AVIANCA WANTS TO LOWER TRAVEL AGENT COMMISSION

UNCLAS BOGOTA 003528 SIPDIS E.O. 12958: N/A TAGS: EAIR CO SUBJECT: AVIANCA WANTS TO LOWER TRAVEL AGENT COMMISSION RATES, TOO REF: A. 05 STATE 54317 ¶B. 05 BOGOTA 3076 ¶1. Sensitive but unclassified. Business proprietary information--please protect accordingly. ¶2. (U) Summary. On April 5, econcouns and econoff met with Avianca's president, Fabio Villegas. According to Villegas, Avianca's new management supports efforts to lower travel agent commission rates. In addition, Avianca wishes to enhance security cooperation with USG agencies and is interested in possible open skies on cargo, but believes that the passenger market is already competitive and local carriers would not survive an open skies arrangement. End Summary. ¶3. (SBU) Fabio Villegas, the new president of Avianca, is optimistic about the airline's request for a foreign ownership waiver with the Department of Transportation. Villegas noted that Avianca's emergence from Chapter 11 is the first step of many on their road to success. He highlighted Avianca's 2004 performance, USD 115 million in profits, as an indicator of moving forward. He also asserted that Avianca is working hard on all security-related issues to combat narco-trafficking (its shareholders don't want to see Avianca back in court). Villegas added that Avianca wished to strengthen current cooperation with USG agencies on security issues. ¶3. (U) Econcouns discussed Colombia's high travel agent commission rates with Villegas, noting that Colombia's 8 percent rate is one of the highest in Latin America. Villegas concurred and claimed that Avianca shares the same view of the U.S. and they, too, would like to see the rates lowered. He also commented that no relationship exists between Avianca and ANATO, Colombia's national travel agency association, regarding travel agent commission rates. ¶4. (SBU) When asked about Open Skies, Villegas asserted that there was already sufficient competition in the air-passenger industry in Colombia. He added that Avianca prefers the status-quo. ¶5. (SBU) Villegas had no comments on CAA's new director Fernando Sanclemente, the former director of Ports and Transportation in the Ministry of Transportation. Villegas did note that Sanclemente was involved as Ports director in Avianca's bankruptcy proceedings and had demonstrated in-depth knowledge of civil aviation issues. Both American Airlines' and Continental's country representatives were positive in their assessment of Sanclemente, noting that Sanclemente is close to Manuel Leal, president of Colombia's Airline Association (ATAC),(which is against the high commission rates). ¶6. (SBU) Comment. As previously reported, CAA does not see any linkage between Avianca's request for a foreign ownership waiver and American Airlines' request to block the waiver due to Colombia's high travel agent commission rates. Moreover, the current management of Avianca agrees with the U.S. view on lowering the rates. As the closest thing to a "national flag carrier" in Colombia, that may be a positive thing. End Comment. WOOD