VZCZCXRO7939
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHDL #1359/01 3281550
ZNR UUUUU ZZH
R 241550Z NOV 06
FM AMEMBASSY DUBLIN
TO RUEHC/SECSTATE WASHDC 7727
INFO RUCNMEM/EU MEMBER STATES
RUCPDOC/USDOC WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 DUBLIN 001359 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR ITA/MAC/MCLAUGHLIN 
USDOC FOR ITA/ADVOCACY CENTER/NUGENT 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ETRD PREL EI
SUBJECT: AER LINGUS CEO PRESSES FOR BILATERAL OPEN SKIES 
 
REF: A. YOUNG-BYERLY E-MAIL OF NOVEMBER 20 
     ¶B. DUBLIN 1189 AND PREVIOUS 
 
¶1.  (SBU) Summary: In a November 21 discussion with the 
Ambassador, Aer Lingus CEO Dermot Mannion recommended 
bilateral talks to establish U.S.-Ireland Open Skies, with a 
view to providing Aer Lingus additional access to the U.S. 
market.  Mannion said that he and the Irish Government 
doubted that the EU Transport Council would approve the draft 
U.S.-EU air services agreement in December, and he suggested 
implementing the U.S.-Ireland annex to the U.S.-EU agreement 
as a stand-alone arrangement, inclusive of a transition 
period leading to Open Skies.  The Ambassador replied, 
however, that the USG had no interest in pursuing bilateral 
aviation talks with Ireland, as the U.S.-EU negotiations 
remained the USG's preferred mechanism to deliver Open Skies 
with EU Member States.  Mannion reiterated the Irish 
commitment to Open Skies, noting the inefficiencies foisted 
on Aer Lingus by restrictions in the current U.S.-Irish 
bilateral agreement.  He also observed that Boeing remained 
in the running to sell new long-haul aircraft to Aer Lingus, 
and he expressed confidence that the carrier had repulsed 
Ryanair's recent takeover bid, at least for the moment.  End 
summary. 
 
Mannion's Pitch for Bilateral Open Skies 
---------------------------------------- 
 
¶2.  (SBU) In a November 21 meeting with the Ambassador, Aer 
Lingus CEO Dermot Mannion suggested implementing the 
U.S.-Ireland annex to the draft U.S.-EU air services 
agreement as a stand-alone arrangement.  This approach, he 
believed, would give Aer Lingus more access to the U.S. 
market regardless of the status of the U.S.-EU negotiations. 
(The existing U.S.-Ireland aviation agreement gives Irish 
carriers access to four U.S. cities.  The annex would, by 
2008, phase in additional U.S. destinations for Irish 
carriers, while phasing out the Shannon Stop requirement, 
whereby U.S. and Irish carriers must provide a direct flight 
to Shannon for every direct flight to Dublin.)  Mannion noted 
the Irish Government's expectation that the December 12 EU 
Transport Council meeting would not approve the draft U.S.-EU 
agreement without a U.S. Department of Transportation final 
rule on foreign investment in U.S. carriers.  He added that 
Transport Minister Martin Cullen therefore would seek "a wink 
and a nod" from EU Commission officials that they would not 
block bilateral talks to establish Open Skies.  (Per ref A, 
Prime Minister Bertie Ahern cited the possibility of 
enhancing the bilateral agreement in a November 16 
statement.)  Mannion was confident that the Commission would 
provide this assurance, and he predicted that the Irish 
Department of Transport would soon contact the Embassy on 
bilateral possibilities. 
 
¶3.  (SBU) The Ambassador replied that the USG had no interest 
in pursuing bilateral aviation talks with Ireland.  He 
highlighted the USG view that the U.S.-EU negotiations 
remained the preferred mechanism to deliver Open Skies with 
EU Member States.  The Ambassador added that proposals for a 
side deal with Ireland would be inconsistent with the U.S.-EU 
effort, and he expressed regret that this view would not be 
good news for Aer Lingus.  "Extracting the Irish part of the 
U.S.-EU negotiations could destabilize the whole," he 
explained.  He stressed, however, that Ireland could play a 
supportive role in the USG's continuing push for a U.S.-EU 
agreement. 
 
¶4.  (SBU) Mannion thanked the Ambassador for his comments, 
noting that the Irish Government, particularly Prime Minister 
Ahern, remained committed to Open Skies, notwithstanding 
continued, though dimished opposition from the Shannon Lobby. 
 Mannion pointed out that Aer Lingus would maintain Shannon 
service at current levels in an Open Skies situation, 
including round-year service to New York, Boston, and 
Chicago.  He expected, however, that U.S. carriers would 
reduce Shannon service with Open Skies, likely providing one 
direct flight to Shannon for every four direct flights to 
Dublin.  (Under the terms of the U.S.-Ireland annex to the 
draft U.S.-EU agreement, U.S. carriers would transition to 
one flight to Shannon for every three flights to Dublin.) 
Mannion added that Aer Lingus would seek USG permission for 
new service to San Francisco, Washington Dulles, and Orlando 
if a transition arrangement could be implemented under the 
terms of the annex.  He added that the Shannon Stop foisted 
frustrating inefficiencies on Aer Lingus and was responsible 
for the termination of the carrier's previous service to 
Washington-Baltimore. 
 
DUBLIN 00001359  002 OF 002 
 
 
 
Boeing Still in the Running for Aer Lingus Planes 
--------------------------------------------- ---- 
 
¶5.  (SBU) Aer Lingus was preparing to send out a Request For 
Purchase (RFP, or commercial tender) on November 22 to Boeing 
and Airbus to fill the carrier's needs for new long-haul 
aircraft, said Mannion.  He observed that the time frame for 
decisions on new aircraft was very short, as the euro 400 
million generated in Aer Lingus' September stock flotation 
"was burning a hole in his pocket."  He also commented that 
Boeing had helped its case with recent notification that 787s 
could be delivered earlier than 2012, as originally 
indicated.  Mannion noted his familiarity with Boeing 
representatives and aircraft during his tenure with Emirates. 
 He added that the final package of new aircraft would 
include a mix of purchased and leased models. 
 
Ryanair Defeated -- For Now 
--------------------------- 
 
¶6.  (SBU) Mannion observed that Aer Lingus had fended off 
Ryanair's takeover bid for now, especially with the November 
21 statement by Ryanair CEO Michael O'Leary that Ryanair 
would not raise its bid price of euro 2.80 (compared to Aer 
Lingus's IPO price of euro 2.20, per ref B).  Mannion also 
predicted that Aer Lingus employees, who together hold 
roughly a 15 percent stake in the carrier, would vote 
overwhelmingly on November 22 to reject the Ryanair bid. 
Mannion said that competition between Aer Lingus and Ryanair 
was good for Irish travelers, and he described his challenge 
as retaining shareholder confidence by raising Aer Lingus' 
stock price above the euro 2.80 threshold set by Ryanair.  He 
noted that he would not be surprised to see a renewed 
takeover bid from Ryanair in 2007, or at least an onslaught 
of new Ryanair service with which Aer Lingus would have to 
compete. 
FOLEY