CARRIERS STILL FIGHTING QUITO AIRPORT FEES

C O N F I D E N T I A L QUITO 000452 SIPDIS FOR DEPT OF TRANSPORTATION: ATTN BRIAN HEDBERG FOR OPIC AND EXIM E.O. 12958: DECL: 05/23/2018 TAGS: EAIR EINV EFIN EC SUBJECT: CARRIERS STILL FIGHTING QUITO AIRPORT FEES REF: QUITO 2168 Classified By: ADCM Nan Fife, Reason: 1.4 b and d. ¶1. (SBU) Summary: Resolution remains elusive in the drawn-out debate over charges paid by international air carriers to the Quito airport concession operator Quiport. Quiport offered to defer all airport fee increases until the new airport opens in 2010, but the airlines disagree with a contract provision that restrains the airlines from taking legal action against Quiport for the duration of its concession, or 35 years. The head of the local airline association visited OPIC and ExIm bank on May 9 to express disagreement with planned fee increases. End summary. ¶2. (SBU) The most recent round of talks between Quiport and ARLAE, the Ecuadorian airline association that includes U.S. and other international air carriers, began in February, when a local court ruled that American Airlines must stop paying its landing and other airport fees "by consignment" to the court, rather than directly to Quiport (reftel). Under Secretary for Aviation Captain Guillermo Bernal was called in to mediate the talks, and the airlines agreed to pay directly to Quiport until a negotiated solution could be found (note: some international carriers, such as LAN, had already been paying Quiport directly, but "under protest"). ¶3. (SBU) The airlines have claimed over the last two years that Quiport's fee increases have caused them to "pay for services not yet received." This is because a portion of the fees charged at the present airport are used to fund construction of the new Quito airport (Quiport holds the concessions for both airports). As such, Quiport says it developed a proposal that would freeze increases at their present rate (adjusted for inflation) until the opening of the new airport in 2010 * at which time the airlines would be charged a 26% increase. This, Quiport said, would cost the company $4 million, but the airlines had reportedly agreed to it during the course of their most recent talks. ¶4. (SBU) In early May, when the proposed agreement was drawn up into a "Principle of Cooperation" document, the airlines refused to sign, saying that Quiport had added a stipulation requiring the airlines to waive all judicial proceedings against the company for the duration of its concession, or 35 years. The head of ARLAE, Antonio Salvador, visited OPIC and ExIm Bank on May 9 (introducing himself as a representative of TACA Airlines, and regional representative of IATA),to say that the proposal was "immoral." American Airlines and Continental both told post that they will not sign a document that prohibits legal action for this length of time. ¶5. (C) When asked what they will do now, American and Continental both conceded that they would continue to pay their fees directly to Quiport, though under protest, since it appears that their legal options have diminished (AA says it will continue to seek legal recourse, however). Quiport says that without a Principles of Cooperation document, they will continue to implement regularly-scheduled fee increases as per their concession contract. They have, however, again appealed to Under Secretary Bernal for intervention, should they again experience payment problems. Jewell