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Cablegate: Kenya Air Services Negotiations; Questions From Kenya

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PP RUEHWEB

DE RUEHNR #4441/01 3180547
ZNR UUUUU ZZH
P 140547Z NOV 07
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC PRIORITY 3443
INFO RUEHGV/USMISSION GENEVA 4269
RUEHMT/AMCONSUL MONTREAL 0119
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DOT WASHDC
RHMCSUU/FAA WASHDC
RUEAHLC/HOMELAND SECURITY CENTER WASHDC

UNCLAS NAIROBI 004441

SIPDIS

SENSITIVE

DEPT FOR AF/E, AF/RSA, AF/EPS, EB/TPP/MTA, AND EB/TRA/AN
DEPT ALSO PASS TO DOT FOR CONNIE HUNTER AND KEITH GLATZ
DEPT ALSO PASS TO USTR FOR BILL JACKSON
TREASURY FOR VIRGINIA BRANDON
MONTREAL FOR USICAO
TSA FOR ROBERT MCLAUGHLIN

SIPDIS
FAA FOR DONNA KRIMSKI

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E.O. 12958: N/A
TAGS: EAIR KTIA ECON KE
SUBJECT: Kenya Air Services Negotiations; Questions from Kenya
Airways

REFS: A) 11/2/07 Reifman e-mail, B) NAIROBI 4252, C) STATE 135337,
D) NAIROBI 3667

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY. FOR
INTERNAL USG DISTRIBUTION ONLY.

1. (U) This is an action message. Please see para 7.

2. (SBU) Summary: Kenya Airways sees no real benefit from Kenya
signing an Open Skies Agreement with the U.S. until Kenya achieves
Category 1 status. In fact, it is concerned about the potential
competition from U.S. airlines that could serve Nairobi if an Open
Skies Agreement were reached. End Summary.

Kenya Airways Wary of Open Skies Agreement
------------------------------------------
3. (SBU) Econoff met with Kenya Airways (KQ) officials to learn
their understanding of some of the issues raised in ref A. They had
already reviewed the model Open Skies Agreement (OSA) and recognized
many of the provisions as industry standards. KQ has not yet
analyzed the potential commercial impact of an OSA, and has no
position yet on whether Kenya should sign one. It would partly
depend on whether other countries in the region would allow KQ to
transfer passengers from the U.S. to other African countries via
Kenya (implementation of the Yamoussoukro Agreement). However, the
officials saw no reciprocal advantage in an OSA for KQ until Kenya
achieves Category 1 status, thereby allowing KQ to apply for direct
flights to the U.S. Wet leasing is expensive, and Kenya Civil
Aviation Authority (KCAA) regulations restrict its use. Code
sharing with Northwest or other Star Alliance partners is not
allowed without Category 1. KQ officials asked whether the OSA
could be implemented in stages, but could not specify which
provisions they meant. (Note: Econoff told them the entire OSA
cannot be made provisional or transitional. End note.)

4. (SBU) The KQ officials said KCAA and the Kenya Airport Authority
(KAA) claim that meeting security requirements for Category 1 and
direct flights requires completing the new terminal at Jomo Kenyatta
International Airport, mainly to separate incoming and outgoing
passengers. However, the KQ officials claimed that KQ's and JKIA's
security procedures have been approved by Israeli security officials
for direct flights to Israel. Although incoming and outgoing
passengers mingle in the main concourse at JKIA and on the tarmac
while walking to/from planes, they suggested KQ and JKIA could meet
TSA requirements by screening passengers for a flight to the U.S. at

SIPDIS
the gate, holding them in a sterile area, and then sending them to
the airplane by shuttle bus.

5. (SBU) KQ's current inventory of airplanes and crew would prevent
KQ from starting service to the U.S. immediately, but at some point
it might be possible to divert a Boeing 777 to the U.S. route.
However, the uncertainty of when Kenya will achieve Category 1 makes
it difficult for KQ to make plans for serving the U.S. The
officials agreed that Delta's proposed direct flight to begin in
June 2008 could benefit KQ by providing passengers for KQ's flights
to domestic and regional destinations including Mombasa, Zanzibar
and Dar es Salaam.

Comment
-------
6. (SBU) The comments and questions from the KQ officials indicated
KQ is not prepared to support an OSA at this time, and may subtly
oppose one by raising too many important issues for the Ministry of
Transportation to ignore. Absent a more immediate prospect of Kenya
achieving Category 1, KQ appears to be focused on more urgent
problems, and would likely postpone the costs of analyzing the
potential commercial impact of an OSA.

Kenya Airways Questions About Model OSA
---------------------------------------
7. (SBU) KQ requests answers to the following questions. Embassy
would appreciate answers from concerned Washington agencies.

- Please confirm whether KQ could enter into a code sharing
arrangement in which a U.S. partner flies the Dakar-U.S. leg and KQ
flies the Nairobi-Dakar leg before Kenya achieves Category 1. Would

an OSA affect this?

- Please confirm whether an OSA would allow KQ to code share with a
U.S. or non-U.S. carrier on flights via Europe before Kenya achieves
Category 1.

- Would chapter 11 protection or USG subsidies constitute unfair
competition and fall under Article 12.1.c limits on intervention by
the Parties to protection of airlines from prices that are
artificially low due to direct or indirect governmental subsidy or
support?

- What is the purpose of including a provision on intermodal
transportation in an aviation agreement? KQ has no landside
delivery service, and any prospect of it developing one may excite
resistance to the OSA from road and rail carriers in Kenya, who are
unlikely to want to operate in the U.S. Is the potential benefit to
U.S. firms worth raising this issue with Kenyan stakeholders?

- Under the Fly America Act, would USG travelers be required to fly
Delta or any other U.S. carriers' direct U.S.-Kenya flights, or
could they still choose to fly via Europe on KLM and KQ?

- Would the change of gauge provision require Kenya to allow a U.S.
carrier to base aircraft in Nairobi to provide onward service to
other East African destinations, in direct competition with KQ?

- Since Kenya has only one international airline, could it swap
higher frequency of flights for co-termination and cabotage rights,
i.e. the right for one flight to serve multiple U.S. points and
carry U.S. passengers between those points?

- KQ requests clarification of the Fifth Freedom Rights between two
countries that sign OSA's with the U.S. Would the U.S. help Kenya
by encouraging Senegal to allow a KQ flight to the U.S. to carry
passengers between Dakar and the U.S. and Dakar and Nairobi? Delta
appears to be offering this service, which would compete directly
with KQ's service to Dakar. Would such an agreement be covered in
the OSA or in a side agreement?

- Please explain Annex 1, section 2.2, operational flexibility. How
can one aircraft operation have two flight numbers?

RANNEBERGER

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