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Cablegate: Ukraine: Airline Ticket Payment System Under Threat From

VZCZCXYZ0001
RR RUEHWEB

DE RUEHKV #4154 3051130
ZNR UUUUU ZZH
R 011130Z NOV 06
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 0228
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEANHA/FAA WASHDC

UNCLAS KYIV 004154

SIPDIS

SIPDIS
SENSITIVE

STATE PLEASE PASS TO USTR
STATE FOR EB/TRA/TENGLE
COMMERCE FOR ITA/MAC/EUR/CLUCYK
COMMERCE FOR ITA/FCS/EUR/MCOSTA
COMMERCE FOR ITA/MAS/AERO/KDUBIN

E.O. 12958: DECL: NA
TAGS: EAIR EFIN BEXP KCOR UP
SUBJECT: UKRAINE: AIRLINE TICKET PAYMENT SYSTEM UNDER THREAT FROM
STATE AVIATION AUTHORITY?

REF: KIEV 2788

Sensitive but Unclassified. Not for Internet Distribution.

1. (SBU) Summary. The Kyiv representative office of the
International Air Transport Association (IATA) informed member
airlines on October 24 that Ukrainian government agencies were
trying to prevent IATA from implementing its billing and settlement
plan (BSP) -- the industry-standard clearing system for air
transport payments. According to IATA, Ukraine's State Aviation
Administration (SAA) is accusing IATA of illegally importing the
blank ticket stock used in BSP, which IATA denies. IATA
Representative Sergei Martinyuk told EconOff on October 30 that SAA
was pressuring IATA because IATA did not agree to use the SAA's
suggested clearing bank for BSP. As a result, SAA established its
own parallel national clearing system, and asked international
airlines to assist. IATA now is seeking a court ruling confirming
its BSP operations are legal. The court case is scheduled for
November 3. End Summary.

Inspections, Challenges, and Harassment
---------------------------------------

2. (SBU) IATA's representative office in Kyiv alerted member
airlines on October 24 that it had been subject to multiple
inspections and legal challenges apparently aimed at preventing IATA
from putting in place its billing and settlement plan (BSP). Since
IATA introduced the BSP in Ukraine in September 2005, IATA has been
subject to numerous inspections from the Transport Prosecutor's
Office, the State Security Service, the State Service for Economic
Crimes, and the Tax Inspection, according to IATA representative
Sergei Martinyuk. Martinyuk told EconOff October 30 these
inspections began after IATA did not comply with State Aviation
Administration (SAA) "suggestions" on how IATA should implement BSP
in Ukraine and which local bank it should use for clearing
operations. According to Matinyuk, member airlines selected
Citibank Ukraine as the BSP clearing bank after IATA held a
competitive tender. (Note: BSP is the industry standard clearing
system for airline and agent settlement operations. BSP operates in
155 countries around the world and processes 80% of airline revenues
worldwide. End Note.) Delta Airlines' local representative Dan
Fenech raised the BSP issue on October 27 with the head of SAA's
Licensing Department, who only reiterated SAA's concern that IATA
had not registered its ticket stock with the GOU.

Legal Challenges
----------------

3. (SBU) The SAA sent letters in September 2005 to IATA and travel
agents claiming that BSP was illegal. Simultaneously, the SAA began
developing an alternative Ukrainian National Settlement System, and
asked international airlines to assist. The SAA argued that IATA
had violated the law by failing to register with the Finance
Ministry the blank ticket stock which IATA imports from Germany and
distributes to ticket agents on behalf of member airlines. A
December 2005 order from the Prosecutor General's office also
claimed that IATA was required to register the stock in order to
comply with Ukrainian licensing law.

4. (SBU) IATA responded via letter that the licensing law applied
only to ticket stock produced in Ukraine. IATA sued the SAA in
March 2006 and again in May, seeking a court ruling that it could
legally use its blank ticket stock. Both courts dismissed IATA's
claim, following what Martinyuk described as "pressure" from SAA or
its business backers. IATA then filed suit against the Prosecutor
General to have its order requiring registration overturned. The
hearing in that suit is set for November 3. Delta's Fenech told
EconOff October 27 that BSP's payment standardization is critical to
Delta's operations.

The Road Ahead
--------------

5. (SBU) Comment. The harassment of IATA via numerous inspections
and the SAA's earlier draft regulation governing ticket stock
(reftel), suggest strongly that parties within or close to SAA want
to stop BSP in Ukraine, possibly in order to control the float on
ticket payments though a friendly bank of their choosing. This
issue could gain significance if Ukrainian courts fail to find the
use of IATA ticket stock to be legal. Post will look at next steps
once IATA's legal challenges have clarified the situation more.

Taylor

© Scoop Media

 
 
 
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