VZCZCXYZ0018
OO RUEHWEB

DE RUEHQT #2168/01 2641215
ZNR UUUUU ZZH
O 211215Z SEP 07
FM AMEMBASSY QUITO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7762
INFO RUEHGL/AMCONSUL GUAYAQUIL PRIORITY 2824
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY

UNCLAS QUITO 002168 
 
SIPDIS 
 
SIPDIS 
 
PLS PASS TO DEPT OF TRANSPORTATION: ATTN BRIAN HEDBERG 
 
E.O. 12958: N/A 
TAGS: EAIR EC EFIN ETRD
SUBJECT: QUITO AIRPORT EXPENSIVE FOR U.S. CARRIERS 
 
REF: QUITO 2167 
 
¶1.  (SBU) Summary:  U.S. air carriers say that their ongoing 
dispute with the current Quito airport concessionaire over 
usage fee increases has caused them to re-evaluate their 
operations.Q The airlines say they support the new Quito 
airport project (the reason for current airport fee 
increases), but that current costs have caused at least one 
major cargo carrier to consider moving operations to 
Latacunga, south of Quito.  American Airlines hints that it 
may redirect some services to Guayaquil.  U.S. carriers also 
voiced concerns over differential fuel pricing and possible 
controls over travel agent fees.  End summary. 
 
¶2.  (U) The Embassy met with four U.S. carriers on August 31 
(American, Continental, UPS and Arrow Air). 
 
Quiport Fees 
------------ 
 
¶3.  (SBU) During the meeting the carriers focused their 
complaints on what they say are high fees at the Quito 
Airport.  They reiterated their prior complaints that the 
airport concessionaire, Quiport, has raised fees by 64% over 
the previous 18 months, in large part to cover the financing 
costs of the new Quito airport which is being constructed by 
the same concessionaire that is operating the current 
airport.  They asserted that Quiport has the highest rate 
structure in the region after Mexico City, although they 
assert the service is far better in Mexico City.  They also 
complained that there is no limit on how much further Quiport 
could raise rates in the future. 
 
¶4.  (SBU) In 2006 the airline association ARLAE (which 
includes all foreign carriers) filed a request for 
injunction, and the airlines began paying their fees "by 
consignment" into an account managed by the courts.  On 
August 30, 2007, the Constitutional Court dismissed the case 
without comment.  American Airlines told econoffs that it 
plans to file another request for injunction, but by 
September 7, the Constitutional Court had still not published 
its decision. 
 
¶5.  (SBU) According to the carriers, in August 2007, the 
mayor of Quito, Paco Moncayo, proposed a mediation 
commission, but the airlines complained that his choice of 
mediators was biased because the nominees included the 
municipality's lawyer who negotiated the airport concession. 
 
¶6.  (SBU) The carriers say that because the current cost of 
operations is so high, they are re-evaluating their 
operations.  One cargo carrier, UPS, is thinking of moving to 
Latacunga, south of Quito, and passenger carriers note that 
if there were fewer carriers overall at the Quito airport, 
the cost to those who remain would be even higher, according 
to Quiport's current pay scheme.  Because of this, American 
Airlines hinted that these high costs may be driving the 
passenger market toward Guayaquil, away from Quito. 
 
¶7.  (SBU)  The airlines told us that they support the new 
airport project, but that they are unsure of the facilities 
and services they will be offered there, and therefore object 
to having to pay now for future services.  They alleged that 
Quiport has never fully disclosed its finances (in contrast, 
they said, the Guayaquil airport has reviewed its finances 
with the carriers), and argued that Quiport has been given 
free rein by the Quito municipality to set rates.  They 
argued that instead, an outside body should set the rates for 
the airport, taking into consideration the financial 
condition of the concessionaire, its willingness to cover 
part of the construction cost with equity, and the impact the 
rates will have on other economic activity, such as tourism 
and the export industry. 
 
¶8.  (U) (Two side notes: In an AmCham meeting on September 
14, a U.S. flower exporter and U.S. hotel operator complained 
about the high cost of the Quito airport.  The flower 
operator asserted that the additional transportation cost 
undermines his company's competitiveness against suppliers 
from other countries.  The hotel operator said that he has 
lost some package tours to Guayaquil because of the high 
airport fees.  Separately, Quiport contacted the Embassy, 
offering a tour of the new airport site and a discussion of 
the new operation.  The visit will take place in mid-October. 
 
Fuel Prices and Travel Agent Fees 
--------------------------------- 
 
¶9.  (U) In an effort to broaden the conversation, Embassy 
asked the U.S. carriers if they have additional concerns 
beyond the Quiport fee structure.  They indicated two:  fuel 
prices and travel agent fees. 
 
¶10.  (SBU) Carriers complained that domestic Ecuadorian 
carriers benefit from subsidized jet fuel (reftel), and that 
at least one domestic company, Aerogal, will soon begin 
flights to the U.S. and will benefit from the subsidized fuel 
as it competes directly with U.S. carriers.  Second, the 
airlines worried that the Correa government might support 
efforts to regulate travel agency commissions.  They did not 
point to any specific signals from the current government, 
but instead noted that the prior government had supported 
minimum travel agents fees and asserted that the issue could 
arise again (perhaps within the upcoming Constituent 
Assembly).  They said that travel agencies are currently 
advocating for a new law to regulate their fees. 
 
¶11.  (SBU) Comment:  The U.S. aviation industry's concern in 
Ecuador is Quiport, Quiport and more Quiport; they only 
brought up fuel prices and travel agent fees because we 
asked.  Trying to obtain any sort of relief from current or 
future rate increases at the Quito airport will be thorny, 
however.  Relations between the carriers and Quiport are 
tense, and in an earlier meeting with Quiport, the local head 
of the concession implied that he was willing to cut services 
for those who do not directly pay their fees.  Furthermore, 
the mayor of Quito sees the new airport as a pet project, and 
is sensitive to any criticism, although the argument that 
current fees should not pay for future services has begun to 
obtain some resonance with the Municipal Council.  Both the 
mayor and council might also be sensitive to Quito losing 
aviation services and tourism.  End comment. 
JEWELL