Identifier
Created
Classification
Origin
05DUBLIN177
2005-02-11 16:14:00
CONFIDENTIAL
Embassy Dublin
Cable title:  

U.S.-IRISH DISCUSSIONS ON OPEN SKIES PROSPECTS

Tags:  EAIR PREL ETRD 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.

111614Z Feb 05
C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 000177 

SIPDIS

E.O. 12958: DECL: 01/31/2015
TAGS: EAIR PREL ETRD
SUBJECT: U.S.-IRISH DISCUSSIONS ON OPEN SKIES PROSPECTS


Classified By: Political-Economic Counselor Mary Daly; Reasons 1.4 (B)
and (D).

C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 000177

SIPDIS

E.O. 12958: DECL: 01/31/2015
TAGS: EAIR PREL ETRD
SUBJECT: U.S.-IRISH DISCUSSIONS ON OPEN SKIES PROSPECTS


Classified By: Political-Economic Counselor Mary Daly; Reasons 1.4 (B)
and (D).


1. (C) Summary: In informal bilateral discussions on
February 7, Ireland indicated its intent to decide in the
next several weeks on the possibility of establishing Open
Skies with the United States. Transportation Affairs Deputy
Assistant Secretary John Byerly and DOT International
Aviation Director Paul Gretch told Irish counterparts that
the USG was prepared to pursue an Open Skies "arrangement"
that would not entail formal amendments to the existing
bilateral air transport agreement. This unprecedented
approach would aim to sidestep the legal impediments posed by
the November 2002 judgments of the European Court of Justice
and the mandate subsequently given to the Commission to
negotiate with the USG on behalf of Member States. Irish
Transport officials said that the GOI could immediately
accept nearly all the elements of Open Skies, but preferred a
transition on the Shannon stop requirement as well as a
possible delay in implementing full fifth-freedom rights,
given likely Commission opposition. Byerly and Gretch noted
that fifth freedoms were central to Open Skies, but indicated
a willingness to consider a transition that would allow for
implementation of fifth-freedom rights and cargo
seventh-freedom rights in a year as part of an overall Open
Skies arrangement, inclusive of a Shannon phase-out. Irish
officials committed to respond shortly and recommended that
the two sides avoid designating possible follow-on talks as
"formal," since this would trigger legal difficulties for the
GOI with the Commission. Separately, Byerly expressed USG
support for Ireland as ICAO's selected site for the
international registry under the Capetown Convention, despite
recent attempts by Canada, a losing bidder, to revisit the
selection. On February 8, Byerly addressed a Dublin seminar
on trans-Atlantic aviation that fleshed out conflicting Irish
views on the need for a multi-year phase-out of the Shannon
stop. End summary.


2. (C) On February 7, State Department Deputy Assistant
Secretary for Transportation Affairs, John Byerly, and U.S.

SIPDIS
Department of Transportation Director for International
Aviation, Paul Gretch, met with Irish counterparts to discuss

possibilities for establishing a bilateral Open Skies
relationship. Irish participants included: John Murphy,
Department of Transport (DOT) Director General for Civil
Aviation; John Lumsden, DOT Assistant Secretary for Roads
(and Murphy's immediate predecessor); Brendan Lyons,
Department of Foreign Affairs (DFA) Assistant Secretary for
Bilateral Economic Relations; Robin McKay, DOT Principal
Officer for Aviation Regulation and International Relations;
Doreen Keaney, DOT Principal Officer for Aviation Security;
Colin Hunt, Special Advisor to the Minister of Transport;
and, Micheal O'Mealoid, DOT Assistant Principal Officer for
Aviation Regulation and International Relations.

A Way Forward on Open Skies
--------------


3. (C) Byerly noted the USG's willingness to consider an
"arrangement" with Ireland that would establish Open Skies
without formally amending the existing bilateral air
transport agreement -- an approach that would aim to sidestep
the legal impediments posed by the ECJ judgments and the
Commission's mandate to negotiate with the USG on behalf of
Member States. This approach would require an explicit GOI
political commitment to implement the Open Skies arrangement
in the form of a Memorandum of Consultations (MOC). Byerly
explained that the MOC would have an attached text of
U.S.-proposed amendments needed to transform the bilateral
agreement into an agreement containing the essential elements
of Open Skies. The amendments would incorporate liberalized
routes (including fully open fifth-freedom rights and
desirable all-cargo seventh-freedom rights for scheduled and
charter service) as well as Open Skies model provisions on
customs, operational flexibility, fair competition,
codesharing, user charges, commercial opportunities, safety,
and security. Moreover, the MOC would note that the GOI was
not prepared to amend formally the existing bilateral
agreement, but that the two governments would apply the
proposed changes on the basis of comity and reciprocity.
Byerly added that the U.S. proposal attached to the MOC would
reflect U.S. industry input and could include, if the GOI
desired, a "transitional annex" for a phase-out of the
Shannon stop requirement and a phase-in of new U.S. points
for Irish carriers.


4. (C) To proceed with this approach, the USG needed a
definitive signal from the GOI on its willingness to
establish Open Skies, Byerly emphasized. He cited several
bilateral exploratory discussions held since mid-2004, and he
noted that there would be no value in further informal
consultations. Byerly added that an unequivocal "yes" to
Open Skies would trigger a process in Washington involving
the scheduling of bilateral talks, the preparation of texts,
and necessary USG consultations with U.S. industry. He
observed that the USG had not yet discussed the specifics of
the MOC idea with U.S. industry, which would have definite
views on the package to be offered Ireland. Lumsden and
Murphy concurred with Byerly that additional exploratory
talks would not be useful.


5. (C) Byerly and Gretch explained that reliance on an MOC,
a non-legally binding document under international law, would
constitute an unprecedented approach to the establishment of
Open Skies. They noted that the approach had raised some
concerns on the U.S. side, since the two sides would not have
recourse to arbitration if the arrangement were violated.
Murphy asked whether the USG had considered using this
approach with other Member States, given the impasse in the
U.S.-EU negotiations. Byerly replied that the anti-trust
immunity sought by Iberia for its relationship with American
Airlines would probably only be approved in the context of a
legally binding Open Skies agreement with Spain. He added
that there was probably insufficient demand for
trans-Atlantic air services for most new Member States to
consider incurring the ire of the Commission, which would not
welcome this method of sidestepping Commission competence.

Irish Difficulties with Fifth Freedoms
--------------


6. (C) Murphy said that the GOI could immediately accept
nearly all the essential elements of Open Skies, but
preferred a transition on Shannon as well as a delay in the
implementation of fifth-freedom rights. The GOI also needed
to review the possibility of all-cargo seventh-freedom
rights. (Note: Murphy did not express opposition to
third-country codesharing.) To concede fifth/all-cargo
seventh-freedom rights bilaterally at this point in the
U.S.-EU talks, said Murphy, would be unacceptable to the
Commission (which seeks to withhold such rights as perceived
leverage in seeking greater access to the U.S. market for EU
carriers). He added that the GOI wished to allow the U.S.-EU
negotiations to proceed to a point of clarity on whether a
trans-Atlantic agreement was reachable. Lumsden elaborated
that the GOI did not seek indefinite postponement of
fifth-freedoms, but rather a delay that would enable Ireland
to argue later that "the Commission had had time to do a deal
with the United States, but had failed, leaving Ireland no
choice but to act bilaterally."


7. (C) Byerly and Gretch responded that the USG sought
immediate implementation of fifth-freedom rights as a central
part of any Open Skies agreement, with very few exceptions in
unique cases for economic reasons. Moreover, Ireland's
withholding of fifth freedoms would play into false arguments
that the Commission should hold back such rights to
counterbalance the lack of market access (cabotage rights)
faced by European carriers in the United States, relative to
U.S. carriers in Europe. Byerly said, however, that the USG
would be willing to consider two options for a transition.
The first option had the following steps: (1) on day one,
there would be easing of the Shannon stop requirement,
additional U.S. points for Irish carriers, and the
implementation of all elements of Open Skies, except for
fifth and all-cargo seventh freedoms; (2) in a year, Ireland
would grant full fifth freedoms and all-cargo seventh
freedoms, with further easing of the Shannon stop requirement
and additional U.S. points for Irish carriers; and, (3) at an
end-point subject to negotiation, the Shannon stop would end
completely, and Irish carriers would have full access to the
U.S. market. Under the second option, the entire arrangement
could be delayed for a year, but there could be no transition
on fifth-freedom rights. Murphy said that this methodology,
broadly speaking, seemed acceptable, and he indicated that
the Irish side might be partial to the second option.

Next Steps
--------------


8. (C) In terms of next steps, Byerly said that the U.S.
side would await a final GOI decision on moving to Open
Skies, preferably within the next two weeks. With the GOI's
green light, the USG would begin consultations with U.S.
industry on the U.S.-proposed Open Skies amendments to the
bilateral. This proposal would not include provisions for a
transition on Shannon, U.S. points for Irish carriers, and
fifth/all-cargo seventh-freedom rights. Upon receiving the
proposal, the Irish side would introduce the transition
provisions and return the updated package to the USG for
review with U.S. industry. The two sides would then move to
formal negotiations to work out final details, after which
the Irish side would announce "a failure," in the sense that
it was not prepared to amend the bilateral formally. The GOI
would then agree to implement the amendments on a comity and
a reciprocity basis and would sign the MOC with the
amendments and transitional annex attached.


9. (C) Murphy responded that this approach sounded
reasonable, and he committed to obtain Transport Minister
Cullen's final decision on whether to move to Open Skies.
Murphy, however, recommended against a U.S. request to enter
into formal negotiations, as this would trigger notification
requirements to the Commission for the Irish side. Rather
than negotiate formally and "fail," the GOI preferred to have
discussions that would not be designated as "formal."
Government delegations of the customary size as well as
industry representatives could nonetheless participate as
usual. Ireland might also envision an MOC that incorporates
the agreed new arrangement rather than have the text as a
U.S.-proposed (and Irish-rejected) text of formal amendments.
Byerly and Gretch signaled U.S. willingness to consider this
approach. They also cautioned that Ireland should expect
strenuous Commission opposition to whatever approach was
chosen, and he urged that Minister Cullen communicate his
decision to the U.S. side as soon as possible.

Ireland and the Capetown Convention Registry
--------------


10. (C) Byerly said that ICAO Council President Kotaite had
expressed concerns on the margins of a recent Washington
conference that Canada was pressing to revisit the selection
of Ireland, its rival bidder, as the site for the
international registry under the Capetown Convention.
According to Kotaite, Canada claimed that it was able to
secure USD 200 million in insurance to cover the liability of
the registry for negligence/mistakes, while Ireland had only
been able to obtain USD 10 million. Irish DOT Principal
Officer for Aviation Regulation and International Relations,
Robin McKay, responded that he had been involved in the
PrepCom discussions on the registry and that Canada was
acting as a sore loser. He remarked that there was no way to
confirm Canada's claim about the amount of insurance it had
secured, since the insurance company involved protected this
information as confidential. The key to countering Canada's
tactics, McKay explained, was to un-block that
confidentiality. Byerly pointed out that the USG continued

SIPDIS
to support Ireland's selection as the registry site, and he
ventured that Dr. Kotaite had raised the issue to confirm the
U.S. position. Lumsden said that the GOI would discuss the
issue directly with Dr. Kotaite and PrepCom.

Public Discussion on the Shannon Stop
--------------


11. (SBU) A February 8 seminar in Dublin on trans-Atlantic
aviation hosted by the Institute of European Affairs and
addressed by Byerly provided for lively discussion on the
U.S.-Ireland bilateral agreement and the Shannon stop
requirement. In prepared remarks, Byerly cited the U.S. goal
of eliminating outdated restrictions in the bilateral in
order to establish Open Skies, and he noted U.S. willingness
to phase out these restrictions, including the Shannon stop,
over a reasonably short period. As the local press reported
the following day, recently resigned Aer Lingus CEO Willie
Walsh said that the Shannon stop was inimical to national
interests, and he recommended that the requirement be
abolished without any transition. Walsh elaborated that the
Shannon stop raised fares in Dublin, prevented new carriers
from entering the market, and had prompted Aer Lingus'
announcement that it would end Baltimore/Washington service
(effective this May). Representatives of the Shannon Airport
Authority (which will be split from the Dublin Airport
Authority this summer) countered that Shannon Airport was
preparing business plans in anticipation of the stop's
elimination, but that these plans envisioned a five-year
phase-out. Walsh replied that five years was too long to
make projections for the aviation industry, and he added that
the Shannon community had already had 15 years to prepare for
the transition.


12. (U) This cable was cleared by DAS Byerly.
KENNY