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Cablegate: Airlines Confident of Seeing Complete Open Skies In

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

041229Z Nov 05

UNCLAS SECTION 01 OF 02 OTTAWA 003285

SIPDIS

STATE FOR WHA/CAN - ALAN HOLST, EB/TRA - JOHN BYERLY, TOM
ENGLE

STATE PASS USTR FOR SAGE CHANDLER

TRANSPORTATION FOR OST/IA (EDDIE CARAZO, MARY STREET, SUSAN
MCDERMOTT)

COMMERCE FOR 4320/MAC/WH/ONIA (BASTIAN, WORD)

FAA FOR LEEANN HART

TSA FOR SUSAN WILLIAMS

SIPDIS

E.O. 12958: N/A
TAGS: EAIR EINV CA
SUBJECT: Airlines confident of seeing complete Open Skies in
Canada

REF: (A) 2005 Ottawa 1374

1. Sensitive But Unclassified - For Internal USG use only

2. (SBU) Summary: Conversations with the President of the
Air Transport Association of Canada (ATAC), and separately
with Air Canada officials reveal that the Canadian civair
industry is confident that Canada and the United States will
achieve a full U.S. model Open Skies civair agreement during
next week's negotiating session. ATAC relayed that all
Canadian passenger carriers support the U.S. Open Skies
model, however, some carriers will press for progress on
slot access and customs facilitation concerns to allow the
airlines to fully develop the opportunities that Open Skies
will provide. ATAC acknowledged that these will likely take
the form of follow-on discussions with either FAA (slots) or
DHS/CBP (customs). On the cargo side, both ATAC and Air
Canada identified Kelowna Flightcraft (KF) as the major,
possibly sole, opponent to cargo liberalization. KF (doing
business as Purolator) is Canada's biggest cargo carrier and
its business model depends on the co-terminalization
restrictions currently in place. Some of our interlocutors
believe that the GoC has taken stock of the political cost
of alienating KF and may have determined that Open Skies
benefits are easily worth the price the government may pay.
End summary.

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3. (SBU) Cliff Mackay, President and Fred Gasper, V.P.
Policy of the Air Transport Association of Canada (ATAC)
told ECON Minister-Counselor on November 1st that every
passenger carrier in Canada supports moving to the full U.S.
Open Skies model. Notwithstanding this support, though,
there remain concerns that will need to be addressed to
allow Canadian carriers such as Westjet and Air Transat to
truly develop the opportunities a new, true, Open Skies
agreement will present. In particular Mackay noted that for
new entrants into the U.S. market the lack of access to
slots at key U.S. airports is a barrier that will prevent
them from making a viable business case for fifth freedom
operations. In addition, carriers such as Westjet and Air
Transat have identified facilitation issues, i.e. customs
staff availability and customs clearance procedures, as
potential barriers to viable fifth freedom operations
through the United States (the typical scenario is that upon
landing in the U.S. all passengers must pass through U.S.
Customs and Immigration even if the passengers' final
destination is a third country). Mackay and Gasper
acknowledged concerns such as these are not typically dealt
with in a civil aviation agreement, but emphasized that
these are significant issues for Canada, they will color the
discussion, they thought that Canada will be looking for an
expression of "political will" to address them. The ATAC
officials suggested that the Security and Prosperity
Partnership (SPP) is an appropriate forum where these
concerns could eventually be discussed and resolved.

4. (SBU) With respect to Canadian cargo carriers, Mackay and
Gasper told us that Kelowna Flightcraft (KF) Canada's
biggest air cargo operator (doing business as Purolator
Courier) has been steadfast for years in its opposition to
liberalization on the cargo side and there has been no sign
of a change of sentiment. Indeed, KF's business model
depends on the current cargo co-terminalization
restrictions. On the other hand, Mackay told us, some
smaller cargo operators are now signaling that they see
opportunities arising from cargo liberalization. Until
recently they had been cowed somewhat by KF's unyielding
opposition to altering the cargo rules, and by rumors that
UPS and FedEx pilots' scope clauses will force UPS and FedEx
to fly to all co-terminal points if restrictions are lifted.

5. (SBU) At a meeting on November 2nd, Alain Boudreau, Air
Canada's Director for International Regulatory Affairs and
Joe Galimberti, Director Government Relations for ACE
Aviation, confirmed to ECON Minister Counselor the ATAC
claim that Kelowna Flightcraft is the biggest opponent of
air cargo liberalization. But Boudreau noted that the GoC
has recently received a consultant's report that
demonstrates that Open Skies liberalization would have no
negative impact on cargo operators, whereas KF has
apparently never provided objective data to support its
assertion that lifting co-terminalization restrictions would
be detrimental. Further detracting from the credibility of
KF is the fact that representatives from that company did
not attend the Canadian delegation pre-meeting or send
written comments even though the carrier is one of three
cargo airlines represented on the delegation. According to
Boudreau, the final nail in the coffin of those opposed to
cargo liberalization is the fact that ALPA President Duane
Woerth, at an Air and Space Law conference in Montreal in
September, dismissed any connection between co-
terminalization and scope clause requirements to fly to all
co-terminal points. Boudreau and Galimberti believe that
the GoC no longer views Kelowna Flightcraft opposition as a
showstopper to achieving full Open Skies - and that the
mandate to Canada's negotiator, John McNab, is to agree to
full U.S. Open Skies.

6. (SBU) Air Canada is of course a strong proponent of
further civair liberalization; and Boudreau noted that
despite having advocated for an "Open Skies plus" model in
the recent past (involving home country cabotage) Air Canada
has backed away from that forward leaning posture and now
would be satisfied with the canonical U.S. Open Skies
agreement. The key objective for Air Canada during this
negotiation is to achieve full Antitrust Immunity to allow
Air Canada and United Airlines (similar to what UA enjoys
with Lufthansa) to more fully develop their partnership in
the marketplace beyond North America. Boudreau mentioned
also that with respect to cargo operations that Air Canada
would like 7th freedoms, but the company is not focused on
achieving that.

7. (SBU) Boudreau noted that Air Canada does not share the
concerns of Westjet and Air Transat regarding slot
availability in the United States. Air Canada does,
however, share some other airlines' concerns about
availability of U.S. Customs and Border Protection staff,
although its concern is focused on CBP staff at Canadian
preclearance airports, especially Toronto, rather than at
U.S. receiving airports. Like ATAC, Air Canada does not
expect these issues to be addressed in the Agreement but
expect the concerns to be raised by the GoC for appropriate
follow-on.

8. (SBU) Comment: Despite some parliamentary misgivings (Ref
A) and opposition by the dominant cargo airline, our
interlocutors at both ATAC and Air Canada seem to think that
achieving a full Open Skies Agreement is entirely possible
during next week's negotiations. Our interlocutors did not
believe that the current bilateral tensions over softwood
lumber will have any impact on the talks. We share their
optimism. We expect also that the GoC negotiator will
express Canada's concern that facilitation issues be
accorded serious consideration and follow through in order
to allow smaller Canadian operators to fully utilize Open
Skies. Even though these issues will have to be dealt with
in a forum other than the civair negotiations, we think that
the US delegation should be willing to acknowledge to the
GoC delegation that the USG takes these Canadian concerns
seriously and will endeavor to see that they are
appropriately addressed. Indeed, the USG delegation may
wish to raise an ancillary issue of our own, the very high
fees at Toronto's Pearson International airport. The ATAC
representatives claimed that recent statistics show that
Pearson's fees are now the highest in the world, surpassing
those at Tokyo's Narita Airport. End comment.

Dickson

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