IBERIA PULLING "MINI-HUB" OUT OF MIAMI; SALVADORAN

UNCLAS SECTION 01 OF 02 MADRID 002554

SIPDIS

EB/TRA/OTP FOR MEGAN WALKLET
EB/TRA/AN FOR JOE YOUNG

E.O. 12958: N/A
TAGS: EAIR ECON CVIS SP
SUBJECT: IBERIA PULLING "MINI-HUB" OUT OF MIAMI; SALVADORAN
AIRLINE TACA TO BENEFIT


1. Summary: Today, Iberia Airlines announced plans to fly
directly to Guatemala and Panama, avoiding the Miami
International Airport for "purely financial" reasons,
beginning in October. Nevertheless, an Iberia contact told
us that increased layover time due to new security procedures
in Miami played heavily in client requests that Iberia have a
more direct means of traveling between Spain and Europe and
Central America. The same Iberia executive acknowledged that
Florida officials have attempted to enable Iberia to maintain
its "mini-hub" in Miami. Although codeshare possibilities
for traffic between Miami and Central America have been
offered to a US carrier, Salvadoran carrier TACA might get
this business (possibly due to antitrust concerns),as well
as feeder flights from various Central American airports to
Iberia,s Central American stopovers. End Summary.


2. We met with Iberia Airlines International Relations
Director Elvira Herrero Mateo on July 6 to discuss Iberia,s
plans to fly directly to several Central America capitals,
avoiding Miami International Airport. Herrero said that it
was "difficult financially to maintain the four aircraft" at
its "mini-hub" in Miami which currently serves Central
American capitals and offers at least ten flights on most
days into Miami. She also cited increased security
procedures at the Miami airport as a reason why European and
Central American transit customers requested an alternative
to the Miami connection.


3. Along with the elimination of these connections from
Miami to various cities in Central America, Iberia will cut
one of its two daily round-trip flights between Madrid and
Miami. Herrero denied that AirMadrid,s new direct flights
to several Central American cities had any impact on
Iberia,s decision to serve Central America with direct
flights. (Comment: Currently AirMadrid does not even accept
passengers originating in Central America: the trip must
originate in Spain. Surprisingly, Herrero did not seem to
know about this peculiar requirement of AirMadrid. End
Comment.)

PLANNED CIRCULAR ROUTE: MADRID TO GUATEMALA CITY TO PANAMA
CITY TO MADRID.


4. Herrero described the new "direct" routing as a circular
one, in which an aircraft will travel from Madrid to
Guatemala to Panama to Madrid. When asked why Guatemala City
and Panama City were selected, Herrero explained that these
destinations provide the most passengers to Iberia. Herrero
added that another airport is being considered as an
additional stop on Iberia's route.

SALVADORAN AIRLINE TACA WILL CONNECT OTHER MAJOR CENTRAL
AMERICAN AIRPORTS TO THE IBERIA FLIGHT


5. It is likely that the Salvadoran airline TACA will
provide service from other Central American airports to
Guatemala City and Panama City for passengers to join the
circular route. Herrero noted that TACA has an extensive
Central American network, and is well positioned to connect
Central American clients to the new Iberia flight.

SOME TRAFFIC STILL TO GO THROUGH MIAMI ON CODESHARE


6. Iberia still anticipates some Spanish traffic will route
through Miami. Passengers could fly from Spain to Miami on
Iberia, and then board a codeshare flight to their final
destinations (or vice versa). Herrero said that Iberia
approached American Airlines about codesharing American
flights from Miami to various Central American cities, but
speculated that antitrust concerns may be preventing American
Airlines from viewing their proposal positively. She cited a
Department of Justice Notice of Action dated 30 April 1998 in
which the DOJ stated that it will "defer on" its decisions
regarding "codeshare services between Miami and points in
Central America" as supporting this speculation.

WILL SPAIN BECOME A TARGET FOR ILLEGAL IMMIGRATION FROM
CENTRAL AMERICA?


7. Spain currently does not require tourist visas from most
Central American countries. Since Central American travelers
to Europe typically needed to pass through Miami, US visa
regulations have generally served as an effective barrier for
the would-be Central American illegal immigrant to Spain.
Iberia's new circular route will eliminate this disincentive,
possibly making Spain a more accessible destination. The GOS
has imposed visa requirements for some South American
countries whose nationals have abused Spain's visa-free
travel provisions. We anticipate that the GOS will closely
monitor immigration patterns as this new route brings
travelers to Spain from Central America.


8. Comment: While one less flight to and from Spain each
day might seem insignificant, the elimination of Iberia's
mini-hub in Miami will result in less European and Central
American traveler stopovers in Florida for tourism, shopping
and business. Additionally, for those who still prefer to go
through Miami on their way to Spain and Europe, it is
regrettable that a US carrier may be losing the opportunity
to pick up Iberia,s traffic through a codeshare. End
Comment.
MANZANARES