Philippines Weighs Open Skies Options

UNCLAS SECTION 01 OF 02 MANILA 001618 STATE FOR EAP/MTS TRANSPORTATION FOR FAA SINGAPORE AND TOKYO FOR FAA E.O. 12958: N/A TAGS: EAIR ETRD BEXP RP SUBJECT: Philippines Weighs Open Skies Options REF: Manila 01653 ¶1. (SBU) Summary: Philippine Transportation and Communication Secretary Leandro Mendoza has announced that the ASEAN Open Skies agreement that ASEAN transportation ministers will sign in Manila in December will obviate the need for the proposed executive order to provide a "pocket open-skies" regime to Clark and Subic (see reftel). However, officials and business people at Clark strongly disagree and are still pressing for Philippine President Arroyo to sign the executive order in order to attract more tourism to the Philippines and enable the development of Clark as an aviation hub for Southeast Asia. We find ways to discretely support their efforts. End Summary. Open Skies With The Ten Original ASEAN, Plus Four -------------- -------------- ¶2. (U) Philippine Transportation and Communication Secretary Leandro Mendoza announced recently that he expects ASEAN transportation ministers will sign an agreement on open skies among the ten original ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Thailand, Singapore, and Vietnam) in Manila in December 2008. The agreement would immediately grant airlines of these 10 ASEAN member countries bilateral traffic rights (freedoms 1-4, in civair parlance) among their capital cities. Addition of the right to carry out connecting flights (fifth freedom) between capital cities would have a target date of December 2010. According to Mendoza, ASEAN's adoption of an open skies policy would lead to creation of a single aviation market throughout East Asia by 2015. He estimated that the agreement could generate 500 million tourist trips within the region, including an estimated 10 million tourist arrivals to the Philippines. China, Japan, India and South Korea have reportedly expressed interest in joining the ASEAN Open Skies agreement. Clark As Part Of The Capital City -------------- ¶3. (U) In preparation for ASEAN Open Skies, Secretary Mendoza said, the Diosdado Macapagal International Airport (DMIA - formerly Clark Field) will be designated the Philippine capital airport. The airport has a parallel runway system that can handle the world's heaviest planes, including the Antonov AN225 and the Airbus A380. Mendoza said that the designation of DMIA follows a regional trend to relocate international airports outside of the capital region. (DMIA is located eighty-five kilometers northwest of Manila proper). ASEAN Open Skies and E.O. 500-B -------------- ¶4. (U) Although Secretary Mendoza publicly stated that the ASEAN Open Skies agreement would obviate the need for the Executive Order 500-B, the Clark and Subic stakeholders are not ending their fight for a more liberal aviation policy for their airports. They sent a second appeal letter in May 2008 to President Arroyo pointing out the benefits of the proposed E500-B policy for users, businesses, employment and income opportunities in Clark, Pampanga, Central Luzon and the country. The ASEAN Open Skies agreement would not have the same impact, since it is limited to the ASEAN countries and it does not initially provide for connecting flights. They believe that connecting flights are essential for the transformation of developmental routes, like Clark and Subic, into major gateways. The ability to schedule connecting flights opens up the possibility that airlines of other countries would use Clark as a hub for their East Asian operations. Proponents also point out that Executive Order 500-B would not prevent the Philippines from pursuing greater liberalization under unilateral, bilateral or multilateral negotiations, and so would complement the ASEAN agreement. Opposing Competition -------------- ¶5. (U) Philippine Airlines leads domestic opposition to any type of open skies agreement. In addition to outspoken opposition to Executive Order 500-B, Philippine Airlines' President has expressed concern about competing with airlines from other ASEAN countries in ASEAN Open Skies, since some foreign airlines are state-owned and have strong governmental backing. Philippine Airlines argues that there is a need to establish safeguards against market distortions and anti-competitive practices by subsidized airlines. Comment: Why We Care -------------- ¶6. (SBU) The USG has discretely supported open skies in the Philippines for many years. We support further liberalization of routes to the U.S., as we do everywhere. We also support liberalization of regional routes in order to increase tourism and trade and help the Philippine economy to grow more quickly and create more jobs. Philippine economists estimate that one tourist arrival here translates into one job for a year. Given the underdeveloped tourism potential of the Philippines and the increasing wealth of neighboring countries, reduction of currently high airfares via more competition could make an enormous difference. We nonetheless keep our support for liberalization discrete, working with Philippine proponents of liberalization, in order not to arouse nationalist resistance. KENNEY