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Viewing cable 07ULAANBAATAR297, Turbulence Ahead for Mongolia's Airline Sector?

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Reference ID Created Released Classification Origin
07ULAANBAATAR297 2007-05-23 05:37 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ulaanbaatar
VZCZCXRO3616
RR RUEHLMC RUEHVK
DE RUEHUM #0297/01 1430537
ZNR UUUUU ZZH
R 230537Z MAY 07
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 1121
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
INFO RUEHBJ/AMEMBASSY BEIJING 5565
RUEHKO/AMEMBASSY TOKYO 2492
RUEHMO/AMEMBASSY MOSCOW 1777
RUEHRO/AMEMBASSY ROME 0035
RUEHUL/AMEMBASSY SEOUL 2759
RUEHRL/AMEMBASSY BERLIN 0079
RUEHOT/AMEMBASSY OTTAWA 0448
RUEHGP/AMEMBASSY SINGAPORE 0331
RUEHSH/AMCONSUL SHENYANG 0271
RUEHVK/AMCONSUL VLADIVOSTOK 0108
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC 0582
RUEAZCA/FAA WESTERN PACIFIC RGN LOS ANGELES CA 0016
UNCLAS SECTION 01 OF 02 ULAANBAATAR 000297 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS EXIMBANK AND OPIC 
STATE PASS TO AID/ANE, EB/TRAN/AN AND EAP/CM 
TOKYO, BEIJING AND SINGAPORE FOR FAA REP 
 
E.O. 12958: N/A 
TAGS: EAIR PGOV ECON MG
SUBJECT: Turbulence Ahead for Mongolia's Airline Sector? 
 
ULAANBAATA 00000297  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
Ref: A) Ulaanbaatar 245 B) 05 Ulaanbaatar 59 
 
1. (U) This is an action cable.  See action requested in of the FAA 
in para 12. 
 
2. (SBU) SUMMARY. The General Director of Mongolia's Civil Aviation 
Authority (MCAA) dismissed reports that Aero Mongolia is suffering 
serious financial difficulties, despite a series of safety related 
incidents and swirling rumors of impending bankruptcy.  The official 
praised the country's newest domestic airline, EZnis as a model 
company.  He complained to Econoff recently  that the U.S. Embassy's 
continuing ban on the use of MIAT's domestic service by U.S. 
government personnel has damaged the company's reputation and 
revealed that MIAT would soon purchase two or more ATRs to replace 
its aging Antonov-26 in hopes of reinserting itself into the 
domestic air market.  MCAA reps also asked for assistance in 
developing a closer working relationship with the FAA and in 
locating training opportunities for MCAA staff in the U.S. END 
SUMMARY 
 
3. (SBU) Econoff met with the MCAA General Director Batmunkh on May 
22 to discuss the general health of Mongolia's aviation sector and 
ask about recent reports that one of the country's two private 
domestic airlines, Aero Mongolia (AM), could be facing bankruptcy. 
The airline has suffered a series of safety-related mechanical 
incidents recently and it continues to be dogged by rumors of wobbly 
finances.  MCAA's Director of Foreign Relations, J. Tsolmon, and 
Aviation Economist D. Bayasgalan also attended the meeting. 
 
4. (SBU) Post recently learned from a source (albeit a competitor) 
that three of AM's four aircraft had been grounded for safety or 
financial reasons.  One plane was undergoing its (longer than 
expected) annual "C" check in Germany, a second plane was grounded 
by MCAA for improper maintenance, and a third had had its wheels 
locked after the company failed to make monthly payments on its 
lease.  If true, AM would have only one aircraft at its disposal 
during the height of the June to August tourist season, constricting 
revenue inflows and putting the company's ability to remain 
financially airborne at risk.  It is hard to see how the company 
could keep revenues at sustainable levels, the source surmised. 
 
5. (SBU) Batmunkh assured Econoff that AM was alive and well and it 
was meeting all international safety standards. "You can take my 
word on it," he said. As for its finances, as far as he knew, AM had 
experienced past problems but now he felt that the airline's flight 
frequency was appropriate to keep it afloat.  He confirmed that the 
MCAA had grounded one of AM's aircraft because it had not gone for 
its C check at the required time.  Apparently, AM was pushing the 
outside of the envelope by keeping one plane flying past its 
expiration date while another was unavailable as it was undergoing a 
C check.  Once the first plane returned from its C check, which he 
expected would happen in short order, the grounded plane could then 
be sent off to Germany for its annual check and would then be back 
on line. 
 
6. (SBU) Because MCAA focuses on safety issues, Batmunkh demurred on 
speaking to AM's failure to make timely lease payments on another of 
its aircraft. 
 
7. (SBU) Turning to MIAT,  Mongolia's state-owned airline, Batmunkh 
announced that the airline was looking to effectively re-enter the 
domestic market with the purchase of two or more European built, 
twin-turboprop short-haul ATRs.  (Note: American Eagle Airlines 
currently has a fleet of 39 such aircraft.)  Although he seemed to 
lack details about MIAT's plans, he felt that the national carrier 
would move forward with the purchase soon. 
 
 
ULAANBAATA 00000297  002.2 OF 002 
 
 
8. (SBU) COMMENT: Batmunkh hyped MIAT's efforts to reenter the 
domestic market by saying, "We want there to be competition, we do 
not want there to be only one domestic airline," leaving the 
impression that, despite his cheerleading for Aero Mongolia, he did 
not hold out strong hope for the airline's long term survival. END 
COMMENT. 
 
9. (U) Batmunkh praised Mongolia's newest airline, EZnis (ref A), 
saying it had excellent financial backing, excellent management and 
was performing well in its first few months in service.  As a recent 
start-up, he believed the airline was likely losing money. 
Nevertheless, he was impressed with the company's emphasis on safety 
and opined that EZnis' current fleet of two Saab 340Bs purchased 
from American Eagle last year represented the perfect kind of 
aircraft for Mongolia. 
 
10. (SBU) D. Bayasgalan asked whether the U.S. Embassy-imposed ban 
on U.S. government personnel flying MIAT domestically (ref B) might 
soon be lifted, saying the move had damaged MIAT's the reputation. 
(Note: U.S. Government employees are prohibited from flying on MIAT 
domestically; internationally, MIAT flies Boeing and Airbus planes 
and is fine.) Econoff responded that questions surrounding the 
age-out status, maintenance records and "uninsurability" of MIAT's 
one remaining aircraft for domestic flights, an aging Russian-built 
military specifications Antonov-26, had led to the decision two 
years ago and that, since nothing had changed in the interim, the 
decision was not likely to be overturned.  (Note:  Although MIAT 
admits the Antonov is nearing the end of its useful life-span, it 
insists the actual logged flight hours of the plane are relatively 
low, that maintenance is top-notch, and that insurance is proper and 
up to date.  Nevertheless, MIAT has been unable to present 
documentary proof of these claims to Embassy staff when asked.) 
 
11. (U) Finally, Batmunkh asked Econoff for assistance in 
establishing contacts with appropriate U.S. counterparts who could 
assist MCAA with capacity building.  He also stressed the need for 
more MCAA staff, particularly air-traffic controllers, to attend 
training in the U.S. so they could acquire the right English 
language skills.  He asked for help in finding good schools for 
aviation industry employees as well as assistance with visas. 
Sending staff to Singapore for training, he said, was not meeting 
MCAA's needs. 
 
12. (U) ACTION:  Request FAA review MCAA's requests and consider a 
visit sometime soon to help flesh out these needs and possible areas 
for training and technical cooperation. 
Goldbeck