Cablegate: New Air Carriers Coming to Paraguay

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DE RUEHAC #0671 2751451
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O 011451Z OCT 08
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7283
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUEHPE/AMEMBASSY LIMA PRIORITY 0457
RUEHSN/AMEMBASSY SAN SALVADOR PRIORITY 0060

C O N F I D E N T I A L ASUNCION 000671

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WHA/BSC MDASCHBACH, PASS TO USTR KDUCKWORTH, PASS TO
COMMERCE SCOOK

E.O. 12958: DECL: 09/29/2027
TAGS: EAIR ECON EINV ETRD PA
SUBJECT: NEW AIR CARRIERS COMING TO PARAGUAY

Classified By: DCM Michael J. Fitzpatrick; reasons 1.4 (b) and (d).

1. (U) The international carriers TACA and PLUNA will service
Paraguay before the end of 2008. The Uruguayan-owned carrier
PLUNA (First Uruguayan Lines of Air Navigation) is expected
to begin its service to Paraguay on October 29 with four
weekly direct flights to Montevideo. PLUNA will also offer
weekly flights from Ciudad del Este to Punta del Este, and
will consider expanding its services with daily flights to
Buenos Aires, Sao Paulo, and Santiago. The Salvadorian-owned
carrier TACA (Central American Air Transportation) will begin
service November 15 with three weekly direct flights to Lima,
which will be the first direct flights in over 20 years from
Asuncion to Lima. TACA will also offer three weekly
non-direct flights to Lima via Montevideo. TACA's South
American hub is in Lima with connections to the U.S.,
Ecuador, Colombia, Central America, and the Caribbean.

2. (C) A Paraguayan-owned local carrier, Aero Regional
Paraguaya, is to offer direct flights to Brazil, Argentina
and Uruguay in October 2008. The carrier will fly only one
plane, with limited services to the capitals of those
countries. Local entrepreneurs announced in April that
Colombian-owned subsidiary of Avianca, Ocean Air, will
service Paraguay. The carrier was registered but it still
has no presence in the country, and there are no indications
that it is actually planning to operate in Paraguay. Another
locally owned carrier, Fly Paraguay, recently registered but
it is not ""officially"" operating. (NOTE: Several private
representatives have told Emboffs that Fly Paraguay is a
Cuban-owned carrier. The former head of Air Cubana is said
to be the investor behind the carrier. President Lugo told
Ambassador September 19 that he was suspicious about the Fly
Paraguay investors who approached him. END NOTE.)

3. (U) According to the latest figures from the National
Civil Aeronautics Secretariat (DINAC), Paraguay's demand for
international flights grew by 20 percent in 2007. The
Brazilian-owned carriers GOL and TAM, along with the
Bolivian-owned Aerosur and the Argentine-owned Aerolineas
Argentinas (both now operating irregularly), are the only
international carriers with regular daily service to
Paraguay. Regular direct flights outside Sao Paulo, Buenos
Aires, and Montevideo remain non-existent, and TAM cut one of
its three Airbuses serving Paraguay August 1, further
reducing flight frequency and routes, as well as laying off
200 employees. (NOTE: Flight availability was an issue
before TAM's decision to downsize. To secure a seat during
peak-season, reservations and confirmations for outbound
flights 3 months in advance are the norm. END NOTE.)

4. (SBU) COMMENT: The arrival of TACA and PLUNA should
increase Paraguay's connectivity but will not remedy its air
traffic isolation. Paraguay remains the only country in
MERCOSUR without direct international flights to the U.S. or
Europe. There is a growing demand for air travel, but the
law that guarantees a 6 percent commission for travel agents
and ongoing security and infrastructure issues at Asuncion's
Silvio Pettirossi airport make direct flights to the U.S. or
Europe difficult at this time. President Lugo's new
government has shown interest in modifying the travel agent
commission law and improving conditions at Silvio Pettirossi,
which would be the first steps to attract additional
carriers. Until that happens, however, Paraguay remains--for
all intents and purposes--hostage to TAM's near monopoly on
daily air service. END COMMENT.

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