VZCZCXRO7879
PP RUEHDBU RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #2676/01 2970922
ZNR UUUUU ZZH
P 240922Z OCT 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 4175
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZG/NATO EU COLLECTIVE PRIORITY
RUEHMO/AMEMBASSY MOSCOW PRIORITY 0264
RUEHMT/AMCONSUL MONTREAL PRIORITY 0008

UNCLAS SECTION 01 OF 02 KYIV 002676 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/RUS PATTERSON 
EEB BYERLY AND COLEMAN 
USDOC FOR 4231/ITA/MAC/EUR/RISA BROUGHER AND BEADLE 
USDOC FOR 3004/CS/ADVOCACY/BLOOM 
USICAO MONTREAL FOR LAURA FAUX-GABLE 
NSC FOR WARLICK AND MCKIBBEN 
 
E.O. 12958: N/A 
TAGS: EAIR ETRD KTIA PREL UP
SUBJECT: UKRAINE: SAA TELLS IATA TICKET STOCK OK, BUT 
BRINGS UP NEW ISSUES 
 
REF: A. KYIV 2542 
 
     ¶B. KYIV 2383 
     ¶C. KYIV 1974 
     ¶D. KYIV 2788 
     ¶E. STATE 10632 
 
¶1. (SBU) Summary.  On October 19 in Kyiv, State Aviation 
Administration (SAA) officials confirmed to visiting 
International Air Transport Association (IATA) officials that 
the dispute surrounding IATA's paper tickets (ref D) had been 
solved, and that sanctions against IATA had been lifted. 
However, the SAA said it still had outstanding issues with 
IATA's electronic tickets, and objected to IATA's recent 
resolution to switch to the Euro from the US dollar for 
airline ticket fares.  IATA agreed to the SAA suggestion to 
refer the e-ticket issue to a working group, and agreed to 
give Ukraine more time to address the commercial implications 
of switching from the Dollar to the Euro.  Admitting that its 
decision to challenge the paper ticket issue may have ruffled 
feathers at the SAA, IATA is now deliberately taking a 
cooperative approach to test whether the Ukrainian civair 
regulator's concerns are genuine, and not just a front for 
Ukrainian interests in acquiring part of the lucrative and 
growing market now serviced by IATA.  End summary. 
 
¶2. (SBU) On October 19, EconOff attended a special meeting 
between SAA and IATA officials and airline representatives. 
IATA sent its Senior VP for Industry Distribution and 
Financial Services Tom Murphy, its Regional Rep for Russia 
and CIS countries Dymtry Shamraev, and its Rep in Ukraine 
Sergei Martinyuk.  Deputy Chairman Dmytro Babeichuk and Head 
of Air Services and Licensing Sergiy Korshuk represented the 
SAA.  Representatives from Ukrainian International, AeroSvit, 
Delta Airlines, and KLM/Air France were also in attendance. 
IATA's Tom Murphy took a reconciliatory approach and 
apologized if IATA had given the impression that it did not 
want to follow Ukrainian law (Note: IATA had opted to pursue 
the ticket stock issue in Ukrainian courts, only finally 
registering the ticket stock when sanctions had been imposed. 
To date, IATA officials still believe the registration is 
unwarranted.  End note). 
 
¶3. (SBU) The SAA's Babeichuk expressed gratitude for IATA's 
apology and reminded IATA that all businesses operating in 
Ukraine, either foreign or domestic, must abide by Ukrainian 
law.  Babeichuk also told IATA that all subsequent batches of 
ticket stock would need to follow the same registration 
process that IATA had recently completed.  IATA's country 
manager in Ukraine Sergei Martinyuk promised that this would 
be done before IATA imported any batch of ticket stock to 
Ukraine.  The SAA's Head of Air Services and Licensing Sergiy 
Korshuk stated that the SAA did not have any vendetta against 
IATA; the SAA simply wanted IATA to comply with Ukrainian 
law.  IATA's Murphy agreed, and both parties expressed their 
gratitude that the infamous ticket stock issue had finally 
been resolved. 
 
Ticket Stock Issue Resolved, But Not E-tickets 
--------------------------------------------- - 
 
¶4. (SBU) Next, the SAA's Babeichuk regretted that the SAA was 
still concerned about the future of e-tickets, noting that in 
the opinion of the SAA, e-tickets by themselves did not meet 
the standard of an official accountable document laid out in 
current Ukrainian law.  Babeichuk suggested that an e-ticket 
working group be formed consisting of IATA, SAA, and airline 
representatives as soon as possible to arrive at a quick 
solution to the e-ticket issue.  (Note: In ref C, the SAA 
contended that e-tickets will need an accompanying tax 
document, which according to Korshuk, can be purchased from a 
local Ukrainian printer for approximately $0.43 each.  IATA 
processed approximately 330,000 e-tickets in Ukraine last 
year, which would have equaled roughly $141,900 in income for 
this local company last year.  End note).  The SAA said that 
a working group would be the best forum to determine the 
steps needed to make e-tickets legal documents for official 
Ukrainian accounting purposes.  IATA officials agreed, 
understanding that the working group would lead to a solution 
whereby e-tickets, as they exist now, would get appropriate 
legal status being accompanied by an additional document. 
 
 
KYIV 00002676  002 OF 002 
 
 
Euro or Dollar? That is the Question 
------------------------------------ 
 
¶5.  (SBU) IATA's Tom Murphy next addressed the IATA's recent 
decision to switch its main currency for airline ticket fares 
from Dollar to Euro beginning November 1.  Murphy told the 
SAA that the decision was made unanimously at an IATA 
conference in July.  He noted no representatives from either 
Aerosvit or Ukrainian International Airlines (UIA) were at 
the conference to voice their concerns or veto the 
resolution.  Murphy noted that either of the Ukrainian 
airlines could have vetoed the move. 
 
¶6. (SBU) The SAA explained that UIA had expressed its 
concerns with the resolution (albeit not at the July IATA 
conference), and the SAA had agreed with UIA's concerns.  The 
hryvnia was pegged to the dollar, and not the Euro, the SAA 
pointed out.  Ticket prices quoted in hryvnia remained stable 
as a result.  On the other hand, ticket prices in hryvnia 
would oscillate in tandem with changes in the hryvnia/Euro 
exchange rate if IATA switched to the European currency.  UIA 
and the SAA feared that such a practice could prove 
economically damaging to Ukrainian carriers.  Murphy was 
unable to convince either the SAA or the UIA representative 
that the switch made economic sense in the long run.  The SAA 
decided to send a letter of their disapproval of the 
resolution that same day, which would result in the immediate 
postponement of the resolution which was supposed to take 
effect on November 1.  Both the SAA and IATA agreed that the 
resolution would be temporarily suspended in Ukraine, 
allowing Ukrainian airlines more time to prepare for 
implementation.  The KLM/Air France representative then asked 
the SAA when the implementation of the Euro could happen, and 
the SAA replied that it could not set a concrete date, but it 
was hopeful that implementation would occur before summer 
¶2008. 
 
¶7. (SBU) Comment.  IATA and the foreign airlines, including 
Delta, are happy with the results of the meeting and 
expressed thanks to the Embassy for its support.  We hope 
that they are not celebrating too soon:  the controversy 
surrounding IATA's paper tickets may be resolved, but the SAA 
wasted no time in bringing up new concerns.  IATA, which 
admits that its decision to contest the paper ticket 
registration issue may have ruffled feathers at SAA, has now 
decided to adopt a cooperative approach to test the 
willingness of the SAA to work cooperatively, and has agreed 
to discuss the e-ticket issue in a working group.  In doing 
so, however, IATA points out that it has not had to face such 
issues in the more than 140 other countries where its members 
do business.  The SAA's approach to electronic ticketing and 
the currency issue will show whether its concerns are truly 
substantive, or whether it is troubling IATA on behalf of 
other interests (ref D), as some in the industry fear.  End 
comment. 
Taylor