Cablegate: Portugal: Demarche On U.S.-Eu Second Stage Air

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R 091253Z FEB 10 ZDK
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC 8107
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UNCLAS LISBON 000058

SIPDIS

E.O. 12958: N/A
TAGS: EAIR EUN KTIA ECON PO
SUBJECT: PORTUGAL: DEMARCHE ON U.S.-EU SECOND STAGE AIR
TRANSPORT NEGOTIATIONS

REF: STATE 9584

1. Emboffs delivered reftel demarche on February 8 to Joao
Confraria, Deputy Chairman of the Board of the Portuguese
Civil Aviation Authority (INAC), and Fernanda Bandarra, Head
of the Market Access Department at INAC, urging a realistic
and pragmatic approach in the upcoming round of U.S.-EU
negotiations to reach a second-stage agreement by the end of
2010.

2. Bandarra said that Portugal has been closely following the
rounds of negotiations and that senior INAC negotiator Ana
Cristina Pais would be participating in the Madrid
negotiations. She acknowledged the policy and legal
challenges for both sides -- for EU member states to change
legislation regarding noise-related operational restrictions
at EU airports and for the U.S. to change its laws on
ownership and control of U.S. carriers.

3. Confraria noted that airport noise restriction is a
national, not EU, competency, with each EU member state
regulating its own level. He explained that changes to
domestic noise-level legislation is difficult due to the lack
of legal obligation and absence of Portuguese tradition to
subject such legislation to cost-benefit analyses. He
pointed out that even if the benefits outweighed the costs,
environmentalists in Portugal are well organized and would
oppose proposed changes.

4. Confraria told us that Portugal is in favor of reducing
emissions by 2020 but not at the expense of competitiveness.
He noted that some U.S. airlines have filed action in British
courts, challenging a U.K. effort to bring them into the EU
emissions trading scheme by 2012 to fight climate change.
(The European Parliament voted in July 2008 to add EU and
foreign carriers to the emissions trading scheme, which
imposes a cap on industrial emissions of carbon dioxide.) He
pointed out that if the U.S. carriers prevail and they are
exempt from the scheme, Portuguese airlines would be at a
"cumulative competitive disadvantage" starting in 2013, with
the implementation of the emissions trading system, which
would require developed nations to reduce emissions from 1990
levels by 2020.

5. Confraria viewed favorably U.S. willingness to recognize
traffic rights awarded to merged companies that have already
signed Open Skies agreements, describing it as a "friendly
move" by U.S. negotiators and "potentially more interesting"
than Portuguese airlines having stakes in U.S. companies.
Nonetheless, he affirmed that Portugal would support a common
EU position and defend the right of EU companies to buy a
controlling share in U.S. companies if that was the final EU
position. He anticipated that if air traffic continues to
grow at a steady 3.5 percent per year, capacity at Lisbon's
international airport would be exhausted by 2020, resulting
in some congestion and decreased quality of service. He
calculated that construction of the new airport could be
completed by 2020 if begun in 2012.

For more reporting from Embassy Lisbon and information about Portugal,
please see our Intelink site:

http://www.intelink.sgov.gov/wiki/portal:port ugal
BALLARD

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