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RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #1186/01 2910636
ZNR UUUUU ZZH
R 170636Z OCT 08 ZFR
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 8628
INFO RUEHHM/AMCONSUL HO CHI MINH 5225
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGP/AMEMBASSY SINGAPORE 2663
RUEHKO/AMEMBASSY TOKYO 5924

UNCLAS SECTION 01 OF 02 HANOI 001186 
 
////ZFR ZFR ZFR CANCEL THIS CABLE IN ITS ENTIRETY, CABLE WILL BE ZFR/// 
///RETRANSMITED UNDER NEW MRN  ZFR ZFR ZFR//////////////////////////// 
 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND EEB/TRA 
STATE FOR EEB/TRA TERRI ROBL AND VIKI LIMAYE-DAVIS 
SINGAPORE FOR FAA MARY WALSH 
USTR FOR DBISBEE 
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: ECON EAIR EIND EINV ETRD VM
SUBJECT: U.S. AND VIETNAM AGREE TO OPEN SKIES CARGO REGIME 
 
REF: HANOI 1113 
 
HANOI 00001186  001.4 OF 002 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED (SBU).  NOT FOR 
INTERNET DISTRIBUTION. 
 
¶1. (U) Summary:  The United States and Vietnam agreed to an Open 
Skies regime for all-cargo services on October 7 following two days 
of talks in Hanoi.  The two sides renewed the 2003 Air Transport 
Agreement for three years and agreed to eliminate designation and 
frequency restrictions on passenger routes contained in the old 
agreement.  The main impediment to a full Open Skies Treaty was 
again the GVN's unwillingness to grant U.S. carriers fifth freedom 
passenger rights over Japan.  The GVN agreed to meet within two 
years to work toward further liberalization, including a possible 
exchange of fifth freedom passenger rights.  End summary. 
 
VIETNAM AGREES TO OPEN SKIES ALL-CARGO REGIME 
--------------------------------------------- 
 
¶2. (U) The United States and Vietnam agreed to a new Open Skies 
regime for all-cargo services following two days of talks in Hanoi, 
October 6-7 2008.  The Vietnamese side agreed quickly in the 
negotiations to these new rights, noting the benefits they would 
bring to trade and investment in Vietnam.  The cargo arrangement, 
which incorporates seventh freedom rights, provides increased 
flexibility for U.S. cargo carriers such as FedEx Express and UPS, 
which currently operate in Vietnam, including the right to move 
goods between Vietnam and third countries.   The agreement does not 
permit intermodal cargo surface transport across Vietnam's border, 
although the GVN's Ministry of Transport indicated that it may lift 
that restriction after further consideration. 
 
¶3. (SBU) Lai Xuan Thanh, the Deputy Director General of the Civil 
Aviation Administration of Vietnam (CAAV), who led the Vietnamese 
side at the talks, pressed the U.S. to introduce new language into 
the agreement that would have restricted U.S. cargo carriers from 
obtaining basing rights (the locating of aircraft on a long-term 
basis) at Hanoi's Noi Bai and Ho Chi Minh City's (HCMC) Ton Son Nhat 
International Airports.  Thanh, moreover, sought the introduction of 
a provision specifying central Vietnam's Chu Lai International 
Airport as the only airfield in Vietnam where U.S. cargo carriers 
could obtain basing rights.  (Note:  The GVN is spending $700 
million to transform Chu Lai Airport into an air cargo transport hub 
as part of a greater economic development plan for central Vietnam. 
End note). 
 
¶4. (SBU) The U.S. side, however, protested that new restrictions on 
cargo basing would revoke rights already held by the USG under the 
previous agreement.  The GVN ultimately agreed to exclude new 
language from the agreement and to leave cargo-basing decisions to 
relevant airport authorities in Hanoi and HCMC.  The U.S. side, 
meanwhile, agreed to include a provision in the Memorandum of 
Conversation noting Vietnam's interest in developing the Chu Lai 
airport. 
 
PASSENGER FIFTHS STILL A PROBLEM 
-------------------------------- 
 
¶5. (SBU) The negotiation discussions on liberalizing passenger 
services were problematic.  Although Vietnam agreed to eliminate 
designation and frequency restrictions on passenger routes contained 
in the old agreement, the main impediment to full liberalization was 
once again the GVN's unwillingness to grant U.S. carriers fifth 
freedom passenger rights over Japan.  (Comment:  U.S. carriers say 
that fifth freedom rights are essential to open commercially viable 
new service to Vietnam.  The failure to conclude an agreement on 
fifths means that new U.S. passenger service to Vietnam is unlikely 
in the short-term, including flights by Northwest Airlines, which 
had hoped to expand its route network by initiating service on the 
underserved Tokyo-HCMC route.  For now, United Airlines remains the 
only U.S. carrier to offer direct service from the United States to 
Vietnam.  End Comment). 
 
¶6. (SBU) Explaining the GVN's unwillingness to exchange fifth 
freedom rights with the USG, Thanh explained that Vietnam had tried 
but failed to secure fifths from the Government of Japan (GOJ) 
during bilateral aviation talks in May 2007 and noted that such 
rights were necessary for Vietnam to offer direct services to the 
U.S.  A negotiator from the U.S. Department of Transportation (DOT), 
however, pointed to evidence on the website of the GOJ's Ministry of 
Land, Infrastructure, Transport and Tourism (MLIT) indicating that 
Japan, in fact, did offer Vietnam limited fifth freedom traffic 
rights at the 2007 talks. 
 
HANOI 00001186  002.4 OF 002 
 
 
 
¶7. (SBU) Thanh denied this, arguing that the 2007 agreement merely 
gave Vietnam's carriers the right to make technical stops in Japan 
(i.e., refuel without taking on passengers).  The DOT representative 
responded that Vietnam's carriers likely had technical landing 
rights established under the existing Japan-Vietnam bilateral 
aviation agreement.  Privately, members of the U.S. negotiating team 
speculated that Vietnam either refused the fifth freedom rights 
offered by Japan or asked Japan to defer the rights for several 
years until Vietnam Airlines was prepared to begin flights on its 
long-planned HCMC-Osaka-Los Angeles (LAX) route. 
 
¶8. (U) Thanh concluded that while Vietnam recognized the economic 
benefits that expanded passenger services would bring, the GVN 
needed to provide for "minimal equality" of opportunity for Vietnam 
Airlines and a "balance of interests" between the passenger carriers 
of both sides.  The two sides agreed to meet again within two years 
to work toward further liberalization, including a possible exchange 
of fifth freedom passenger rights. 
 
MICHALAK 
 
 
 
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