NICARAGUAN CIVIL AVIATION BILL TAKES OFF

C O N F I D E N T I A L MANAGUA 001802

SIPDIS

SIPDIS

FOR WHA/CEN AND EB/TRA
STATE PASS TO DEPT OF TRANSPORTATION FOR FAA OFFICE OF
INTERNATIONAL PROGRAM AND POLICY - MEL CINTRON, FAA MIAMI
IAO FOR MAYTE ASHBY, FAA NICARAGUA DESK OFFICER ANNA SABELLA

E.O. 12958: DECL: 08/16/2011
TAGS: EAIR ECON NU
SUBJECT: NICARAGUAN CIVIL AVIATION BILL TAKES OFF

REF: A. MANAGUA 01344

B. MANAGUA 0937

Classified By: Ambassador P. Trivelli for reasons 1.4 b&d.


1. (C) Summary: On August 3, the Nicaraguan National
Assembly passed a Civil Aviation bill, pending since 2004.
The new law establishes an independent civil aviation
authority, named the Nicaraguan Civil Aviation Institute
(INCA),which will be governed by a board of directors. In
the final drafting of the bill, the Army was given the seat
originally designated for the Ministry of Defense (MOD). A
key benefit to INCA's formation and the updating of civil
aviation regulations is that it paves the way for Managua
International Airport to achieve FAA's Category I status.
Although the law contains new regulations affecting airlines
operating in Nicaragua, local country managers are pleased
with the final overall results. End Summary.

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A new, modern Civil Aviation Code
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2. (U) On August 3, the Nicaraguan National Assembly passed
the Civil Aviation bill which had been pending since 2004
(reftels A and B). The new law establishes the independent
Nicaraguan Civil Aviation Institute (INAC) and doubles
funding for civil aviation. By bringing Nicaragua's Civil
Aviation code into compliance with International Civil
Aviation Organization standards, the law also paves the way
for Managua International Airport to achieve FAA Category I
status. The next step in this process is for Nicaragua to
host an FAA inspection.


3. (C) In a meeting with Deputy PolCouns, MOD staff expressed
displeasure about not having a seat on INCA's Board of
Directors. During the National Assembly debate, the Army
successfully argued that it be given MOD's seat. Alvaro
Miranda, Legal Counsel at the Direction of Civil Aviation
(DGAC),told econoff that the MOD lost out because it was not
tracking the legislation closely enough. They were unaware
of the proposed change until after its approval. When
questioned about the Army's interest in INAC, Mr. Miranda
responded that the Army often tries to take positions of
power because they may serve some purpose in the future.
However, he also stated that the President appoints the
majority of the members of the Board and, therefore, should
be able to control policy. (Comment: Since 1990, the
Nicaraguan Army, formerly the Sandinista Popular Army, has
become more professional. Although as an institution the
Army has accepted the principle of civilian control, elements
continue to resist subordination to the MOD. End Comment.)

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Issues for the airlines
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4. (U) The original bill presented in June 2006 included
several articles that were objectionable to U.S. airlines,
including one that fixed the commission airlines pay to
travel agents at six percent and another that allowed the GON
to reject airfares set by airlines. These two were removed
from the bill, but other articles of concern remain. One
proposed by a Sandinista Assembly Member prohibits the
privatization of national airports. Vaguely written, the
article may be interpreted to apply to physical airport
facilities or, more broadly, to airport management companies.
Currently, a private company runs Managua International
Airport. Another article allows INAC to establish a floor
and ceiling for airline fares when it is in "the national
interest."


5. (C) Country Director for Continental Airlines Rodolfo
Saenz expressed concern about a provision in the law that
would require airlines to accept payment in Nicaraguan
cordobas. Currently, U.S. airlines only take payment in U.S.
dollars and in turn pay all of their fees to the GON and
Civil Aviation in dollars. Switching to cordobas would
generate exchange costs and might be a roadblock when it
comes to repatriating profits. The foreign airlines in
Nicaragua have decided, for the moment, not to highlight this
issue as they feel they won a great deal in the removal of
the articles on commissions and control of airfares. The
airlines will continue to quote prices in dollars and
passengers who insist on paying in cordobas will pay the
official exchange rate of the date of purchase.
TRIVELLI