VZCZCXRO8785
RR RUEHROV
DE RUEHAE #0379/01 3081040
ZNR UUUUU ZZH
R 041040Z NOV 09
FM AMEMBASSY ASMARA
TO RUEHC/SECSTATE WASHDC 0571
INFO RUCNIAD/IGAD COLLECTIVE
RUEHEG/AMEMBASSY CAIRO 0487
RUEHKH/AMEMBASSY KHARTOUM 0293
RUEHNR/AMEMBASSY NAIROBI 4789
RUEHYN/AMEMBASSY SANAA 1881
RUEHFT/AMCONSUL FRANKFURT 1399
RUEHJI/AMCONSUL JEDDAH 0922
RUEHMT/AMCONSUL MONTREAL 0001
RUEKJCS/SECDEF WASHDC
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC
RUEKDIA/DIA WASHDC
RUMICEA/JICCENT MACDILL AFB FL
RHRMDAB/COMUSNAVCENT
RUEPADJ/CJTF-HOA J2X CAMP LEMONIER DJ
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 03 ASMARA 000379 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/E, AF/EPS, EEB/TRA/AN 
LONDON AND PARIS FOR AFRICA WATCHERS 
DS/IP/AF 
PASS TO DEPARTMENT OF TRANSPORTATION 
 
C O R R E C T E D  C O P Y  added sensitive caption 
 
E.O. 12958: N/A 
TAGS: EAIR ATRN ASEC CASC EFIN ECON ER
SUBJECT: ERITREAN AVIATION: GOVERNMENT SQUEEZING THE 
AIRLINES 
 
REF: ASMARA 345 
 
ASMARA 00000379  001.4 OF 003 
 
 
 ¶1. (SBU) SUMMARY: The four international airlines serving 
Asmara are discouraged by the Eritrean government's (GSE) 
refusal to allow them to convert $20 million worth of local 
currency and its repeated attempts to gouge them for hard 
currency.  The GSE, through its wholly owned Eritrean 
Airlines, has raised airport handling fees to nearly 
quadruple the rate for comparable airports in Africa.  The 
GSE also will not allow the airlines to purchase fuel in 
Asmara, lowering their carrying capacity and thus their 
profitability.  If the GSE continues the pressure on the 
international airlines, they may eventually pull out, leaving 
few safe and dependable options for travel to Eritrea.  The 
two domestic airlines are not profitable and rely on charters 
to stay in business.  END SUMMARY. 
 
AIRLINES AND AIRPORTS 
--------------------- 
 
¶2. (SBU) Five airlines currently offer commercial service to 
Asmara International Airport (ASM).  No commercial service is 
available by any carrier to any other airport in Eritrea. 
Lufthansa, which is post's supplier of medevac, evacuation, 
repatriation, pouch, and courier services, flies from 
Frankfurt via Jeddah three days per week.  EgyptAir flies 
four days per week to Cairo between June and October, three 
days per week all other months.  Yemenia flies twice a week 
to Sanaa.  Sudan Airways resumed flights to Asmara in May 
2009 with direct flights twice a week to Khartoum via Kasala, 
Sudan.  Nasair, a private Eritrean carrier that started in 
November 2006, offers six flights per week to Dubai, Jeddah, 
Khartoum, Cairo, and Nairobi.  Eritrean Airlines no longer 
runs commercial flights though it has resumed charter 
flights. 
 
¶3. (SBU) Although Massawa sports a new state-of-the-art 
international airport, it is not yet open for commercial 
operations.  Local industry insiders state that this is 
largely due to the lack of business in the Massawa Free Zone. 
 In June 2008, twelve chartered EgyptAir flights brought 
1,200 Eritrean deportees back from Egypt and landed at 
Massawa, most likely to avoid attention.  Nasair opened its 
operations November 2006 in Massawa, but has temporarily 
moved headquarters back to Asmara until Massawa opens for 
commercial operations.  There have been reports the GSE may 
try to make Massawa Eritrea's primary international airport, 
perhaps as soon as 2012. 
 
Eritrean Airlines: It's All About Hard Currency 
--------------------------------------------- -- 
 
¶4. (SBU) Eritrean Airlines opened for business in 1998, "not 
for profit but because we wanted to have a way in and out of 
the country," according to its Chairman of the Board.  Now 
$11 million in debt, the airline is attempting to restore 
profitability by leasing its sole aircraft, a 767 purchased 
from Qantas for $3 million, for charter flights to Sudan and 
Saudia Arabia.  The airline's chairman states that the 
airline hopes to lease another plane, a 737 or an A-320, to 
resume commercial operations, possibly to Karachi or Lahore 
(through Dubai), Rome or Milan (through Cairo), and Nairobi 
(through Khartoum).  Eritrean Airlines has a monopoly on 
handling operations at ASM (reftel).  In a blatant, and at 
least partially successful, attempt to soak the international 
carriers for hard currency, Eritrean Airlines raised handling 
rates to now quadruple the industry average in Africa.  All 
airlines but Lufthansa have agreed to pay the 25% increase in 
fees. 
 
 
ASMARA 00000379  002.4 OF 003 
 
 
¶5. An embassy contact who is well-connected to the travel 
industry told us that Eritrean Airlines is interested in 
establishing a code-share with Kenya Air to use landing 
rights it still has in Milan, Rome, and Frankfurt.  Kenya Air 
flights would stop in Asmara en route to those cities.  The 
key questions would be if Kenya Air would have to accept fare 
payment in nakfa-- and wind up in the same position as other 
international airlines, and whether the deal would be 
politically palatable to the GSE, given Kenya's AU and IGAD 
votes in favor of sanctions on Eritrea. 
 
The Upstart Nasair 
------------------ 
 
¶6. (SBU) Nasair, is named for its Eritrean owner Nasriddin 
Ibrahim, who is resident in Dubai.  Educated in the United 
States, Nasriddin began his career there as an aircraft 
broker.  Nasair has the most convenient service to Nairobi 
(through Khartoum), flying a 737-200 aircraft holding 108 
passengers.  The airline's break-even point is 45 passengers 
per flight, but usually has about 50.  It also operates 
profitable charter flights from West Africa to Saudi Arabia 
for Muslim pilgrims.  Its marketing targets ex-pat Eritreans 
living and working in the Gulf States. 
 
Worthless Nakfa, the Bane of the Airlines 
----------------------------------------- 
 
¶7. (SBU) Most passengers originating in Asmara pay for their 
tickets in Eritrean nakfa, but the international carriers 
have few nakfa expenses.  As a result, the big three 
(Lufthansa, EgyptAir, and Yemenia) together have an 
ever-increasing pile of nakfa, now worth nearly $20 million, 
that they have been unable to repatriate.  Lufthansa and 
Yemenia both state that they would not be surprised if their 
corporate offices pulled the plug on operations in Asmara at 
any moment.  EgyptAir dismisses this thought, though its 
country manager claims its share of the nakfa pile is $7 
million.  Should any international airline close up shop, 
they would likely be unable to repatriate their nakfa 
holdings.  An Eritrean government official recently told one 
airline manager that it might be possible to repatriate 
earnings in hard currency once Bisha gold mine comes on line 
in 2011. 
 
More Frustrations 
----------------- 
 
¶8. (SBU) The Eritrean government's (GSE) treatment of 
international carriers ranges from neglect to coersion and 
bullying.  Earlier this year, Lufthansa's country manager got 
into a dispute with the GSE over enforcement of Lufthansa's 
safety regulations.  Ultimately the GSE refused to renew the 
manager's work permit and tried to dictate who her 
replacement would be.  The GSE also tried to force Lufthansa 
to provide passenger service between Jeddah and Asmara 
(currently no passengers may embark in Jeddah inbound to 
Asmara nor disembark there from Asmara).  Lufthansa 
successfully resisted the pressure over concerns that more 
Eritreans would try to use the stop to claim asylum.  Also, 
the GSE held up airport access for EgyptAir's new airport 
manager for months.  Yemenia has had no response to its 
long-standing request to increase its flights from twice per 
week to daily.  Nasair has historically received pressure 
from the GSE not to compete on the same routes as Eritrean 
Airlines, but the issue is currently moot.  Should Eritrean 
Airlines re-open commercial routes, Nasair's marketing 
manager has stated it would agree to different routes. 
 
¶9. (SBU) Eritrean Airlines also short-changes the 
 
ASMARA 00000379  003.4 OF 003 
 
 
international carriers by reserving the small amount of fuel 
available in Asmara for its own and Nasair's use.  The 
unavailability of fuel means international carriers cannot 
fly full loads in or out of Asmara, since they cannot refuel 
here.  As a result, EgyptAir usually flies with 40 empty 
seats per flight.  Yemenia flies a larger aircraft than it 
would prefer to in order to handle distance or weight 
emergencies.  Post periodically does not receive its pouch on 
Lufthansa because weight is limited on its flight.  Airlines 
already struggling to make a profit on their Asmara flights 
cannot fill their aircraft even when demand is high. 
 
Asmara: Is it Safe to Fly Here? 
------------------------------- 
 
¶10. (SBU) Lufthansa is widely reputed to be the safest 
airline serving Asmara.  It brings its own mechanic on every 
flight and does not subcontract maintenance to Eritrean 
Airlines.  It performs its own weight and balance 
calculations for every flight leaving ASM, unlike all the 
other carriers.  Nasair lies at the other end of the safety 
spectrum.  Its aircraft are leased "wet" (with flight crew) 
from Max Avia, a Kyrgyz Republic-based company that is 
blacklisted by the European Union due to poor oversight by 
the Kyrgyz civil aviation authority.  Although EgyptAir is a 
new member of the Star Alliance, it currently faces similar 
blacklisting by the EU if it does not address serious 
concerns noted by the EU regarding airworthiness, 
maintenance, operations, and safety of cargo on board.  The 
Air Transport and Intelligence news published a report in 
July 2009 stating that in 75 inspections of EgyptAir since 
January 2009, 240 safety incidents were noted, including 69 
deemed serious.  Many ex-pat residents of Asmara enjoy flying 
EgyptAir, as it is cheaper than Lufthansa and not as strict 
in applying baggage weight standards.  EgyptAir's country 
manager claims its maintenance facility is the best in the 
Middle East, and that that 40 European airlines subcontract 
their maintenance to them in Cairo.  In June, Yemenia 
experienced its first catastrophic crash of an A310 off the 
coast of the Comoros Islands, which killed 152 of 153 
onboard.  Sudan Airways flies a 30-passenger Fokker 50 twin 
engine aircraft to Asmara and is locally reputed to be 
unsafe.  The airline is planning to acquire an A320 to carry 
up to 140 passengers per flight into ASM.  The country 
manager says its pilots train and maintain their 
qualifications overseas in London, Riyadh, and Doha. 
 
¶11. (SBU) COMMENT.  The inhospitable business climate may 
soon leave fewer safe and dependable options for travel to 
Eritrea.  The situation is not likely to improve in the near 
future, as economic conditions continue to deteriorate 
throughout the country.  The GSE will continue to find 
creative ways to generate hard currency as it does now 
through airport handling fees.  International carriers are 
caught in a difficult situation: if they pull out, they 
cannot repatriate earnings in hard currency.  If they stay, 
they will continue to struggle to maintain profitability. 
McMULLEN