LIMIT ON AMERICAN AIRLINES' FLIGHTS ROLLED BACK,

C O N F I D E N T I A L CARACAS 001974 SIPDIS STATE PASS TO DEPARTMENT OF TRANSPORTATION NSC FOR BARTON E.O. 12958: DECL: 06/29/2015 TAGS: EAIR PREL VE SUBJECT: LIMIT ON AMERICAN AIRLINES' FLIGHTS ROLLED BACK, FOR NOW REF: CARACAS 1833 Classified By: Economic Counselor Richard M. Sanders. Reason: 1.4(b) and (d). -------------- Summary -------------- ¶1. (C) The decision by civil aviation authorities to reduce American Airlines' (AA) flights on the Miami-Caracas route has been suspended at least through the summer. This follows vigorous representations by the Ambassador on AA's behalf (including with the office of GOV Executive Vice President Jose Vicente Rangel),as well as AA's lobbying effort. We would not be surprised, however, if the issue arises again. End summary. -------------- GOV Move Leads to Embassy Effort -------------- ¶2. (C) As reported reftel, on June 13 AA received a letter from the National Civil Aviation Institute (INAC) unilaterally reducing the number of flights on its Caracas-Miami route from four to three per day and directing it to advise INAC of what flights it would retain. (Note: the 1953 civil aviation agreement does not impose any quantitative restrictions on flights, but merely establishes routes. End note.) ¶3. (C) After being briefed by AA local manager Omar Nottaro on the issue, the Ambassador raised it with three senior GOV officials: Rene Arreaza, chief of staff to Executive Vice President Jose Vicente Rangel, GOV Ambassador in Washington Bernardo Alvarez_ (by telephone),and Jose Gregorio Vielma Mora, head of SENIAT, the Venezuelan tax and customs authority. To all three he stressed that the embassy was prepared to engage in dialogue regarding the operation of the civil aviation agreement if the GOV thought it useful, but that he would not recommend to the USG that it allow any Venezuelan carrier to add frequencies on the Caracas-Miami route to take advantage of the one taken away from AA. He also made it clear that he thought it would be difficult to recommend that the FAA engage in any expedited review of Venezuela's effort to regain "Category 1 status" in terms of its civil aviation safety regime, while this issue was unresolved. -------------- Decision Rolled Back for Now -------------- ¶4. (C) AA undertook its own efforts, including making written submissions and meeting twice with Rangel chief of staff Arreaza and with other officials. On June 22, AA's Senior Vice President for Latin America Peter Dolara was told by Arreaza and INAC head Col. Giuseppe Yoffreda that there would be no changes to flight schedules at least until September, the end of the busy season. However, they made it clear that the GOV would continue to study the matter. And in a June 27 meeting with the Ambassador SENIAT head Vielma Mora also said that the AA route issue was resolved for the time being. Vielma added that after talking earlier with the Ambassador, he had raised it with Rangel, stressing the inadvisability of taking this step as the summer season begins, and, also, immediately before the GOV's much ballyhooed trade event ("macro-rueda") with U.S. exporters and importers in Caracas, scheduled for June 30. -------------- Further Fall-Out -------------- ¶5. (C) In his conversation with the Ambassador, Vielma predicted that INAC chief Yoffreda would lose his position over this un-coordinated action. Later that day, an AA executive confirmed to econcouns that Yoffreda had indeed left, and was being replaced by his deputy Air Force Colonel Francisco Paz Fleitas. The executive also advised that the GOV had asked AA to purchase a stand (for USD 10,000) at the trade "macro-rueda" as a sign of good will. AA had declined to pay, but did agree to sell heavily discounted tickets for participants in the trade event, which seemed to satisfy the GOV. -------------- Comment -------------- ¶6. (C) AA is the preferred carrier on the Caracas-Miami route with more flights, as well as better connections and service. Local carriers, which do compete on price, still have trouble filling their planes. Thus we can expect that they will try again to get the GOV to use regulatory power to favor them. We suspect that they will learn from their mistake of relying on mid-level officials, and will lobby at higher levels next time unless some kind of amicable arrangement to grow the market, rather than to try to restrict it, can be found (which we doubt). ¶7. (C) This aviation mini-crisis also provides an interesting look at the GOV decision-making process. For this kind of decision, to reverse the ruling of an over-reaching bureaucrat, Executive Vice President Rangel remains the one man (other than Chavez himself) with real power. Customs and tax chief Vielma Mora's engagement was also noteworthy. A rising star in the Chavista firmament, he was confident enough in himself to play outside of his own lane. We do not want to attribute the either Rangel or Vielma's roles to any great sympathy for U.S. interests. The fact that the decision to go after AA was made without political level clearance (and was so poorly timed) made it ripe for reversal, following ours and AA's lobbying. Brownfield NNNN 2005CARACA01974 - CONFIDENTIAL