VZCZCXRO3013
OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHML #1390/01 1820518
ZNR UUUUU ZZH
O 010518Z JUL 09
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4527
INFO RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RHMFIUU/TSA HQ WASHINGTON DC IMMEDIATE
RHMFIUU/FAA NATIONAL HQ WASHINGTON DC IMMEDIATE
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 3717
RHHMUNA/USPACOM HONOLULU HI//FPA// IMMEDIATE

UNCLAS SECTION 01 OF 02 MANILA 001390 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EAP/MTS AND EB/TRA 
SINGAPORRE AND TOKYO FOR FAA 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EINV ETRD RP
SUBJECT:  Philippine Civil Aviation Update 
 
REFS: a. 08 MANILA 02115, b. 08 MANILA 01619 
      c. 08 MANILA 01496  d. 08 MANILA 00548 
 
¶1.  (SBU) Summary: The progress of the Philippine civil aviation 
regulator towards regaining a U.S. Federal Aviation Administration 
'Category 1' safety rating has been stymied by bureaucratic 
obstacles that block essential salary increases needed to attract 
and retain qualified personnel.  There is little chance of the 
Philippines regaining a Category 1 safety rating unless these issues 
are resolved.  Aside from the safety implications, this obstacle 
complicates pending U.S. aircraft deliveries and undermines hopes 
for new air routes between the U.S. and the Philippines.  Embassy 
continues to work with stakeholders to advance needed safety 
reforms.  End summary. 
 
 
 
Reform Stalled 
-------------- 
 
¶2.  (SBU) Although reform-oriented legislation that became law in 
April 2008 abolished the troubled Air Transportation Office (ATO) 
and replaced it with the Civil Aviation Authority of the Philippines 
(CAAP, ref D), further progress in implementing the reforms needed 
to regain a Federal Aviation Administration (FAA) Category 1 safety 
rating has proven difficult.  The legislation that created the CAAP 
provided it with additional revenues and a degree of independent 
authority, but CAAP Director General Ruben Ciron has been unable to 
push forward needed personnel changes.  Long-term ATO employees 
absorbed into the CAAP have raised numerous legal challenges to 
further reforms, particularly any moves to replace unqualified 
employees with qualified ones.  Aviation industry sources believe 
these employees would lose opportunities for income (the fees they 
earn for certifying aircraft and pilots) and perhaps their jobs if 
the reforms were fully implemented, and so they resist the reforms 
as a matter of self-preservation. 
 
CAAP Personnel Still Unqualified for Duties 
------------------------------------------- 
 
¶3.  (SBU) One of the critical deficiencies in the Philippine 
regulatory agency identified by the FAA was the lack of qualified 
personnel to conduct certification inspections of aircraft and 
certification checks of pilots.  According to International Civil 
Aviation Organization (ICAO) and FAA regulations, these 
certifications must be performed by inspectors or 'check pilots' who 
themselves have been certified as qualified to maintain or fly the 
type of aircraft inspected.  The ATO and CAAP have been unable to 
offer competitive salaries to attract such experts, who can easily 
find much higher paying employment in the private sector, either in 
the Philippines or in other countries. 
 
¶4.  (SBU) The issue of adequate salaries was supposed to be 
addressed in the legislation that created the CAAP.  However, the 
old ATO employees have challenged the new qualifications and salary 
standards and insisted on the right to be re-trained and receive 
preference for employment at CAAP.  The authority of the CAAP to 
offer higher salaries had to be clarified by Congress earlier this 
year, and is now pending further review with the Civil Service 
Commission and the Department of Budget and Management.  Assuming 
these reviews confirm a higher salary structure is allowed, it will 
still likely take several months to find, hire, and train qualified 
inspectors and check pilots. 
 
¶5.  (SBU) Our sources also believe that CAAP Director General 
Ciron's lack of commercial aviation experience limits his ability to 
oversee operations and realistically evaluate progress towards 
regaining a Category 1 rating.  According to these sources, there is 
no one on the CAAP governing board who understands civil aviation 
safety, security, and airline operations fully enough to accurately 
measure the progress of safety reforms. 
 
Attempts to Reform Provoke Retaliation 
-------------------------------------- 
 
¶6.  (SBU) Attempts to change the status quo have provoked 
retaliation from long-term employees of the ATO/CAAP in the form of 
allegations of the Director General's misconduct, according to our 
sources.  In March 2009, Director General Ciron suspended his CAAP 
second-in-command for alleged corruption.  Shortly afterwards a 
letter accusing Ciron of hiring many of his military friends without 
 
MANILA 00001390  002 OF 002 
 
 
regard for their qualifications was sent by CAAP officials and 
employees to Civil Service Commission.  In recent weeks, several 
allegations of impropriety against Ciron have been reported in local 
media.  Industry sources have told us that the CAAP 
second-in-command has powerful supporters in the top levels of the 
Philippine government which make him a formidable opponent. 
 
Pending U.S. Aircraft Deliveries and Routes Affected 
--------------------------------------------- ------- 
 
¶7.  (SBU)  As long as the CAAP remains in FAA Category 2, Philippine 
Airlines (PAL) cannot implement its plans to add additional flights 
to the United States.  PAL has a contract with Boeing for the 
purchase of two Boeing 777-300ER aircraft, with an option for two 
more aircraft.  PAL also has a separate agreement to lease two 
additional Boeing 777-300ERs from General Electric Capital Aviation 
Services.  Delivery of the first 777-300ER is scheduled for later in 
¶2009. 
 
¶8.  (SBU) Although our sources report that PAL still wants the new 
Boeing planes because they are more fuel efficient than the planes 
it currently uses, PAL will not be able to utilize them on routes to 
the United States, as originally planned .  Among other 
implications, this restriction particularly affects the city of San 
Diego, California, which has been pressing for a new Manila-San 
Diego route, and had already received encouragement from PAL 
regarding the new route. 
 
ICAO October Safety Review 
-------------------------- 
 
¶9.  (SBU) The next scheduled review of Philippine civil aviation 
regulation will occur in October 2009 when ICAO is scheduled to 
conduct its Universal Safety Oversight Audit Program (USOAP) 
examination.  Industry sources tell us that there is little chance 
the Philippines will receive high marks on this review because of 
the well-known problems and the delays in implementing needed 
reforms.  The implications of a poor score on this USOAP review 
include that other nations may follow the FAA in downgrading the 
safety rating of the Philippine regulator and that the FAA will 
likely decline to re-evaluate its rating of the Philippines until 
there is material evidence of a significant improvement in the 
regulatory situation. 
 
Comment 
------- 
 
¶10.  (SBU) Although, under strong Embassy urging the Arroyo 
administration acted promptly to pass reform-oriented legislation 
needed for improving its civil aviation administration, it has not 
done well in implementing the reforms envisioned in this 
legislation.  Within the Philippine government, high-level interest 
in the issue of air safety seems to be fading as the administration 
shifts its focus to the 2010 presidential election.  While we will 
continue to press for full implementation of the needed safety 
reforms, they seem effectively blocked for the time being by an 
entrenched bureaucracy that benefits from the status quo and which 
is backed by senior figures in the Arroyo administration. 
 
KENNEY