WILL AEROCONTINENTE RESUME FLIGHTS?

UNCLAS SECTION 01 OF 02 LIMA 002053 SIPDIS SENSITIVE DEPT FOR WHA/AND, EB/TRA/AN FAA FOR MIAMI E.O. 12958: N/A TAGS: EAIR ECON ETRD EINV CASC PE SUBJECT: WILL AEROCONTINENTE RESUME FLIGHTS? REF: A) LIMA 1987 B) 04 LIMA 5082 ¶1. (SBU) Summary. OFAC King Pin designate and owner of the now defunct AeroContinente airlines, Fernando Zevallos, recently announced plans to resume domestic service of his airline. On May 1, AeroContinente announced job openings for pilots who can fly F28s, B737s, and B727s - all planes in the AeroContinente fleet. Roberto Rodriguez, acting Director of the Directorate General of Civil Aviation confirmed that if AeroContinente meets the DGAC's financial and technical requirements, it will be granted permission to fly. Rodriguez, however, noted that AeroContinente still faces financial difficulties with its creditors and former staff, and under the King Pin Act, is unable to purchase parts from Boeing. Unless these problems were resolved 100 percent, Rodriguez vowed that AeroContinente will not fly. End Summary. Plans to Fly... -------------- ¶2. (U) Fernando Zevallos, former owner of AeroContinente(before it was sold to staff in June and renamed NuevoContinente),announced on May 1 that he is exploring the possibility of restarting domestic AeroContinente flights by the end of June. Taking advantage of Lan Peru's current legal issues (ref A),Zevallos argues that Peru's civil aviation sector is a disaster, with high prices dictated by a foreign competitor (Lan Peru/Lan Chile). (Note: According to the DGAC, the GOP plans on initiating a civil case against Lan Peru over the video scandal. End Note.) Promising to restore lower rates on domestic flights, Zevallos claims there is no reason why AeroContinente cannot resume flights in Peru. Zevallos informed the local press that AeroContinente has met all of MTC's requirements - the company has no legal problems, all financial debts have been repaid, and all technical issues resolved. ¶3. (U) Despite his posturing to the press, Zevallos failed to indicate exactly how he planned to finance AeroContinente operations. Under the King Pin Act, all of Zevallos' assets in the United States were frozen. NuevoContinente (the new name after AeroContinente was "sold"),in fact, was grounded by the DGAC, not for safety and technical reasons, but because it lacked the financial solvency to pay its fuel bills and staff salaries(ref B). ¶4. (U) Zevallos claims that AeroContinente will use its six functioning planes to service key domestic routes in Peru, including Piura, Iquitos, Cusco, Tacna, and Juliaca. The company issued an advertisement on May 1 calling for experienced pilots of F28s, B727s, and B737s - all planes in the former AeroContinente fleet. He also explained that while AeroContinente was banned "for now" from flying to the United States, there is no legal reason why AeroContinente cannot fly to Europe and/or Asia. But Will AeroContinente Take Off? -------------- ¶5. (SBU) We met with Roberto Rodriguez, acting Director General of the Directorate General of Civil Aviation (DGAC) on May 3 to discuss Zevallos' plans to resume flights. Rodriguez explained that he was unaware of Zevallos' intentions until he saw the job advertisement in last Sunday's paper. Rodriguez will meet with Zevallos on Friday, May 6, to discuss AeroContinente's future. ¶6. (SBU) Rodriguez informed us that legally, AeroContinente can fly in Peru. However, the company must meet the DGAC's rigorous standards for recertification, which includes an investigation into the company's finances, as well as a full technical inspection. Rodriguez indicated that when NuevoContinente was grounded in October, it only had one operating plane, not six. He expects that the company's planes will not pass the technical inspections, given that Boeing is prohibited from selling spare parts to AeroContinente/NuevoContinente under the King Pin Act. Rodriguez did note that AeroContinente can purchase parts for the F28. ¶7. (SBU) Rodriguez indicated, however, that if Zevallos transferred ownership of the company to an independent person or entity (including the GOP),AeroContinente would then be able to purchase the necessary parts. The MTC and DGAC would conduct a through investigation of the company, which could take up to nine months. We noted that the Department of Treasury would also conduct its own investigation before allowing Boeing to sell parts to the new company. Comment -------------- ¶8. (SBU) AeroContinente has a long way to go before the DGAC will even consider granting it the proper flight permits. It remains unclear whether Zevallos truly has plans for AeroContinente or if he is trying to take advantage of the current anti-Chile political climate. Either way, the DGAC remains committed to promoting a safe and secure civil aviation climate. STRUBLE