UNCLAS        MANILA 01618
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RUEHKO/AMEMBASSY TOKYO IMMEDIATE 3569
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RUEHBY/AMEMBASSY CANBERRA IMMEDIATE 9835
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UNCLAS SECTION 01 OF 02 MANILA 001618 
 
STATE FOR EAP/MTS 
TRANSPORTATION FOR FAA 
SINGAPORE AND TOKYO FOR FAA 
 
E.O. 12958: N/A 
TAGS: EAIR ETRD BEXP RP
SUBJECT: Philippines Weighs Open Skies Options 
 
REF: Manila 01653 
 
¶1. (SBU) Summary:  Philippine Transportation and Communication 
Secretary Leandro Mendoza has announced that the ASEAN Open Skies 
agreement that ASEAN transportation ministers will sign in Manila in 
December will obviate the need for the proposed executive order to 
provide a "pocket open-skies" regime to Clark and Subic (see 
reftel).  However, officials and business people at Clark strongly 
disagree and are still pressing for Philippine President Arroyo to 
sign the executive order in order to attract more tourism to the 
Philippines and enable the development of Clark as an aviation hub 
for Southeast Asia.  We find ways to discretely support their 
efforts.  End Summary. 
 
Open Skies With The Ten Original ASEAN, Plus Four 
--------------------------------------------- ----- 
 
¶2. (U) Philippine Transportation and Communication Secretary Leandro 
Mendoza announced recently that he expects ASEAN transportation 
ministers will sign an agreement on open skies among the ten 
original ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, 
Myanmar, Philippines, Thailand, Singapore, and Vietnam) in Manila in 
December 2008.  The agreement would immediately grant airlines of 
these 10 ASEAN member countries bilateral traffic rights (freedoms 
1-4, in civair parlance) among their capital cities.  Addition of 
the right to carry out connecting flights (fifth freedom) between 
capital cities would have a target date of December 2010.  According 
to Mendoza, ASEAN's adoption of an open skies policy would lead to 
creation of a single aviation market throughout East Asia by 2015. 
He estimated that the agreement could generate 500 million tourist 
trips within the region, including an estimated 10 million tourist 
arrivals to the Philippines.  China, Japan, India and South Korea 
have reportedly expressed interest in joining the ASEAN Open Skies 
agreement. 
 
Clark As Part Of The Capital City 
--------------------------------- 
 
¶3. (U) In preparation for ASEAN Open Skies, Secretary Mendoza said, 
the Diosdado Macapagal International Airport (DMIA - formerly Clark 
Field) will be designated the Philippine capital airport.  The 
airport has a parallel runway system that can handle the world's 
heaviest planes, including the Antonov AN225 and the Airbus A380. 
Mendoza said that the designation of DMIA follows a regional trend 
to relocate international airports outside of the capital region. 
(DMIA is located eighty-five kilometers northwest of Manila 
proper). 
 
ASEAN Open Skies and E.O. 500-B 
------------------------------- 
 
¶4. (U) Although Secretary Mendoza publicly stated that the ASEAN 
Open Skies agreement would obviate the need for the Executive Order 
500-B, the Clark and Subic stakeholders are not ending their fight 
for a more liberal aviation policy for their airports. They sent a 
second appeal letter in May 2008 to President Arroyo pointing out 
the benefits of the proposed E500-B policy for users, businesses, 
employment and income opportunities in Clark, Pampanga, Central 
Luzon and the country.  The ASEAN Open Skies agreement would not 
have the same impact, since it is limited to the ASEAN countries and 
it does not initially provide for connecting flights.  They believe 
that connecting flights are essential for the transformation of 
developmental routes, like Clark and Subic, into major gateways. 
The ability to schedule connecting flights opens up the possibility 
that airlines of other countries would use Clark as a hub for their 
East Asian operations.  Proponents also point out that Executive 
Order 500-B would not prevent the Philippines from pursuing greater 
liberalization under unilateral, bilateral or multilateral 
negotiations, and so would complement the ASEAN agreement. 
 
Opposing Competition 
-------------------- 
 
¶5. (U) Philippine Airlines leads domestic opposition to any type of 
open skies agreement.  In addition to outspoken opposition to 
Executive Order 500-B, Philippine Airlines' President has expressed 
concern about competing with airlines from other ASEAN countries in 
ASEAN Open Skies, since some foreign airlines are state-owned and 
have strong governmental backing.  Philippine Airlines argues that 
there is a need to establish safeguards against market distortions 
and anti-competitive practices by subsidized airlines. 
 
Comment:  Why We Care 
--------------------- 
 
¶6. (SBU) The USG has discretely supported open skies in the 
Philippines for many years.  We support further liberalization of 
routes to the U.S., as we do everywhere.  We also support 
liberalization of regional routes in order to increase tourism and 
trade and help the Philippine economy to grow more quickly and 
create more jobs.  Philippine economists estimate that one tourist 
arrival here translates into one job for a year.  Given the 
underdeveloped tourism potential of the Philippines and the 
increasing wealth of neighboring countries, reduction of currently 
high airfares via more competition could make an enormous 
difference.  We nonetheless keep our support for liberalization 
discrete, working with Philippine proponents of liberalization, in 
order not to arouse nationalist resistance. 
KENNEY