SUMMARY OF MAY 24-25 MEETING WITH COLOMBIA'S CIVIL

UNCLAS SECTION 01 OF 02 BOGOTA 005569

SIPDIS

E.O. 12958: N/A
TAGS: EAIR CO
SUBJECT: SUMMARY OF MAY 24-25 MEETING WITH COLOMBIA'S CIVIL
AERONAUTICS SPECIAL ADMINISTRATIVE UNIT


1. Summary. On May 24-25, officials from the Departments
of State and Transportation (DOT) met with representatives
from Colombia's Civil Aeronautics Special Administrative
Unit and the Ministry of Foreign Affairs in Bogota. The
U.S. team raised travel agent commissions, internet fares,
safety and security articles, and a cargo open skies
protocol. Colombian officials raised Avianca's request for
a waiver of the ownership and control provision under our
bilateral air services agreement (ASA). End Summary.


2. The U.S. delegation consisted of Edward T. Smith,
Director of the Office of Aviation Negotiations of the
Department of State; Carolyn Coldren and Brian Hedberg from
the Office of International Aviation of the US Department of
Transportation, and; Brian Winans, Civair Officer at Embassy
Bogota. The Colombian side was led by Civil Aviation
Authority Director General Fernando Sanclemente; his Deputy,
Col. Montealegre; Chief of the Air Transport Office Juan
Carlos Salazar, and; four other officials from the Civil
Aviation Authority and the Foreign Ministry. DG Sanclemente
opened the meetings, but departed quickly and left Salazar
in the chair for the GOC.

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Travel Agent Commissions
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3. Colombian regulations require that airlines pay
Colombian travel agents an 8% commission for any tickets
sold through them. The U.S. delegation explained that,
although not prohibited under our ASA, these mandated
commission levels represent an unwise intrusion of
government regulation into the marketplace, increasing costs
for airlines, and reducing their ability to run their
businesses the way they see fit. In addition, the
commissions represent a mandated transfer of resources from
one sector to another. The U.S. delegation noted that while
the aviation and travel sectors in the rest of the world are
moving towards deregulation, Colombia is going in the
opposite direction.


4. In response, Salazar said the Civil Aviation Authority
(CAA),the body that regulates travel agency commissions,
was in a very difficult position. The issue of commissions
was well beyond the technical level and had become very
politicized. The CAA said it had tried to offer solutions
in the recent past to offset the effects of high
commissions, but "radical" positions of one side or the
other had blocked these attempts. The GOC's principal
objective is to keep the legislature from mandating a
specific commission rate. The CAA emphasized that the
travel agent lobby was extremely well-organized, while the
traveling public was relatively small and affluent and was
generally perceived as able to afford the additional cost of
higher commissions. Thus, Salazar noted, the issue of high
travel agent commissions would have little public resonance.

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Internet Fares
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5. The U.S. delegation also questioned the GOC's policy on
carriers offering lower fares through the internet.
According to the CAA, Colombian law does not prohibit lower
fares to be offered through the internet, but it does
require that travel agents be given access to the tickets
for the same price (while still receiving their 8%
commission).

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Safety and Security Articles
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6. The delegations discussed a USG proposal to add a
security article to the ASA and to modernize the safety
article. The CAA indicated that, to the extent that the
articles followed language contained in the International
Civil Aviation Organization Model Air Services Agreement
(MASA),the GOC would be more likely to accept them. While
acknowledging a state's right to suspend, revoke, or
restrict a carrier's operating authority, the GOC indicated
a desire to make the commercial effects of an adverse action
under the safety or security articles "reciprocal". The
U.S. delegation said that it would not entertain introducing
commercial or market "equity" considerations into the safety
or security articles. The CAA intends to provide a
counterproposal for both safety and security articles by the
end of June.

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Open Skies Cargo Protocol
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7. The two delegations also reviewed in some detail the
text of a U.S. draft protocol to the ASA that would
establish an Open Skies regime for cargo services.
According to the CAA, some Colombian carriers wish to
protect certain specific regional markets. The CAA did not
name the carriers and the regions, but noted that the
carriers in question were not interested in serving the U.S.
market. The U.S. delegation urged the CAA to examine the
draft protocol, but noted that cargo Open Skies was a
package and not a menu of options. The U.S. delegation
undertook to provide a Spanish language draft protocol, as
well as an annotated agreement showing how the bilateral
agreement would be modified by the protocol.

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Avianca Waiver
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8. The CAA asked about the status of Avianca's application
for a waiver of the ownership and control provisions of the
ASA. The U.S. delegation responded that the application was
under consideration by DOT, that several parties had raised
objections to a waiver, and that the USG could not comment
on the ultimate decision at this point. The CAA explained
Colombian law obligated the GOC to treat Avianca, despite
its ownership by non-Colombians, as a Colombian carrier.
While acknowledging the USG's right to decide the case, the
CAA said the GOC would be politically and legally obligated
to terminate the ASA if the DOT were to deny the waiver
application.

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Next Steps
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9. The USG side undertook to provide a Spanish language
translation of the draft cargo Open Skies Protocol, as well
as an annotated version (English only) of the changes that
would be made to the ASA by the proposed cargo Open Skies
Protocol. The Colombian side undertook to provide the USG
within one month draft proposed texts for safety and
security articles for the current bilateral. The GOC side
also noted their intent to propose bilateral negotiations in
the near future for the purpose of liberalizing cargo
services.

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Comment
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10. These technical discussions were useful in several
respects. The USG made clear to the GOC the extent of
industry and USG displeasure with the GOC's onerous mandated
travel agent commission regime. Likewise, we clarified for
the GOC side a number of issues surrounding the essential
elements of cargo Open Skies, while making clear that Open
Skies is a coherent package, and not a menu of options from
which a bilateral partner can choose partial liberalization.
On the USG proposal to add modern safety and security
articles to the ASA, we made clear that we would not
entertain the idea of introducing commercial or economic
"equity" considerations into safety and security provisions.
The CAA's positions and reactions to these informal
consultations revealed that protectionism retains a hold
over GOC policy, though Colombia appears interested in at
least some degree of liberalization on the cargo side.


11. USDEL has cleared this message.