VZCZCXYZ0021
RR RUEHWEB

DE RUEHBU #0245/01 0391416
ZNR UUUUU ZZH
R 081416Z FEB 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 7223
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 5922
RUEHMN/AMEMBASSY MONTEVIDEO 6159
RUEHSG/AMEMBASSY SANTIAGO 0170
RUEHBR/AMEMBASSY BRASILIA 5773
RUEHCV/AMEMBASSY CARACAS 1075
RUEHLP/AMEMBASSY LA PAZ FEB QUITO 0847
RUEHSO/AMCONSUL SAO PAULO 3154
RUEHRI/AMCONSUL RIO DE JANEIRO 2141
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC//AWH-10//
RHMCSUU/FAA MIAMI SO IFO23 MIAMI FL
RHMCSUU/FAA MIAMI ARTCC MIAMI FL

UNCLAS BUENOS AIRES 000245 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE for TOM ENGLE, JEFF HORWITZ AND JOEL REIFMAN 
WHA FOR WHA/BSC AND WHA/EPSC 
E FOR THOMAS PIERCE 
PASS NSC FOR JOSE CARDENAS 
PASS TRANSPORTATION FOR BRIAN HEDBERG 
PASS FAA 
TREASURY FOR ALICE FAIBISHENKO 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
USDOC FOR 4322/ITA/ALFORD 
US SOUTHCOM FOR POLAD 
TRANSPORTATION FOR BRIAN HEDBERG 
FAA FOR CECILIA CAPESTANY, KRISTA BERQUIST 
FAA MIAMI FOR MAYTE ASHBY 
 
E.O. 12958: N/A 
TAGS: EAIR AR ECON PGOV
SUBJECT: PLANNING MINISTER PROMISES TO ADDRESS US AVIATION COMPANIES 
CONCERNS 
 
REF: (A) 05 Buenos Aires 2681, (B) 05 Buenos Aires 2055 
 
¶1. (SBU) SUMMARY.  Ambassador Wayne hosted a civil aviation 
roundtable luncheon on January 31 for top Government of Argentina 
(GOA) officials, and representatives from the six U.S. air carriers 
operating in Argentina.  Participants discussed the March 2007 
USG-GOA aviation liberalization talks to be held in Washington; the 
high costs of the airport operator; problems with the state-owned 
ground handling company; bureaucratic regulations for parcel 
shipping companies; challenges in providing security and screening 
at the airport; and the need for all aviation entities to have more 
open communication.  Minister of Planning Julio De Vido and 
Secretary of Transportation Ricardo Jaime offered their assistance 
 
SIPDIS 
on these matters and also encouraged more consultation between their 
offices and these airlines.  They promised to convene regular 
working groups with the U.S. carriers to discuss aviation-related 
matters.  The six U.S. carriers and Embassy are guardedly 
optimistic, and we will follow up with the GOA.  Press coverage of 
the event was positive, and will also assist us in pressing for 
follow-up.  The carriers are drafting a letter to De Vido and Jaime 
to review the issues discussed, and to request a formal follow-up 
meeting.  END SUMMARY 
 
¶2. (SBU) Ambassador hosted a luncheon on January 31, which included 
Minister of Planning Julio De Vido, Secretary of Transportation 
Ricardo Jaime, airports regulator (ORSNA) Brig. Gen. (ret) Horacio 
Orecife, state utility contracts chief negotiator Dr. Jorge Gustavo 
Simeonoff, and the country managers from American, Delta, 
Continental, United, UPS and Fedex, as well as the DCM, FCS 
Counselor and Econoff. 
 
--------------------------------------------- -------- 
GOA SUPPORT FOR UPCOMING USG-GOA LIBERALIZATION TALKS 
--------------------------------------------- -------- 
 
¶3. (SBU) Ambassador briefed the group on the current status of the 
USG-GOA talks to liberalize our 1985 bilateral air services 
agreement (reftel A).  He noted that both sides seek to liberalize 
the agreement in the following areas: increasing the number of 
weekly flights (or frequencies) allowed between our nations; route 
schedule expansion (the right to bring passengers to each other's 
nation, pick up other passengers, and to bring them onto other 
destinations, or third-, fourth-, fifth- and sixth-freedoms); 
updated language on charters; provisions on pro-competitive items, 
such as pricing, user charges, ground-handling and dispute 
resolution; and updated security provisions.  Ambassador notified 
the group that GOA and USG negotiators plan to hold formal aviation 
liberalization talks March 20-22 in Washington.  Minister De Vido 
and Secretary Jaime voiced support for such increases in 
frequencies, but also voiced some concern that the increase in 
flights by U.S. carriers might not be matched by Argentine carriers, 
due to the latter's limited capacity.  Ambassador noted that these 
increases would benefit the growing Argentine tourist industry, 
which just completed a record year in international arrivals in 
¶2006. 
 
---------------------------- 
HIGH PRICED AIRPORT OPERATOR 
---------------------------- 
 
 
 
¶4. (SBU) As detailed in reftels A and B, American carriers (and 
other foreign carriers) have long expressed serious concerns about 
the airports operator/concessionaire, Aeropuertos Argentina 2000 
(AA2000).  Users regularly complain about the extremely high and 
unjustifiable prices for landing, parking, storage, services, and 
fuel; arbitrary fines and rules; unrealized infrastructure 
investments; and AA2000's monopolistic advantages.  At the luncheon, 
the group discussed the pending AA2000-GOA contract re-negotiation, 
in which the airlines and the International Air Transport 
Association (IATA) have also been involved.  The new contract 
involves the GOA taking a 20 percent stake in the company, AA2000 
having its accumulated debt of USD 280 million forgiven, and 
reducing AA2000 annual fee and investment commitments to the GOA. 
Recent negotiations between IATA, carriers and the GOA also could 
result in: price reductions for user fees of about 20-25%, which 
carriers indicate would be very helpful; a pledge to guarantee free 
competition in the aviation fuel market; and the creation of a 
formal commission for fuller consultation, comprised of most of the 
agencies involved with airport administration, and all airlines, to 
increase communication and transparency.  The commission would 
report its findings to Congress. 
 
¶5. (SBU) De Vido and Jaime acknowledged the difficulties that the 
carriers faced, and expressed hope that the new contract would 
alleviate some of their costs.  De Vido asked Jaime to assure that a 
working group, to involve all the various airline authorities at the 
airport, could meet on a regular basis with the U.S. carriers.  The 
airlines also asked for assurances that the GoA and AA2000 would 
stick to the provisions of whatever new contract they complete, and 
not add on arbitrary (and unexpected) fees and conditions in the 
future.  The carriers also noted that any new agreement will not 
affect AA2000's overall revenue, as any agreement will merely shift 
fees among various sources, like eliminating the domestic departure 
tax, and increasing the international departure tax.  AA2000 is 
assured of the same gross income, no matter what.  The airlines 
emphasized that that their main objective was to gain a reduction in 
AA2000 fees, which they claim are among the highest in the 
hemisphere. 
 
--------------------------------------------- ------ 
STATE-OWNED AND HIGH-PRICED GROUND SERVICES COMPANY 
--------------------------------------------- ------ 
 
¶6. (SBU) Participants also raised another long-standing complaint: 
the high-priced and allegedly sub-par performance of the state-owned 
ground services company, Intercargo.  (Note: With the exception of 
American Airlines, which several years ago established its own 
ground handling service when this option was still available, most 
if not all other foreign carriers are forced to use Intercargo.  End 
note).  The recent high-profile arrests of several Intercargo 
employees for theft highlighted another long-standing complaint of 
many carriers.  Airline representatives also noted that most 
carriers had recently received notices from Intercargo that their 
current contract would expire in 90 days, and that their contracts 
would be renewed and renegotiated.  They expressed concern that the 
costs would increase again.  De Vido and Jaime noted that 
Intercargo's exclusivity contract runs until 2009, but that there 
was clearly a need to have more competition.  They pledged to 
discuss this with the carriers soon, and agreed that any contract 
extension needed to take into account the need for a more flexible 
and customer-oriented company. 
 
---------------------- 
UPS AND FEDEX PROBLEMS 
---------------------- 
 
¶7. (SBU) UPS and Fedex representatives complained that GOA customs 
rules limited the value of express packages sent to $1,000 per 
consignment per day.  (Note: Although not directly discussed, Fedex 
and UPS have in the past stated that there are other parcel 
companies. e.g. DHL, allowed higher limits.  If this is true, this 
would represent a case of discrimination against U.S. companies. 
End note.)  The representatives said that they are treated as if 
they were actual importers and exporters, with all the added legal 
implications and responsibilities, for example, having to "lend" 
their taxpayer number (or "CUIT") to clients who do not have one. 
De Vido, in agreeing to holding working groups on these issues, 
volunteered to talk to the Industry Secretary or Secretary of 
External Commerce in response to the carrier representatives 
pointing out that exports by Argentina's small and medium-sized 
industries are restricted under the current regulations.  He also 
volunteered to include Customs in this working group. 
 
---------------- 
OTHER ANNOYANCES 
---------------- 
 
¶8. (SBU) The United representative complained that the municipality 
of Ezeiza, the town that nominally includes the international 
airport, has been trying to charge fees for non-rendered services, 
such as employee airport "sanitary records," and "security fees," 
despite having no official responsibilities for these functions. 
Although United recently won a court decision against the Ezeiza 
municipality, the court case involved a lot of time and money, for 
what United felt was a clear case of harassment.  United and other 
carriers complained of "exorbitant" and "unfair" immigration 
penalties relating to passengers arriving at Ezeiza with improper 
documentation.  United Airlines, for one, claims it is paying 
hundreds of thousands of dollars per year in such fines.  (Note: 
Post understands that Malaysian Airlines is currently contesting a 
several hundred thousand dollar fine recently imposed by GOA 
Immigration for one single arrival that was said to include several 
travelers with improper documentation.  End Note.)  Under GOA law, a 
passenger arriving with documentation judged to be insufficient, the 
airline is fined three times the value of the ticket paid by the 
passenger, but Immigration bases this not on what the passenger 
actually paid, but that of IATA's baseline maximum fare, which is 
never the actual paid cost.  The carrier reps also complained that 
Immigration had too few officials at the airport, often resulting in 
long delays for customers, and that this adversely affected the 
image of Argentina. 
 
--------------------------------------------- ------- 
NEED FOR AIRPORT TO PROVIDE BETTER SECURITY SCREEING 
--------------------------------------------- ------- 
 
¶9. (SBU) Carriers described the challenges they faced in properly 
screening passengers for U.S.-bound flights, to comply with 
Transportation Security Administration regulations.  They noted that 
the relatively new entity in charge of this, the airport security 
police force (PSA), was unable to screen passengers in a timely and 
effective manner, and that these problems were impacting the 
carriers' ability to board passengers on time.  This problem would 
grow if frequencies increased. 
 
--------------------------------------------- ---- 
PERCEPTION THAT THE ENTIRE AIRLINE IS A MONOPOLY 
--------------------------------------------- ---- 
 
¶10. (SBU) Carriers noted what they described as an overall lack of 
transparency in the entire airport system.  They said that their 
many complaints about AA2000 and Intercargo, when they communicated 
them to the nominal airport regulator, ORSNA, were rarely acted 
upon.  More generally, airline representatives said that there was a 
strong perception that the entire aviation industry matrix in 
Argentina - Customs, Immigration, ORSNA, the military, airport 
police, Intercargo - amounted to a form of a monopoly, in that there 
usually is no entity to appeal to, no other vendor to use, and the 
carriers are effectively "hostages" to the policies of this group. 
The carrier representatives said there was a need for freer and more 
competitive services in all these areas. 
 
------------------------------------------ 
AGREE ON THE NEED FOR REGULAR CONSULTATION 
------------------------------------------ 
 
¶11. (SBU) Carriers noted that there was a lack of an effective 
consultative process among and between the carriers, regulators, 
government, AA2000, and the military.  (Note: Civil aviation is 
under the control of the military in Argentina, although, as 
reported reftels A and B, the GOA is planning to a transition from 
military to civilian control.  End Note).  The working group that 
Minister De Vido and Secretary Jaime offered to convene with the 
U.S. carriers, it was agreed, could be most effective if it was 
informal and able to quickly respond to current challenges. 
 
------- 
COMMENT 
------- 
 
¶12. (SBU) The carrier representatives viewed the roundtable as a 
good start, and are eager to follow-up on De Vido and Jaime's 
promises of assistance.  The event received prominent press 
coverage, thanks to Embassy press release, with several dailies 
running stories about the meeting, and we hope that this coverage 
will motivate the GOA to resolve the impediments to improved civil 
aviation services.  Although pushing this agenda of improvements and 
follow-up might not be easy, the meeting at least started the 
dialogue between the private sector and government officials.  As 
one airline representative later commented, "maybe now when we call 
their offices they'll at least take our calls, and not stonewall 
us." 
 
¶13. (U) To see more Buenos Aires reporting, visit our classified 
website at:  http://www.state.sgov.gov/p/wha/buenosaires.< /a> 
 
WAYNE