MINISTER RADEBE ON OPEN SKIES

C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 004786

SIPDIS

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DEPT PASS USTR FOR PCOLEMAN, WJACKSON AND CHAMILTON

E.O. 12958: DECL: 10/29/2014
TAGS: EAIR EINV ETRD ECON SF
SUBJECT: MINISTER RADEBE ON OPEN SKIES

Classified By: Acting Econ Chief Alan Tousignant. Reason 1.5 (B/D).


1. (C) SUMMARY. U.S. Department of Transportation's (DoT)
Deputy Assistant Secretary for Aviation and International
Affairs Susan McDermott met with South Africa's Minister of
Transport Jeffrey Radebe and Dr. Ian Phillips, Special
Advisor to the Minister, on October 27, 2004 at the
Minister's parliamentary office in Cape Town. The meeting
followed up on an Open Skies discussion between Radebe and
U.S. Secretary of Transportation Norman Mineta at the 35th
ICAO Assembly in Montreal, September 2004. Radebe
acknowledged Open Skies benefits outlined by McDermott and
called for the United States and South Africa to form
"technical teams" to discuss a proposed Open Skies agreement.
Restructuring and new management at Transnet, South Africa's
administrator of state-owned transportation enterprises, may
make this an auspicious time to engage South Africa on an
Open Skies agreement. The Minister expressed keen interest
in the organizational structure of the U.S. Department of
Transportation (DoT). McDermott invi
ted Radebe to visit Secretary Mineta in the United States and
to meet with DoT administrators. END SUMMARY.


2. (U) Department of Transportation (DoT) Deputy Assistant
Secretary for Aviation and International Affairs Susan

SIPDIS
McDermott met with South Africa's Minister of Transport
Jeffrey Radebe and Dr. Ian Phillips, Special Advisor to the
Minister, on October 27, 2004 at the Minister's parliamentary
office in Cape Town. The meeting was scheduled to follow up
on an Open Skies discussion between Radebe and U.S. Secretary
of Transportation Norm Mineta at the 35th ICAO Assembly in
Montreal, September 2004.


3. (U) Radebe (pronounced "ha-Day-bay") and Phillips warmly
greeted DAS McDermott. McDermott briefly mentioned the Safe
Skies for Africa Aviation Security Workshop taking place in
Johannesburg from Oct. 26-28. She also thanked Radebe for
the good relationship that exists between South Africa and
the United States and expressed her hope that the
relationship could be expanded through increased aviation
collaboration.

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AN OPEN SKIES OVERVIEW - DAS MCDERMOTT
--------------


4. (SBU) McDermott provided a thorough overview of Open
Skies and detailed likely benefits to tourism, trade, as well
as more accessible and affordable transportation for
passengers and cargo. Although the United States is not
fully utilizing its current bilateral agreement with South
Africa, McDermott emphasized the importance of a broad
aviation framework for future growth. She said a liberal
aviation agreement such as Open Skies conveys a message that
South Africa is "open for business," flexible, and committed
to unlimited commercial opportunity. McDermott cited LAN
Chile as an example of how an Open Skies agreement can not
only increase regional aviation services, but also
dramatically improve the profitability and efficiencies of an
airline. She said that South Africa is well positioned to
accomplish similar results in Africa. McDermott said,
however, that because of Africa's high cost of transport,
potential players are squandering many African Growth and
Opportunity Act (AGOA) preferences and sa
id, "You can't trade if you can't get there."


5. (SBU) McDermott also reviewed the important role of
codeshares and alliances in servicing communities and in
developing a global aviation network. She explained the
benefits of anti-trust immunity and said it may be considered
only for Open Skies partners involved in pro-competitive
codeshare arrangements. In conclusion, McDermott said she
appreciated the opportunity to present two ideas for Radebe's
consideration: 1) Open Skies as a market development tool
and a welcome sign for investment; and 2) a vital tool of
real benefit to South African Airways (SAA) as it moves into
a global alliance arrangement.

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RADEBE'S RESPONSE
--------------


7. (C) Radebe (previously the Minister of Public
Enterprises) thanked McDermott for her comprehensive overview
of Open Skies and agreed that without transport links, trade
cannot develop to its full potential. Radebe acknowledged
that this problem is crippling Africa's development.
Reviewing the importance of intra-African integration, he
said that the Yamoussoukro Declaration and Decisions aim to
liberalize Africa's aviation industry in the same manner as
Open Skies. The Minister said that "regrettably" not much
has been implemented. However, he said that African
Ministers of Transport would meet in South Africa during the
first quarter of 2005 to further the Yamoussoukro accord.


8. (C) Radebe was clear in his belief that an Open Skies
agreement would benefit the development of aviation services
in Africa and said that South Africa was "committed to do
everything possible" to liberalize Africa's skies. He said
that while many fear an Open Skies agreement means South
Africa would be "gobbled up" by U.S. air carriers, the LAN
Chile experience was reassuring. Radebe said his primary
responsibility as Minister was to oversee the expansion and
accessibility of transportation (including aviation) services
rather than the promotion and protection of SAA. He said
that Open Skies "looks compelling." He called on the United
States and South Africa to form "technical teams" to look at
the "details" of an Open Skies interaction between South
Africa and the United States.


9. (SBU) McDermott responded that Secretary Mineta would be
encouraged by this development. When she sought to clarify
whether these teams should conduct exploratory discussions or
negotiations towards an Open Skies agreement, Radebe asked
that they look at "all the details." He also indicated that
Department of Transport Director General Wrenelle Stander
should be contacted to initiate these talks.

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RADEBE CURIOUS ABOUT DoT STRUCTURE
--------------


10. (SBU) Over lunch, Radebe praised South Africa's emerging
low-cost airline industry, said that privatization is not
dead, and identified key Yamoussoukro partners (Kenya,
Ethiopia, Nigeria). He expressed keen interest in the
organizational structure of the U.S. Department of
Transportation. He questioned McDermott about the role of
the FAA and asked who has responsibility for rail, roads,
maritime services, traffic control, and state police. After
responding to Radebe's questions, McDermott invited the
Minister to meet with Secretary Mineta in the United States
and to see how the various DoT Administrators operate.


11. (C) COMMENT. Radebe's expression of support for Open
Skies is encouraging as is his invitation to the United
States to initiate bilateral talks between "technical teams."
Although promising discussions with previous Minister of
Transport Dullah Omar in the early 2000s failed to produce an
Open Skies agreement, the commercial environment has changed.
SAA has suffered two years of massive hedging losses
totaling R15 billion (about $2.38 billion). SAA's Board of
Directors and senior executive management have been replaced
in the last year. In addition, new management at Transnet,
South Africa's administrator of state-owned transportation
enterprises, is no longer willing to protect SAA
inefficiencies. Transnet's new CEO, Maria Ramos (former DG
of National Treasury),said earlier this year that she does
not consider SAA to be a core business of Transnet. Public
Enterprises Minister Alec Erwin is publicly supporting Ramos.
Accordingly, SAA has been removed from Transnet and is
currently reporting direc
tly to the Department of Public Enterprises. SAA can no
longer count on the political protection it formerly received
from the Government. The recent emergence of new low-cost
airline competitors (e.g., Kulula, 1Time) may also make this
an auspicious time to engage South Africa on an Open Skies
agreement. Post encourages Washington to follow up on the
opportunity to further develop bilateral discussions. END
COMMENT.


12. (U) This cable was cleared by DAS McDermott.

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