VZCZCXYZ0001
RR RUEHWEB

DE RUEHKV #4154 3051130
ZNR UUUUU ZZH
R 011130Z NOV 06
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 0228
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEANHA/FAA WASHDC

UNCLAS KYIV 004154 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE PLEASE PASS TO USTR 
STATE FOR EB/TRA/TENGLE 
COMMERCE FOR ITA/MAC/EUR/CLUCYK 
COMMERCE FOR ITA/FCS/EUR/MCOSTA 
COMMERCE FOR ITA/MAS/AERO/KDUBIN 
 
E.O. 12958: DECL: NA 
TAGS: EAIR EFIN BEXP KCOR UP
SUBJECT: UKRAINE: AIRLINE TICKET PAYMENT SYSTEM UNDER THREAT FROM 
STATE AVIATION AUTHORITY? 
 
REF: KIEV 2788 
 
Sensitive but Unclassified.  Not for Internet Distribution. 
 
¶1.  (SBU)  Summary.  The Kyiv representative office of the 
International Air Transport Association (IATA) informed member 
airlines on October 24 that Ukrainian government agencies were 
trying to prevent IATA from implementing its billing and settlement 
plan (BSP) -- the industry-standard clearing system for air 
transport payments.  According to IATA, Ukraine's State Aviation 
Administration (SAA) is accusing IATA of illegally importing the 
blank ticket stock used in BSP, which IATA denies.  IATA 
Representative Sergei Martinyuk told EconOff on October 30 that SAA 
was pressuring IATA because IATA did not agree to use the SAA's 
suggested clearing bank for BSP.  As a result, SAA established its 
own parallel national clearing system, and asked international 
airlines to assist. IATA now is seeking a court ruling confirming 
its BSP operations are legal.  The court case is scheduled for 
November 3.  End Summary. 
 
Inspections, Challenges, and Harassment 
--------------------------------------- 
 
¶2.  (SBU) IATA's representative office in Kyiv alerted member 
airlines on October 24 that it had been subject to multiple 
inspections and legal challenges apparently aimed at preventing IATA 
from putting in place its billing and settlement plan (BSP).  Since 
IATA introduced the BSP in Ukraine in September 2005, IATA has been 
subject to numerous inspections from the Transport Prosecutor's 
Office, the State Security Service, the State Service for Economic 
Crimes, and the Tax Inspection, according to IATA representative 
Sergei Martinyuk.  Martinyuk told EconOff October 30 these 
inspections began after IATA did not comply with State Aviation 
Administration (SAA) "suggestions" on how IATA should implement BSP 
in Ukraine and which local bank it should use for clearing 
operations.   According to Matinyuk, member airlines selected 
Citibank Ukraine as the BSP clearing bank after IATA held a 
competitive tender.  (Note: BSP is the industry standard clearing 
system for airline and agent settlement operations.  BSP operates in 
155 countries around the world and processes 80% of airline revenues 
worldwide.  End Note.)  Delta Airlines' local representative Dan 
Fenech raised the BSP issue on October 27 with the head of SAA's 
Licensing Department, who only reiterated SAA's concern that IATA 
had not registered its ticket stock with the GOU. 
 
Legal Challenges 
---------------- 
 
¶3.  (SBU) The SAA sent letters in September 2005 to IATA and travel 
agents claiming that BSP was illegal. Simultaneously, the SAA began 
developing an alternative Ukrainian National Settlement System, and 
asked international airlines to assist.  The SAA argued that IATA 
had violated the law by failing to register with the Finance 
Ministry the blank ticket stock which IATA imports from Germany and 
distributes to ticket agents on behalf of member airlines.  A 
December 2005 order from the Prosecutor General's office also 
claimed that IATA was required to register the stock in order to 
comply with Ukrainian licensing law. 
 
¶4.  (SBU) IATA responded via letter that the licensing law applied 
only to ticket stock produced in Ukraine.  IATA sued the SAA in 
March 2006 and again in May, seeking a court ruling that it could 
legally use its blank ticket stock.  Both courts dismissed IATA's 
claim, following what Martinyuk described as "pressure" from SAA or 
its business backers.  IATA then filed suit against the Prosecutor 
General to have its order requiring registration overturned.  The 
hearing in that suit is set for November 3.  Delta's Fenech told 
EconOff October 27 that BSP's payment standardization is critical to 
Delta's operations. 
 
The Road Ahead 
-------------- 
 
¶5.  (SBU) Comment.  The harassment of IATA via numerous inspections 
and the SAA's earlier draft regulation governing ticket stock 
(reftel), suggest strongly that parties within or close to SAA want 
to stop BSP in Ukraine, possibly in order to control the float on 
ticket payments though a friendly bank of their choosing.  This 
issue could gain significance if Ukrainian courts fail to find the 
use of IATA ticket stock to be legal.  Post will look at next steps 
once IATA's legal challenges have clarified the situation more. 
 
Taylor