TANS GRANTED FLIGHT PERMISSIONS BUT STILL AWAITS

C O N F I D E N T I A L LIMA 000755 SIPDIS SIPDIS DEPT FOR WHA/AND, WHA/CEN, EB/TRA/AN, CA/OCS/ACS FAA WASHINGTON FOR LEANN HART, MIKE DANIELS FAA MIAMI FOR JAY RODRIGUEZ E.O. 12958: DECL: 02/27/2016 TAGS: EAIR ECON CASC PGOV PE SUBJECT: TANS GRANTED FLIGHT PERMISSIONS BUT STILL AWAITS FUNDING REF: A. LIMA 428 ¶B. LIMA 269 ¶C. LIMA 262 ¶D. LIMA 87 Classified By: Economic Officer Samantha Carl-Yoder for reasons 1.4 (b) and (d). ¶1. (C) Summary. The Directorate General of Civil Aviation (DGAC) on February 16, after an inspection of TANS operations, lifted its January 6 suspension on TANS Airlines' air operating certificate. The DGAC found that the airline substantially improved its safety and maintenance operations to meet DGAC requirements. Although TANS is technically cleared to fly, the state-funded company must await a decision by FONAFE (the GOP agency that supervises state-owned enterprises) on whether the company will receive funding. TANS has until February 24 to submit to FONAFE its business plan for review and expects a decision by the end of February. The company, believing it will receive funding, has already made plans to resume flights by March 1. End Summary. DGAC Lifts Suspension -------------- ¶2. (C) After several safety incidents, two engine failures and a near accident in a one-month period, the DGAC suspended TANS' air operating certificates on January 6, effectively grounding the company (ref D). TANS officials protested, claiming that DGAC had a vendetta against the company and did not notify the company of any problems before taking action. TANS' General Manager also charged that the DGAC lacked any real evidence of safety or maintenance malfeasance, alleging that the DGAC files on TANS lacked the proper documentation to warrant a suspension. (Note: During the FAA International Aviation Safety Assessment (IASA) in mid-January, the FAA team found that the DGAC had little information about TANS' safety and maintenance problems, but acknowledged that the problems did exist. End Note.) The DGAC initiated an audit of the airline on January 9, to be used as the basis for a decision on the future of the airline. ¶3. (C/NF) After a month of meetings with key Ministers, hearings in Congress, and several meetings with President Alejandro Toledo, the DGAC on February 16 lifted the suspension on TANS airlines. According to (please protect) Juan Crovetto, Director of Aviation Safety at the DGAC, the new Director of the DGAC Luis Rivera met with President Toledo twice during the week of February 13 to justify why the DGAC grounded TANS. President Toledo, after reviewing the DGAC's files on TANS, met with the General Manager of TANS to hear the company's side of the story. ¶4. (C/NF) According to DGAC documents, the DGAC sent a team of inspectors to review TANS operations on February 1 (ref A). On February 8, the team submitted its report to the DGAC, stating that TANS had not yet met DGAC standards in the areas of maintenance of turbines and acquisition of parts. The document also referenced that TANS had not yet hired civilian pilots to replace the active-duty military pilots, one of the DGAC's requests. ¶5. (C/NF) However, the Deputy Director of Aviation Safety submitted a document to Crovetto on February 14, stating that TANS had "satisfactorily resolved the two discrepancies" listed in the previous inspection documents. The document made no reference to the hiring of new pilots and did not explain what the company had done to meet the DGAC standards. The DGAC used this document as the basis for its decision to lift the suspension. Have Funding, Will Fly -------------- ¶6. (SBU) While the DGAC has granted TANS flight permissions, TANS is not out of the woods yet. The company, which is owned and operated by the Peruvian Air Force and funded by the central government, still must obtain funding from FONAFE, a GOP agency that overseas state-owned operations. According to FONAFE reports, TANS owes more than $7 million to creditors and has not made money as a commercial airline. FONAFE will review TANS' business plan and assess whether the GOP should either fund the company or liquidate its assets. TANS officials have until February 24 to submit the necessary documentation to FONAFE. According to the DGAC, FONAFE should make a decision on the future of TANS by the end of February. Comment: Don't Count TANS Out -------------- ¶7. (C) Although TANS is not yet flying, sources state that the company has begun to sell tickets for flights in March. The Director of FONAFE and the Minister of Finance (which oversees FONAFE) met with President Toledo this week to discuss the future of the company. STRUBLE