ECUADOR - CIVAIR PROGRESS?

UNCLAS SECTION 01 OF 02 QUITO 002862

SIPDIS

E.O. 12958: N/A
TAGS: EAIR PGOV EC
SUBJECT: ECUADOR - CIVAIR PROGRESS?

SENSITIVE


1. (U) Summary. After lengthy delays, the GOE finally is
making some progress on bilateral Civair issues. Within the
span of one week, Ecuador's civil aviation legislation moved
closer to congressional vote and the Aviation Council
approved the GOE's renewal of its Bilateral Civil Aviation
Agreement with the US. Renewal of the Bilateral Agreement,
previously a simple annual process, had languished for five
months with the Council. Meanwhile, civil aviation
legislation has spent almost two years in congress while
being held up by numerous special interests intent on
keeping it from passing. If it makes it through a second
reading of Ecuador's congress with key provisions intact,
the civil aviation legislation will be a crucial first step
toward allowing Ecuador to regain category one status.
While the legislation addresses category one safety
concerns, it also creates new opportunities for politically-
connected economic interests in Ecuador. End Summary.

COUNCIL APPROVES RENEWAL OF BILATERAL AGREEMENT
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2. (U) On December 8, Ecuador's Aviation Council voted to
renew the Ecuador-US Bilateral Civil Aviation Agreement.
Members of the Council informed Econoff that it is sending a
note to the MFA indicating its approval of the renewal.
Upon receipt of the note, the MFA formally will notify the
Embassy, ending a five-month delay in the renewal process.

CIVAIR LEGISLATION PROCEEDS TO FINAL DEBATE
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3. (U) After almost two years, revisions to Ecuador's Civil
Aviation legislation were unanimously approved in committee
on December 1 and are scheduled to head for a second debate
in January 2006. If Ecuador wants to regain category one
certification of its safety oversight system, safety
provisions acceptable to the Federal Aviation Authority
(FAA) need to survive this second debate. The unanimous
nature of the committee's decision suggests that political
and economic differences that could water down safety
components of the legislation might be avoided in the second
debate. Ecuador lost category one status in 1994 and with
it the right for Ecuadorian airlines to fly directly to the
U.S. and to maintain code-sharing relationships with
American carriers.


4. (U) Congress's first debate on the Civair legislation
took place in April 2004. It scrapped key safety provisions
from a text developed in conjunction with the FAA and was
motivated by vested interests within the GOE.


5. (U) The text of the current legislation, which underwent
an FAA legal review November 29 - December 1, contains the
previously-removed safety provisions critical for category
one compliance. Rather than creating a new law, it amends
the two legal instruments governing civil aviation in
Ecuador: the Aeronautic Code and the Law of Civil Aviation.
Most importantly, the provisions separate the functions of
Ecuador's Civil Aviation Administration (DAC) and the
Aviation Council. Currently, the highly politicized
Aviation Council maintains control over budgets, hiring, and
safety oversight. Under the new legislation reviewed by
FAA, the DAC becomes an autonomous Civair entity that can
create its own regulations, maintain its own budget, hire
its own technical personnel, and delegate authority to
staff.

MUCH MORE NECESSARY FOR CATEGORY ONE
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6. (U) A number of Civair authorities maintain the
impression that Civair legislation is the final hurdle to
obtaining category one status. In order to quell this myth,
both Econoff and the FAA legal reviewer, in meetings with
representatives from the DAC and the Aviation Council,
emphasized that passage of the Civair legislation will not
trigger re-instatement of category one. Still remaining are
a review of the legislation ultimately passed by congress,
an FAA technical visit, a review of safety improvements at
Ecuador's Quito and Guayaquil airports, and a final audit.
Although assessments by the FAA in 2004 indicate that there
are no glaring concerns with respect to these safety reviews
and audits, regaining category one is far from a done deal.

ENTRENCHED INTERESTS STILL A POTENTIAL BARRIER
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7. (SBU) Perhaps the greatest obstacles to passage of robust
Civair legislation are the economic interests that derailed
the legislation during its first reading in 2004. The most
influential of these interests are aligned with the Social
Christian Party (PSC). These interests control flight
frequencies to the US previously used by Ecuadorian
airlines. Without category one status, Ecuadorian airlines
are unable to fly to the US, allowing these actors to "rent"
the frequencies to companies such as LAN Chile for tens of
millions of dollars annually. Passage of the legislation --
and a return to category one -- destroys this cash flow.


8. (SBU) Politically-appointed members of the Aviation
Council also oppose FAA-approved Civair legislation. Under
the current legislation, the Council determines Civair
regulations, allowing its members to sell their votes and
signatures on Civair matters. The new legislation, by
creating an autonomous DAC, would limit the Council's
control over regulations and the economic interests its
members represent.

9. (SBU) In contrast to the political and economic intrigue
disrupting the passage of Civair legislation, economic
interests do not appear to be behind the delay in renewing
the Bilateral Civil Aviation Agreement. In discussions with
Econoff, Andres Cordova, President of the Aviation Council,
and William Birkett, Director General of Civil Aviation,
indicated that the delay in approving the renewal of the
Bilateral Agreement was nothing more than laziness on the
part of civil aviation authorities. No evidence exists to
suggest otherwise.

NEW OPPORTUNITIES FOR ENTRENCHED INTERESTS
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10. (SBU) Other provisions, while not related to safety
matters, create opportunities for others to benefit
economically. One such provision grants the DAC the
authority to determine the commission percentage that
international airlines would pay travel agencies. American
carriers have approached FCS for assistance in this matter,
concerned that the DAC's involvement would distort the
market. While such commissions average 1% in Latin America,
it is believed that some politically-connected travel
agencies will be looking for up to 10% in commissions. If
the law passes, American carriers would consider stopping
flights to Ecuador in protest.


11. (SBU) Meanwhile, a more autonomous DAC, while reducing
the influence of the Aviation Council, also would politicize
the DAC. Economic interests that gained influence through
the Council are likely to target the DAC instead. History
suggests that a more autonomous DAC will find it difficult
to elude this pressure, especially if its objective is not
safety-related aspects of civil aviation.

COMMENT
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12. (U) Delays associated with the civil aviation
legislation and the renewal of the bilateral agreement are
nothing new in Ecuador. Both entrenched economic interests
and institutional laziness can easily preclude action on
matters that benefit Ecuador as a whole. Even if
influential actors bent on stopping the passage of FAA-
acceptable Civair legislation are overcome, new avenues for
political influence would surface with the new legislation.

JEWELL