OPTIMISM ON U.S.-EU OPEN SKIES: DOT U/S SHANE'S

1. (SBU) Summary: In a May 17 meeting with Transport
Minister Martin Cullen and the Ambassador, U.S.
Undersecretary of Transportation for Policy Jeffrey Shane
expressed optimism about concluding the U.S.-EU air services
agreement this autumn. He believed that the U.S.
Administration's efforts to allay Congressional concerns
about new opportunities for foreign involvement in U.S.
carriers, commercial decisions would position the EU
Transport Council to consider those opportunities and the
U.S.-EU agreement at its mid-October meeting. Given this
scenario, U/S Shane recommended deferring discussion of
"fall-back" options for U.S.-Irish aviation relations.
Minister Cullen agreed that a win-win trans-Atlantic accord
was within reach, "if both sides remained calm." He observed
that Irish Government outreach over the past year had led
western Ireland to accept the eventuality of the Shannon
Stop's elimination, and he added that bilateral Open Skies
would enhance the connectivity that underlies strong
U.S.-Irish relations. U/S Shane and the Ambassador also
encouraged Minister Cullen to assist U.S. Customs and Border
Protection in upgrading operations at Shannon and Dublin
Airports, and Minister Cullen agreed to confer with the
Ambassador on this possibility in several weeks. End
summary.

Prospects for the U.S.-EU Agreement


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2. (SBU) In a May 17 meeting with Irish Transport Minister
Martin Cullen and the Ambassador on the margins of the
European Conference of Ministers of Transport (ECMT) in
Dublin, U.S. Undersecretary of Transportation for Policy
Jeffrey Shane expressed optimism about concluding the U.S.-EU
air services agreement in October. He noted that the U.S.
Department of Transportation (DOT) had originally aimed to
issue in April a final rule on actual control of U.S.
carriers and to seek EU Transport Council approval for the
U.S.-EU agreement in June. DOT's 2005 Notice of Proposed
Rulemaking (NPRM) on actual control, however, had prompted
Congressional concerns about more foreign involvement in the
commercial decisions of U.S. carriers. To allay those
concerns, DOT had taken a slower track, issuing in May a
Supplemental Notice of Proposed Rulemaking (SNPRM) on actual
control that refined the safety, security, and
defense-related aspects of the proposal, without eroding new
opportunities for foreign investors. U/S Shane was confident
that Congress would not block DOT's intention to issue by
late August a final rule on actual control that would be
close in content to the SNPRM. This timetable would allow EU
minister to begin analysis of the SNPRM now with a view to a
conclusive discussion on the final rule and the U.S.-EU
agreement at the mid-October EU Transport Council meeting.



3. (SBU) U/S Shane observed that the DOT rule on actual
control and the U.S.-EU agreement would bring unprecedented
change to the trans-Atlantic aviation market. The U.S.-EU
agreement, he said, would move participant countries beyond
the outmoded approach of bilateral accords into a new
template for aviation relations. It was conceivable that
even non-EU countries could join this template over time.
Regarding the actual control of U.S. carriers, U/S Shane
cited the challenge of moving beyond a six-decades-old
administrative approach that had relegated foreign investors
in U.S. carriers to a passive position, in contrast to
foreign participation in other U.S. industries. Given the
common-sense advantages of giving foreign investors more
weight in the commercial decisions of U.S. carriers within
the confines of current law, together with the fact that
there would be no negatives for U.S. interests, U/S Shane did
not expect that domestic opponents would succeed in
persuading Congress to block DOT action on a final rule.

Postponing a Discussion on Bilateral Options


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4. (SBU) In light of movement toward a U.S.-EU agreement,
U/S Shane recommended deferring discussion of "fall-back"
options for U.S.-Irish aviation relations. He noted the
Irish Government's plans to privatize Aer Lingus in the fall,
adding that the USG favored the privatization of state-owned
airlines in Europe and elsewhere. He also acknowledged the
Irish Government's anxieties about possible delays in the
U.S.-EU agreement, as prospective investors in Aer Lingus

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would seek clarity on the availability of additional U.S.
destinations for the carrier. U/S Shane suggested that, if
efforts to conclude the U.S.-EU agreement in October failed,
U.S.-Irish aviation relations could be revisited in the
context of U.S. policy on Open Skies.



5. (SBU) Minister Cullen described U/S Shane's comments as
encouraging and remarked that a win-win trans-Atlantic
agreement was within reach, "if both sides remained calm."
Cullen recounted that his meeting with Secretary Mineta last
fall had facilitated a bilateral arrangement on the Shannon
Stop requirement (within the U.S.-EU agreement) that
acknowledged political sensitivities in western Ireland. He
also observed that Irish Government outreach over the past
year had led western Ireland to drop fierce resistance to the
Shannon Stop phase-out and to accept the need for a new
approach to the trans-Atlantic market. Cullen expressed hope
that the October EU Transport Council would approve the
U.S.-EU agreement, allowing the U.S.-Ireland annex provisions
on the Shannon phase-out to begin on time in late October.
"We want to move on to full Open Skies," stressed Cullen,
noting Irish Prime Minister Bertie Ahern's focus on the
issue. Cullen added that Open Skies would help to satisfy
the Irish public's desire for new U.S. travel destinations,
enhancing the connectivity that underlies traditionally
strong U.S.-Irish relations.

Possibilities for CBP Pre-clearance


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6. (SBU) U/S Shane encouraged Minister Cullen to assist U.S.
Customs and Border Protection (CBP) to upgrade to full
pre-clearance (adding agricultural and customs checks to
current passport screening) at Dublin and Shannon Airports.
He observed that CBP pre-clearance had been hugely successful
in Canada, and he encouraged Cullen to confer with the
Canadian Deputy Minister of Transport, Louis Ranger, at the
ECMT. He pointed out, moreover, that pre-clearance offered
advantages in attracting trans-Atlantic passengers, as
pre-cleared flights could land anywhere in the United States,
not necessarily at international airports. The Ambassador
elaborated that CBP staff had helped with two major arrests
at Dublin Airport in recent weeks, which demonstrated the
value of screening passengers before crossing the Atlantic.
He also expressed concern that current congestion in CBP
facilities would worsen with Open Skies, potentially
requiring CBP to take a triage approach in pre-clearing
flights. The Ambassador added that allowing Shannon Airport
to move to full pre-clearance earlier than space-constrained
Dublin Airport would enable the Irish Government to say that
it was helping western Ireland to cope with the Shannon Stop
phase-out.



7. (SBU) Cullen replied that the Irish Government supported
a move to full pre-clearance at Shannon and Dublin as early
as possible, and he said that he was aware of the
Ambassador's discussions on this point with Irish carriers,
parliamentary leaders, and U.S. firms. He cited Irish
Government concern about increases in Dublin Airport
congestion that had resulted from the addition of new Delta
flights for the summer season. To map a way forward on
pre-clearance, Cullen committed to meet in several weeks with
the Ambassador and Dublin Airport Authority (DAA) Chief
Executive Declan Collier. As part of that discussion, Cullen
promised to correct some confusion in the DAA's initial
responses to the Embassy on the matter (a reference to early
DAA indications that expansion plans for Dublin Airport would
not include upgrades for CBP facilities.)

Shared Transportation Infrastructure Challenges


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8. (SBU) U/S Shane conveyed Secretary Mineta's regrets about
missing the ECMT, as the Secretary was involved in National
Transportation Week activities that focused in an
unprecedented manner on congestion as an impediment to
economic growth and job creation. U/S Shane recounted
conversations with large U.S. companies on the economic costs
of infrastructure bottlenecks, particularly for a nation that
was import-reliant. He added that such problems were often
global in nature, which was a strong reason to support the
ECMT proposal to become an international Davos-like forum on
transportation. Cullen (who chaired the ECMT proceedings in
Dublin) agreed that the ECMT should be internationalized for
this reason. He also pointed out that the Irish Government

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had set aside euro 34 billion for transportation
infrastructure in a bid to re-balance economic and social
opportunities throughout Ireland. The Government hoped, in
other words, to curtail rapid expansion in the Dublin area to
give other regions a chance to share in economic growth.

Participants


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9. (U) Besides Minister Cullen, Irish participants in the
meeting included: Pat "The Cope" Gallagher, Minister of State
for Transport; John Murphy, Assistant Secretary for Aviation;
and, Robin McKay, Principal for Aviation Regulation and
International Relations. On the U.S. side were U/S Shane,
the Ambassador, and econoff.



10. (U) U/S Shane cleared this message.
Kenny