VZCZCXRO3114
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHDL #1403/01 3461733
ZNR UUUUU ZZH
R 121733Z DEC 06
FM AMEMBASSY DUBLIN
TO RUEHC/SECSTATE WASHDC 7770
INFO RUCNMEM/EU MEMBER STATES
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 DUBLIN 001403 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR ECON PREL EI
SUBJECT: TRANSPORT MINISTER WANTS CLARITY ON U.S.-EU CIVAIR 
NEGOTIATIONS 
 
REF: STATE 195012 
 
¶1.  (SBU) Summary: In a December 11 discussion with Transport 
Minister Martin Cullen, the Ambassador highlighted the USG's 
continuing commitment to conclude the U.S.-EU air transport 
agreement, while noting that the USG was not prepared to 
pursue bilateral Open Skies options with Ireland.  Cullen 
said that he would support the draft U.S.-EU agreement at the 
December 12 EU Transport Council meeting, but did not hold 
out hope of Council approval, given DOT's December 5 
withdrawal of proposals on foreign investment in U.S. 
carriers.  Cullen noted that Ireland's next steps would be to 
await the outcome of planned U.S.-EU talks in early January 
and then lobby for a first-phase accord incorporating 
acceptable elements of the current draft agreement, including 
the U.S.-Ireland transition annex.  He added that if the 
U.S.-EU process were to fall apart in 2007, Ireland would be 
ready to pursue a separate bilateral arrangement.  Cullen 
also noted that U.S.-EU prospects would influence Dublin 
Airport's development plans and the timing of Aer Lingus' 
decision on long-haul aircraft purchases.  The Ambassador 
offered to confer with the Minister again after consulting 
with USG negotiators on the degree of clarity that might be 
available on the U.S.-EU process.  End summary. 
 
The Ambassador: USG Committed to the U.S.-EU Process 
--------------------------------------------- ------- 
 
¶2.  (SBU) In a December 11 meeting with Irish Transport 
Minister Martin Cullen, the Ambassador highlighted the USG's 
continuing commitment to conclude the U.S.-EU air transport 
agreement (per reftel), and he expressed appreciation for 
Irish support of the U.S.-EU process.  The Ambassador noted 
that the U.S. Department of Transportation (DOT) had recently 
withdrawn its earlier proposal affecting foreign investment 
in U.S. carriers, a decision that would likely bring the 
U.S.-EU negotiations to a pause.  The USG, he said, planned 
to resume talks in the New Year, while maintaining its 
position on the merits of the draft U.S.-EU agreement.  The 
Ambassador acknowledged Ireland's interest in Open Skies and 
observed that the U.S.-EU situation was a source of 
frustration for all sides.  He added, however, that the USG 
was not prepared to consider bilateral options on Open Skies 
with Ireland. 
 
The Minister: Bilateral Options if Necessary 
-------------------------------------------- 
 
¶3.  (SBU) Minister Cullen replied that he would defend the 
draft U.S.-EU agreement at the December 12 EU Transport 
Council meeting, while realizing that the agreement stood no 
hope of Council approval, given the December 5 withdrawal of 
DOT's investment proposal.  This outcome, he remarked, was a 
disappointment for Ireland, as the scheduled November start 
date for the U.S.-Irish transition annex to the U.S.-EU 
accord had already been missed.  He recounted, moreover, that 
Ireland had abandoned its early 2005 effort to negotiate a 
bilateral Open Skies arrangement in deference to EU attempts 
to finalize a trans-Atlantic deal.  Ireland had strongly 
supported the draft U.S.-EU agreement that emerged in 
November 2005 and was grateful to Transportation Secretary 
Mineta for recognizing Shannon's political sensitivities in 
working out the U.S.-Irish annex.  Cullen expressed regret, 
however, that the U.S.-EU process had stalled over the past 
year and was poised for another likely impasse in 2007. 
 
¶4.  (SBU) Minister Cullen said that Ireland's next step would 
be to await the results of U.S.-EU talks in early January. 
He hoped that U.S. negotiators would bring new proposals to 
the table, but he doubted that any offer would assuage a 
group of ministers who continued to demand the "holy grail" 
of a new DOT approach to foreign investment.  Cullen said 
that, following the January talks, he would likely lobby for 
the extraction of acceptable elements from the draft 
agreement for a "first phase" accord, to include the current 
terms of the U.S.-Irish annex.  "Let's hold what we have and 
move where we can," he observed.  After the past year's 
delay, however, Ireland was not prepared to wait another year 
for progress on the U.S.-EU front, Cullen cautioned.  He 
added that, if the U.S.-EU process were to fall apart in 
2007, Ireland would be ready to exercise its right to pursue 
a separate bilateral arrangement. 
 
¶5.  (SBU) Minister Cullen remarked that lack of clarity on 
the future of the U.S.-EU negotiations was playing havoc with 
Ireland's aviation sector strategy.  The Irish Government, he 
noted, had set aside euro 1.5 billion for upgrades at Dublin 
Airport that would require concrete projections on 
trans-Atlantic service - information that would not be 
 
DUBLIN 00001403  002 OF 002 
 
 
available with uncertainty in the U.S.-EU talks.  Moreover, 
Aer Lingus was now thinking through long-haul aircraft 
purchase plans, again an exercise that was difficult in the 
absence of clarity on Ireland's future rights in the U.S. 
market.  Cullen pointed out that while Aer Lingus was hoping 
to serve three additional cities in the near term (San 
Francisco, Orlando, and Washington Dulles), 22 U.S. cities 
had contacted the Transport Department about interest in 
direct service.  He also remarked that the potential for 
increased two-way tourism, trade, and investment would be 
huge in an Open Skies context. 
 
Planned Follow-up on U.S.-EU Prospects 
-------------------------------------- 
 
¶6.  (SBU) The Ambassador responded that he would contact the 
State Department and DOT to see the degree of clarity that 
might be available on the shape of the U.S.-EU process 
leading into the New Year and beyond.  He offered to confer 
again with the Minister after those discussions.  The 
Minister expressed thanks, noting that the Irish Government 
had already brought key political constituencies, including 
in Shannon, "to the water" on the importance of Open Skies. 
(Comment: In a follow-up up phone call to Cullen on December 
12, the Ambassador pointed out that EU legal considerations 
had shut down the Irish Transport Department's move in early 
2005 toward a bilateral Open Skies arrangement.  Cullen 
confirmed that this was the case, but noted that Irish 
Attorney General Rory Brady was now on board for any 
bilateral aviation discussions.  It was Brady who reportedly 
intervened in 2005 to prevent Irish Transport officials from 
moving on a bilateral arrangement.) 
 
Cullen and Boeing 
----------------- 
 
¶7.  (SBU) When the Ambassador asked for Minister Cullen's 
views on Aer Lingus' planned long-haul aircraft purchases, 
Cullen responded that he preferred not to interfere in the 
carrier's management decisions.  He added that this had been 
the case even when Aer Lingus was still state-owned.  Cullen 
recounted nonetheless that Boeing had given his office a 
presentation on the 787 Dreamliner earlier in 2006.  He 
offered his personal view that the 787 was a "fabulous" plane 
and that he would like to see the model used for 
trans-Atlantic service.  He also reiterated that prospects 
for the U.S.-EU negotiations would be a critical factor on 
the timing of Aer Lingus' purchase decision. 
 
Ryanair's Motives for Aer Lingus Takeover Bid 
--------------------------------------------- 
 
¶8.  (SBU) The Irish Government, still an Aer Lingus 
shareholder, was committed to do anything necessary to ensure 
that the carrier and Ryanair remained separate entities, 
according to Minister Cullen.  He recalled that no aviation 
or financial experts had predicted Ryanair CEO Michael 
O'Leary's takeover bid for Aer Lingus in early October, 
especially after O'Leary had publicly announced his 
disinterest in the carrier's IPO.  Cullen remarked that 
O'Leary likely attempted the bid because he felt that Aer 
Lingus would offer a good mix for his company and that, even 
if he did not succeed (as now appears the case), he could 
influence Aer Lingus' decisions as a major shareholder. 
O'Leary's overall objective, Cullen continued, was to dictate 
the renovation of Dublin Airport, which he would have been 
able to do had he acquired 80 percent of airport traffic with 
the Aer Lingus takeover.  Cullen also remarked that Ryanair 
Chairman Peter Bonderman had experience in long-haul service 
and might perhaps have interest in expanding Ryanair into 
long-haul markets. 
FOLEY