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Cablegate: Gon Aviation Minister Protests Embassy Press

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ABUJA 002135

SIPDIS

PASS DOT FOR OIA, ALSO FAA

E.O. 12958: N/A
TAGS: EAIR EINV PREL NI
SUBJECT: GON AVIATION MINISTER PROTESTS EMBASSY PRESS
BRIEFING ON VIRGIN NIGERIA AIRLINES

REF: (A) ABUJA 2118, (B) ABUJA 2119, (C) ABUJA 2121

1. Following is the proposed letter to Nigeria's Minister
of Aviation mentioned in ref A.

2. Begin text.

Mr. Minister:

Thank you for your letter of December 21, 2004 in response
to the media briefing on Virgin Nigeria by the U.S.
Embassy's Economic Counselor on December 16
(FMA/20/2004/1/152). You have protested the briefing --
which the newspaper This Day publicized on December 17 --
for it was, in your words, an "unwholesome development
whereby confidential governmental business and diplomatic
matters are made subject of newspaper discourse."

Your assertion surprised me, since your Ministry's position
on Virgin Nigeria has often been reported by your country's
media services. On December 16, for example, The Guardian
reported that at "the signing of a Memorandum of
Understanding..., [Minister] Yuguda said that Virgin Nigeria
would be granted an unspecified period of protection on the
plum routes as [an] incentive for the investors." The
Guardian further noted that you "ordered that the clause
[conferring a seven year monopoly] be included in the
agreement signed with Virgin Atlantic Airways, when the
British carrier insisted it would not close the deal unless
the demand was acceded to."

In your letter, you also referred to one dated October 14
(FMA//LU/2004/1/19) to which you said you were awaiting a
reply. In the fourth paragraph of that letter, you stated
that "I consider it most pertinent to provide further
clarifications on the matter as certain representations...
are unfortunately not reflective of the situation at hand."
You then explained why you believe Virgin Nigeria Airways is
substantially owned and effectively controlled by your
government. You therefore expressed "deep concern about the
attempts being made by the United States to link Virgin
Nigeria... with the U.K. registered Virgin Atlantic
Limited."

Toward the end of your letter of October 14, you asked my
"understanding and cooperation in enlightening further the
Government of the United States, its relevant authorities
and agencies on the true position of the matter with a view
to... paving the way for the prompt acceptance of the
designation of the Nigerian flag carrier." Unfortunately, I
did not conclude from your remarks that you were expecting a
reply from me. On the other hand, U.S. Government officials
consulted among themselves following their receipt of the
detailed report on the meeting that you and the Embassy's
Economic Counselor had on September 27. Those consultations
led to the U.S. officials' decision to recommend the press
briefing, the subject of your protest.

Mr. Minister, in paragraph nine of your letter of December
21 you stated that the "emphasis apparently being placed by
the U.S. Government... is that the airline is an entirely
Virgin Atlantic [UK]... matter. The newspaper report
regrettably goes on to name some foreign airlines, which the
United States expects Nigeria to partner with... without
considering the issue of the sovereign rights of Nigeria to
make its own decision on the choice of a suitable partner."

I assure you that the U.S. Government understands that
Virgin Nigeria is not "entirely" a Virgin Atlantic affair.
We know that the latter holds 49 percent of the equity. The
U.S. Government also respects the right of the Government of
Nigeria to choose its own partners in whatever ventures.
The exercise of such rights may have implications for third
parties, however. The Embassy Counselor mentioned foreign
airlines nominally during the briefing to emphasize that
those implications have greater or lesser import depending
on the airlines' normal places of doing business.

In paragraph 11 of your letter of December 21, you indicated
that "suffice it to state at this juncture that the report
further referred to the proposed operations of Continental
Air into Nigeria by April 2005 without taking into
consideration the principle of reciprocity in the bilateral
air transport relations between the two sovereign countries.
Such proposals by the United States in respect of its own
designated airline may legitimately be attended on a quid
pro quo basis." I infer that you meant to establish a
direct link between Nigeria's recognition of Continental
Airlines as a designated carrier by the United States, and
the latter's recognition of Virgin Nigeria as your
government's designated carrier, under our bilateral
aviation services agreement (open skies). Establishing such
a link would be neither in the spirit of our agreement nor
in the interests of our respective countries.

Continental Airlines is substantially owned by citizens of
the United States and under their "effective control."
Effective control is a term employed by the U. S. Department
of Transportation (DOT) in determining whether an airline
meets the US citizenship requirements of US aviation law.
DOT uses a two-pronged test for citizenship: whether at
least 75 percent of the voting stock of the carrier is owned
by US citizens (as well as the president and two-thirds of
the board of directors of the carrier being US citizens),
and whether the carrier is under the "effective control" of
US citizens. The first prong is an objective numerical test.
The second prong is subjective because there is no fixed
legal definition of "effective control"; DOT looks at all of
the factual circumstances involved in the management of the
carrier and determines case by case where "effective
control" lies. Generally, DOT distinguishes "apparent"
control from "actual" control and, as a general proposition,
it usually decides that the party that actually makes, or
has the authority to make, the day-to-day operational
decisions for the carrier is the party that is in "effective
control" of the company.

In exercising its discretion, DOT considers public-policy
factors including the impact of its determination on
domestic and international competition. The latter point is
important because the focus of U.S. aviation policy is to
promote competition to benefit U.S. consumers. Because the
relevant U.S. statute gives DOT discretion to define "actual
control," DOT takes into account whether the United States
has a liberal aviation relationship with the country the
nationals of which want to do business with the United
States. DOT interprets ownership and control requirements
differently depending on the level of access U.S. carriers
enjoy to the relevant foreign market. DOT does this to
prevent free riding by a carrier from a country with which
the United States has restrictive airline rights. As noted
in paragraph five of your letter of December 21, the United
Kingdom is a country whose aviation restrictions are
adversely affecting the interests of the United States. The
Ministry does not contest that Virgin Atlantic Limited,
which holds 49 percent equity in Virgin Nigeria, is a UK-
registered airline.

Mr. Minister, I hope I have clarified the U.S. Government's
position to your satisfaction. I assure you that it, too,
is committed to the faithful implementation of our Open
Skies Agreement of August 2000. In your own words, we look
to its being implemented "in the true spirit of the cordial
relationship that exists between our two governments."

End text.

FUREY

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