VZCZCXRO8680
PP RUEHTRO
DE RUEHAS #1772/01 3451009
ZNR UUUUU ZZH
P 111009Z DEC 07
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC PRIORITY 4977
INFO RUEHFR/AMEMBASSY PARIS 2444
RUEHMD/AMEMBASSY MADRID 8713
RUEHLO/AMEMBASSY LONDON 1746
RUEHRB/AMEMBASSY RABAT 2054
RUEHTU/AMEMBASSY TUNIS 6912
RUEHTRO/AMEMBASSY TRIPOLI
RUEHNK/AMEMBASSY NOUAKCHOTT 6128
RUEHNM/AMEMBASSY NIAMEY 1383
RUEHBP/AMEMBASSY BAMAKO 0333
RUEHCL/AMCONSUL CASABLANCA 3161
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ALGIERS 001772 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/TRA - JBYERLY, JREIFMAN 
DEPT OF TRANSPORTATION FOR SEHATLEY 
 
E.O. 12958: N/A 
TAGS: EAIR ETRD ECON AG
SUBJECT: TRANSPORT OFFICIAL OPTIMISTIC ON OPEN SKIES, 
CIVAIR OUTLOOK FOR 2008 
 
REF: ALGIERS 946 
 
¶1. SUMMARY: Although the main impasse to an Open Skies 
agreement remains unchanged, the Algerian transport ministry 
is optimistic about progress in 2008.  Meanwhile, despite 
American firm FSI losing a Boeing 737 flight simulator 
contract to Canadian firm CAE, Algeria seems committed to 
continue supplying state-run national carrier Air Algerie 
with mid-range Boeing aircraft and says it will need to 
"refresh" this aging segment of its fleet within the next few 
years.  Air Algerie is struggling to develop a compensation 
package for its pilots that will prevent them being poached 
by carriers in the three largest areas of current global 
civil aviation growth: India, China and the Gulf.  Finally, 
contrary to what we were told in June (reftel), direct 
flights to the U.S. are "not on the agenda" for Air Algerie. 
Instead, direct service between Algiers and Beijing is due to 
begin within the next few months.  END SUMMARY. 
 
OPEN SKIES - STILL 80 GRAMS AWAY 
----------- ------------- ------- 
 
¶2. We met on December 5 with Messaoud Benchemam, Director of 
Civil Aviation at the Ministry of Transportation.  Benchemam 
told us Algeria was "eager" to work out an Open Skies 
agreement, but that the sticking point remained protecting 
the monopoly of Algeria's state-controlled postal service on 
the delivery of domestic mail weighing less than 80 grams. 
Benchemam said the current limit was still 250 grams, but 
that Algeria had already committed to lowering the limit to 
80 grams in early 2008.  According to Benchemam, it was "a 
shame" that such a "fine point" prevented an agreement.  He 
referred to a negotiated civil aviation agreement that 
Algeria had reached with France, which he said had involved 
some compromise on both sides and respected the concerns of 
the Algerian postal monopoly.  Benchemam did concede that 
Algeria would be examining the issue further in 2008, as 
market realities made it "extremely difficult to believe" 
that couriers such as FedEx or UPS would have any interest in 
competing for interna 
l Algerian postal services with letters weighing less than 80 
grams. 
 
¶3. In response to our underscoring that Open Skies was an 
all-or-nothing free trade agreement, Benchemam did not insist 
on a U.S. compromise on the 80-gram weight limit.  Rather, he 
stressed that Algeria had made significant progress in 2007 
towards bringing its regulations in line with Open Skies and 
ICAO standards.  As examples, he stated that Algeria has 
eliminated the distinction between residents and 
non-residents for the purchase of airline tickets in foreign 
currency, as well as the reduction or elimination of several 
tariffs.  According to Benchemam, Algeria was still in the 
process of changing its regulations, and he told us that 
Algeria still considered Open Skies to be "a very active 
file."  The process, Benchemam said, was slow and difficult 
due to the involvement of several ministries.  While the 
Ministry of Transportation had a clear interest in Open 
Skies, the postal monopoly was of far greater concern for the 
Ministry of Communications, he pointed out.  He said he hoped 
that in "early 2008" Al 
geria planned to examine the 80-gram obstacle and explore 
ways to overcome it so that an Open Skies agreement could be 
signed during the 2008 calendar year. 
 
BOEING'S FUTURE IN ALGERIA APPEARS SECURE 
---------- --------------------- --------- 
 
¶4. Regarding the recent Algerian decision to award a contract 
for Boeing 737 flight simulators to Canadian company CAE, 
Benchemam simply said they felt the CAE offer was the most 
attractive.  He quickly went on to emphasize Air Algerie's 
reliance on Boeing aircraft for its mid-range fleet. 
Benchemam told us that Air Algerie's long-range aircraft 
consisted of three Airbus 330s and two Boeing 767s, of which 
the Boeings were "getting old" but would probably not be 
 
ALGIERS 00001772  002 OF 002 
 
 
replaced as three long-range aircraft were probably enough 
for Air Algerie.  In contrast, he said that the vast majority 
of Air Algerie's service relied on mid-range 100-150 seat 
aircraft, specifically the Boeing 737.  Benchemam said the 
737 simulator contract was a sign that Algeria was interested 
in keeping costs down by standardizing training, spare parts 
and maintenance, and that "within the next few years" Algeria 
would likely begin to replace its older 737s with newer 
versions. 
 
A GLOBAL PILOT SHORTAGE 
----------------------- 
 
¶5. Benchemam told us that the most immediate challenge for 
Air Algerie was to develop a new compensation package for its 
pilots to avoid losing them to China, India and the Gulf.  He 
said this was a problem faced by airlines worldwide, as civil 
aviation was "exploding" in those three areas without enough 
pilots to fill the demand.  As a result, Gulf, Indian and 
Chinese airlines were hunting for pilots in Africa, Latin 
America and parts of Asia.  Countries like the UAE, he said, 
were offering pilots as much as ten times an Air Algerie 
salary plus housing and family relocation and education 
expenses.  Benchemam said that Air Algerie had enough pilots 
to absorb a five percent annual attrition rate, but that over 
four or five years, this could become a serious problem. 
 
NEXT STOP: BEIJING 
------------------ 
 
¶6. Benchemam said that the only major new area of civil 
aviation expansion currently on the Algerian agenda was with 
China.  Negotiations were almost complete to begin direct 
service between Algiers and Beijing, due to what he called 
"the large number of Chinese laborers and contractors now 
working on civil engineering projects in Algeria."  Contrary 
to what we reported in reftel, when the Algerian government 
had told us it was "interested" in exploring flights to New 
York, Benchemam said that Algeria was satisfied that Air 
Algerie's current direct service to Montreal provided 
sufficient access to North America for the time being and 
that service to any U.S. destination "is not on the agenda." 
 
OPTIMISM FOR 2008? 
------------------ 
 
¶7. Benchemam said he believed Algeria was getting closer to 
an Open Skies agreement with the U.S, and took great pains to 
point out the changes it had made in 2007.  While indicating 
that the transport ministry's desire for Open Skies remained 
strong, he also lamented the slow pace of change in Algeria. 
Benchemam said the Algerian government would be ready to 
discuss a civil aviation agreement similar to the one it 
signed with France, outside the context of Open Skies, but he 
understood the all-or-nothing free trade backbone of Open 
Skies and believed the remaining hurdles would move up the 
Algerian agenda in 2008.  He pledged to inform us as soon as 
the Ministry of Transportation discussed the 80-gram issue 
with the cabinet, and repeated at the end of our meeting that 
he considered the file "very much alive." 
FORD