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Cablegate: Avianca Wants to Lower Travel Agent Commission

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

UNCLAS BOGOTA 003528

SIPDIS

E.O. 12958: N/A
TAGS: EAIR CO
SUBJECT: AVIANCA WANTS TO LOWER TRAVEL AGENT COMMISSION
RATES, TOO

REF: A. 05 STATE 54317

B. 05 BOGOTA 3076

1. Sensitive but unclassified. Business proprietary
information--please protect accordingly.

2. (U) Summary. On April 5, econcouns and econoff met with
Avianca's president, Fabio Villegas. According to Villegas,
Avianca's new management supports efforts to lower travel
agent commission rates. In addition, Avianca wishes to
enhance security cooperation with USG agencies and is
interested in possible open skies on cargo, but believes
that the passenger market is already competitive and local
carriers would not survive an open skies arrangement. End
Summary.

3. (SBU) Fabio Villegas, the new president of Avianca, is
optimistic about the airline's request for a foreign
ownership waiver with the Department of Transportation.
Villegas noted that Avianca's emergence from Chapter 11 is
the first step of many on their road to success. He
highlighted Avianca's 2004 performance, USD 115 million in
profits, as an indicator of moving forward. He also asserted
that Avianca is working hard on all security-related issues
to combat narco-trafficking (its shareholders don't want to
see Avianca back in court). Villegas added that Avianca
wished to strengthen current cooperation with USG agencies on
security issues.

3. (U) Econcouns discussed Colombia's high travel agent
commission rates with Villegas, noting that Colombia's 8
percent rate is one of the highest in Latin America.
Villegas concurred and claimed that Avianca shares the same
view of the U.S. and they, too, would like to see the rates
lowered. He also commented that no relationship exists
between Avianca and ANATO, Colombia's national travel agency
association, regarding travel agent commission rates.

4. (SBU) When asked about Open Skies, Villegas asserted that
there was already sufficient competition in the air-passenger
industry in Colombia. He added that Avianca prefers the
status-quo.

5. (SBU) Villegas had no comments on CAA's new director
Fernando Sanclemente, the former director of Ports and
Transportation in the Ministry of Transportation. Villegas
did note that Sanclemente was involved as Ports director in
Avianca's bankruptcy proceedings and had demonstrated
in-depth knowledge of civil aviation issues. Both American
Airlines' and Continental's country representatives were
positive in their assessment of Sanclemente, noting that
Sanclemente is close to Manuel Leal, president of Colombia's
Airline Association (ATAC), (which is against the high
commission rates).

6. (SBU) Comment. As previously reported, CAA does not see
any linkage between Avianca's request for a foreign ownership
waiver and American Airlines' request to block the waiver due
to Colombia's high travel agent commission rates. Moreover,
the current management of Avianca agrees with the U.S. view
on lowering the rates. As the closest thing to a "national
flag carrier" in Colombia, that may be a positive thing. End
Comment.
WOOD

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