 
divided between flying the mid-Atlantic route and being a 
"regional carrier." SLM envisions dividing the regional 
route between Caribbean and northern Brazilian airports in 
partnership with Air Jamaica, Brazil's TAF airline, and a 
newly proposed "Insel Air" out of Curacao. 
 
Mid-Atlantic Route 
 
¶6. Currently SLM flies 3 times a week with its 747 between 
Paramaribo and Amsterdam but would like to increase to 4 
times a week. The plane flies at about 70 percent capacity 
(out of total 300 seat capacity) and SLM wants to increase 
capacity to 85 percent in the high season (June to 
September). They are considering leasing an Airbus 340 for 
this route and expect it to be in service by April 2007. 
The company also expects between 2 to 3 outside European 
competitors vying for the same route. The company claims it 
must maintain 40 percent of market share to make flying 
this route profitable. 
 
Regional Route 
 
¶7. Currently, the SLM regional route consists of Port of 
Spain, Belem, Curacao and Aruba, on which it operates an 
MD82 aircraft. The company is considering leasing a Boeing 
737 (500 or 600) to replace the MD82 when the lease expires 
in August 2006. The company is very upbeat about possibly 
working with Boeing because they claim it will help 
strengthen their own organizational dynamics when it comes 
to maintenance and support of the aircraft.  It is also 
planning on entering into joint ventures with Air Jamaica, 
Brazilian TAF, and a soon-to-be-formed InselAir out of 
Curacao. The routes covered will be the greater Caribbean, 
northern Latin American airports, i.e., Belem to 
Georgetown, and other northern Brazilian cities. The 
expected increase in trade with Brazil and the growing 
Brazilian population within Suriname, as well as Brazilians 
wishing to fly from Europe to Brazil via Suriname should 
support more capacity on these routes. It is envisioned 
that the company, in addition to servicing Port of Spain, 
Curacao and Jamaica, will be able to send its passengers to 
the U.S. through its partnership with Air Jamaica. [Note: 
The Boeing 737 is the front-runner for the regional route 
not only because of the aircraft's positive reputation and 
improved maintenance scenario but also because it further 
offers the possibility of better integration with the Air 
Jamaica fleet. End Note] 
 
Rationalization of the Company 
 
¶8. Currently, SLM employs 500 people as ground crew, 
baggage, ticketing and flight attendants for 2 aircraft, 
along with an additional 30 pilots. This level of overhead 
reflects the inefficiency that is attributed to government 
meddling in the operations of the national carrier. The 
current president, Jessurun maintains that he has an 
understanding from the current government that there will 
be no intervention in the future business operations of the 
airline. He has set out to rationalize the operations by 
reducing the number of airline employees to 300 and share 
the "excess" pilots with Air Jamaica. 
 
¶9. SLM has already begun to rationalize through the 
privatization (i.e., creation of independent subsidiaries) 
of its baggage handling and catering functions, which it 
expects to be fully operational by March 2006. It hopes to 
be able to transfer some of the redundant employees into 
these operations as a result. Additionally, the impetus to 
privatize ground handling (movement of passengers from 
terminal to plane) comes on the heels of the GOS signing a 
State Decree on January 6 requiring domestic regulations to 
conform to the standards of the CARICOM Single Market 
Economy (CSME). SLM's monopoly position as the "general 
ground agent" was one of several issues hindering 
Suriname's full participation in the CSME. Other companies 
would then have an opportunity to offer the same services 
at the airport (e.g., KLM). Furthermore, SLM has a 75 
percent partnership in two hotels: the Residence Inn in 
Paramaribo and the Residence Inn in the western border city 
of Nickerie.  In addition, SLM owns 99 percent of an eco- 
tourism company, METS, which arranges tours to the 
interior. The company plans to shift approximately 200 
redundant workers into these various operations. 
 
PARAMARIBO 00000080  003.4 OF 003 
 
 
 
Comment 
 
¶10. The equation that SLM has devised to reach 
rationalization of its business model is complex and full 
of unproven assumptions. Maintaining a 40 percent share of 
the mid-Atlantic route at 70 to 85 percent capacity is 
extremely optimistic if 3 or 4 new carriers enter this 
market. Minister Amafo's comments regarding a less than 
fully open skies agreement with the U.S. reflects 
Suriname's attempts to keep as much unwanted competition as 
possible at bay while it struggles to come to terms with 
increasing costs and diminishing market share.  Alas, the 
consumer is not part of this equation. 
 
BARNES