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06DUBLIN1403 2006-12-12 17:33:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Dublin
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DE RUEHDL #1403/01 3461733
R 121733Z DEC 06
					  UNCLAS SECTION 01 OF 02 DUBLIN 001403 




E.O. 12958: N/A

REF: STATE 195012

1. (SBU) Summary: In a December 11 discussion with Transport
Minister Martin Cullen, the Ambassador highlighted the USG's
continuing commitment to conclude the U.S.-EU air transport
agreement, while noting that the USG was not prepared to
pursue bilateral Open Skies options with Ireland. Cullen
said that he would support the draft U.S.-EU agreement at the
December 12 EU Transport Council meeting, but did not hold
out hope of Council approval, given DOT's December 5
withdrawal of proposals on foreign investment in U.S.
carriers. Cullen noted that Ireland's next steps would be to
await the outcome of planned U.S.-EU talks in early January
and then lobby for a first-phase accord incorporating
acceptable elements of the current draft agreement, including
the U.S.-Ireland transition annex. He added that if the
U.S.-EU process were to fall apart in 2007, Ireland would be
ready to pursue a separate bilateral arrangement. Cullen
also noted that U.S.-EU prospects would influence Dublin
Airport's development plans and the timing of Aer Lingus'
decision on long-haul aircraft purchases. The Ambassador
offered to confer with the Minister again after consulting
with USG negotiators on the degree of clarity that might be
available on the U.S.-EU process. End summary.

The Ambassador: USG Committed to the U.S.-EU Process



2. (SBU) In a December 11 meeting with Irish Transport
Minister Martin Cullen, the Ambassador highlighted the USG's
continuing commitment to conclude the U.S.-EU air transport
agreement (per reftel), and he expressed appreciation for
Irish support of the U.S.-EU process. The Ambassador noted
that the U.S. Department of Transportation (DOT) had recently
withdrawn its earlier proposal affecting foreign investment
in U.S. carriers, a decision that would likely bring the
U.S.-EU negotiations to a pause. The USG, he said, planned
to resume talks in the New Year, while maintaining its
position on the merits of the draft U.S.-EU agreement. The
Ambassador acknowledged Ireland's interest in Open Skies and
observed that the U.S.-EU situation was a source of
frustration for all sides. He added, however, that the USG
was not prepared to consider bilateral options on Open Skies
with Ireland.

The Minister: Bilateral Options if Necessary


3. (SBU) Minister Cullen replied that he would defend the
draft U.S.-EU agreement at the December 12 EU Transport
Council meeting, while realizing that the agreement stood no
hope of Council approval, given the December 5 withdrawal of
DOT's investment proposal. This outcome, he remarked, was a
disappointment for Ireland, as the scheduled November start
date for the U.S.-Irish transition annex to the U.S.-EU
accord had already been missed. He recounted, moreover, that
Ireland had abandoned its early 2005 effort to negotiate a
bilateral Open Skies arrangement in deference to EU attempts
to finalize a trans-Atlantic deal. Ireland had strongly
supported the draft U.S.-EU agreement that emerged in
November 2005 and was grateful to Transportation Secretary
Mineta for recognizing Shannon's political sensitivities in
working out the U.S.-Irish annex. Cullen expressed regret,
however, that the U.S.-EU process had stalled over the past
year and was poised for another likely impasse in 2007.

4. (SBU) Minister Cullen said that Ireland's next step would
be to await the results of U.S.-EU talks in early January.
He hoped that U.S. negotiators would bring new proposals to
the table, but he doubted that any offer would assuage a
group of ministers who continued to demand the "holy grail"
of a new DOT approach to foreign investment. Cullen said
that, following the January talks, he would likely lobby for
the extraction of acceptable elements from the draft
agreement for a "first phase" accord, to include the current
terms of the U.S.-Irish annex. "Let's hold what we have and
move where we can," he observed. After the past year's
delay, however, Ireland was not prepared to wait another year
for progress on the U.S.-EU front, Cullen cautioned. He
added that, if the U.S.-EU process were to fall apart in
2007, Ireland would be ready to exercise its right to pursue
a separate bilateral arrangement.

5. (SBU) Minister Cullen remarked that lack of clarity on
the future of the U.S.-EU negotiations was playing havoc with
Ireland's aviation sector strategy. The Irish Government, he
noted, had set aside euro 1.5 billion for upgrades at Dublin
Airport that would require concrete projections on
trans-Atlantic service - information that would not be

DUBLIN 00001403 002 OF 002

available with uncertainty in the U.S.-EU talks. Moreover,
Aer Lingus was now thinking through long-haul aircraft
purchase plans, again an exercise that was difficult in the
absence of clarity on Ireland's future rights in the U.S.
market. Cullen pointed out that while Aer Lingus was hoping
to serve three additional cities in the near term (San
Francisco, Orlando, and Washington Dulles), 22 U.S. cities
had contacted the Transport Department about interest in
direct service. He also remarked that the potential for
increased two-way tourism, trade, and investment would be
huge in an Open Skies context.

Planned Follow-up on U.S.-EU Prospects


6. (SBU) The Ambassador responded that he would contact the
State Department and DOT to see the degree of clarity that
might be available on the shape of the U.S.-EU process
leading into the New Year and beyond. He offered to confer
again with the Minister after those discussions. The
Minister expressed thanks, noting that the Irish Government
had already brought key political constituencies, including
in Shannon, "to the water" on the importance of Open Skies.
(Comment: In a follow-up up phone call to Cullen on December
12, the Ambassador pointed out that EU legal considerations
had shut down the Irish Transport Department's move in early
2005 toward a bilateral Open Skies arrangement. Cullen
confirmed that this was the case, but noted that Irish
Attorney General Rory Brady was now on board for any
bilateral aviation discussions. It was Brady who reportedly
intervened in 2005 to prevent Irish Transport officials from
moving on a bilateral arrangement.)

Cullen and Boeing


7. (SBU) When the Ambassador asked for Minister Cullen's
views on Aer Lingus' planned long-haul aircraft purchases,
Cullen responded that he preferred not to interfere in the
carrier's management decisions. He added that this had been
the case even when Aer Lingus was still state-owned. Cullen
recounted nonetheless that Boeing had given his office a
presentation on the 787 Dreamliner earlier in 2006. He
offered his personal view that the 787 was a "fabulous" plane
and that he would like to see the model used for
trans-Atlantic service. He also reiterated that prospects
for the U.S.-EU negotiations would be a critical factor on
the timing of Aer Lingus' purchase decision.

Ryanair's Motives for Aer Lingus Takeover Bid


8. (SBU) The Irish Government, still an Aer Lingus
shareholder, was committed to do anything necessary to ensure
that the carrier and Ryanair remained separate entities,
according to Minister Cullen. He recalled that no aviation
or financial experts had predicted Ryanair CEO Michael
O'Leary's takeover bid for Aer Lingus in early October,
especially after O'Leary had publicly announced his
disinterest in the carrier's IPO. Cullen remarked that
O'Leary likely attempted the bid because he felt that Aer
Lingus would offer a good mix for his company and that, even
if he did not succeed (as now appears the case), he could
influence Aer Lingus' decisions as a major shareholder.
O'Leary's overall objective, Cullen continued, was to dictate
the renovation of Dublin Airport, which he would have been
able to do had he acquired 80 percent of airport traffic with
the Aer Lingus takeover. Cullen also remarked that Ryanair
Chairman Peter Bonderman had experience in long-haul service
and might perhaps have interest in expanding Ryanair into
long-haul markets.