BRAZIL CIVAIR: AMBASSADOR MEETS WITH US AIRLINES

UNCLAS SECTION 01 OF 03 SAO PAULO 000090

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/EPSC AND EEB/TRA
STATE PASS USTR FOR KATE DUCKWORTH
FAA FOR CCAPESTANY, BAHUMADA, GBURDICK
DEPT OF TRANSPORTATION FOR BHEDBERG
BUENOS AIRES FOR TSA ATTACHE
MEXICO CITY FOR TSA ATTACHE MGALVAN
NSC FOR GTOMASULO
TREASURY FOR JHOEK
SOUTHCOM FOR POLAD
USAID FOR LAC/AA

E.O. 12958: N/A
TAGS: EAIR PREL PGOV ECON EINV BEXP BR
SUBJECT: BRAZIL CIVAIR: AMBASSADOR MEETS WITH US AIRLINES

SENSITIVE BUT UNCLASSIFIED--PLEASE PROTECT ACCORDINGLY

REF: A: BRASILIA 0222
B: 07 SAO PAULO 0619
C: 07 BRASILIA 2309
D: BRASILIA 0094
E: 07 SAO PAULO 0915


1. (U) SUMMARY: On February 19 the Ambassador met with
representatives from U.S. carriers American, Delta, and United
Airlines to elicit their views on the Sao Paulo International
Airport Guarulhos (GRU) parking fee dispute, follow up on bilateral
aviation negotiations, discuss the domestic and international
markets, and lay out future coordination efforts. The three
carriers expressed optimism that ANAC would come to a positive
resolution on the GRU dispute. The Ambassador also solicited
suggestions for future Washington, DC meetings for Defense Minister
Jobim and ANAC personnel. Subsequently, the Ambassador met with
Jobim on Feb. 24 at which time Jobim reconfirmed his view there
would be a positive resolution to the Guarulhos issue. END
SUMMARY.

Guarulhos Parking Fee Dispute
--------------


2. (SBU) The Ambassador opened the meeting by summarizing the
Mission's meetings on February 13 and 14 with Defense Minister Jobim
and the National Agency for Civil Aviation (ANAC) and inquired on
the airlines' sense of where the dispute is headed (Ref A). Erli
Rodrigues from American Airlines (AA) noted that the current team at
ANAC appears more technically prepared than previous teams, but that
they overreacted after the July 2007 accident at Congonhas (Ref B).
The airlines referenced a particularly productive meeting with ANAC
in late January in which the International Air Transport Association
(IATA) presented their ideas on possible alternatives. The airlines
were confident that ANAC was receptive to their concerns and
understood that the consequences are more far-reaching than they had
initially envisioned. (They pointed to ANAC Director Alexandre
Barros as being particularly helpful.) They also noted that the
Christmas and Carnival travel seasons went smoothly, which may have
helped to alleviate the sense of crisis.


3. (SBU) The three international carriers told the Ambassador that
they are sponsoring an IATA technical study for USD 200,000
regarding the GRU parking issue, and are confident that study will
demonstrate to ANAC that there are viable alternatives to increase
aircraft parking capacity at the airport. All the airlines agreed
that the best USG approach at this time was to give ANAC some time
to work this out, particularly because ANAC is indicating that they
will have an interim solution announced by the end of March. That
being said, the airlines reiterated that as a last resort they have
"the pieces in place to push quickly and hard if the dispute takes a
turn for the worse". The Ambassador requested that they keep the
Mission abreast of any changes on this issue, but for the time-being
noted that the USG is inclined not to pursue an antagonistic
approach.


4. (U) Note: Following the meeting, Rodrigues informed the Mission
that IATA's Country Manager Felipe Reis reported a successful
meeting with ANAC and INFRAERO that week. He noted that ANAC had
presented results in line with those of the IATA study towards a

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positive resolution to the fee dispute. Reis highlighted INFRAERO's
positive approach and that it had outlined a contingency plan for
when GRU's maximum parking capacity of 68 aircraft was exceeded.
They agreed that the final results of the study would hopefully be
announced at their next meeting the week of March 3. End Note.

Bilateral Negotiations
--------------


5. (SBU) The Ambassador provided a summary on the USG-GOB
discussions over the past two months in the aftermath of the
December 2007 negotiations (Refs C and D). In particular, he noted
conversations with ANAC Director-President Solange Vieira in which
she indicated that the U.S. airlines (passenger and freight) should
not be shy about providing their wish-list for additional
frequencies. The Ambassador encouraged the airlines to seize the
opportunity to make such requests known and highlighted that the
ball is in the industry's court to move forward. The Ambassador
shared his sense that consensus on freight negotiations is
achievable and that the GOB would be open to further discussions on
code-sharing.

Domestic Market
--------------


6. (SBU) The Ambassador noted the recent news about JetBlue founder
and former President David Neeleman's intentions to enter the
Brazilian market. Rodrigues underscored the potential for expansion
in the domestic market. Michael Guenther from United Airlines (UAL)
recalled that Neeleman is close to Brazilian low-cost carrier GOL's
president Constantino Jr. However, he was unsure whether it would
be a private business venture or JetBlue's attempt to enter the
market. (Note: According to local press reports, Neeleman was in
Brazil to negotiate the purchase of 36 small Embraer aircraft.
Neeleman would target the intermediary market between GOL/TAM and
the small regional companies, with an eventual hub in
Viracopos-Campinas Airport in Sao Paulo State. Because Neeleman is
a dual citizen, his company would not be constrained by foreign
ownership limits in the aviation sector. If news reports are
accurate, Neeleman intends to begin operation by the end of 2008.
End Note.)


7. (SBU) Regarding the dominant Brazilian carriers TAM and GOL, AA
predicted that GOL would soon catch up with TAM's size and
operations. Rodrigues highlighted the new relationship between GOL
and Air France for Paris routes as an example. The Ambassador also
solicited views about Brazilian low-cost carrier OceanAir and the
obstacles it is facing that are preventing the company from scaling
up to offer more flights and options. Rodrigues noted that German
Efromovich, the owner of OceanAir, is working with Colombia's
successful Avianca airline, but did not have particular insights
about OceanAir's plans in Brazil.

International Market
--------------


8. (SBU) The Ambassador referenced his October 2007 meeting with
GOL in which Constantino Jr. spoke about the company's desire to
enter the U.S. market (Ref E). Guenther predicted that GOL will
initiate its U.S. expansion by the end of 2008. Rodrigues recalled
that the Brazilian carriers had to move quickly over the past couple

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of months to begin service to Europe to avoid losing those routes,
but no such immediacy exists for routes to the U.S. where there are
many unused frequencies still available for Brazilian carriers.
(Note: only about one-third of Brazil's 105 frequencies to the U.S.
are currently being used. End note.)


9. (SBU) The Ambassador pointed to Portuguese carrier TAP's
successful new routes linking Lisbon directly to Brasilia and Belo
Horizonte. Guenther noted that part of their success is due to the
fact that they use Lisbon as a hub for onward flights to Europe and
Asia.

Future Coordination
--------------


10. (SBU) The Ambassador noted that Jobim will be traveling soon to
Washington, DC which provided the opportunity for further aviation
discussions. The Ambassador recommended that the airlines provide
summaries of the key issues together with ideas for improving
coordination between the GOB and INFRAERO. The three interlocutors
suggested keeping the communication channels open, noting that
better, more regular communication between the airlines, INFRAERO,
and ANAC might have prevented the unfortunate December airport
parking proposal. The Ambassador also noted that the Embassy is
working to get an ANAC team to Washington, DC soon and elicited
scheduling ideas. Given UAL's Dulles hub, Guenther offered to take
the lead in providing eventual ideas and assistance.


12. (SBU) Note: Rodrigues subsequently provided an outline of the
following communication channels within the industry including three
active channels: the Airport Operators Committee, the International
Airlines Board, and the National Union of Airlines as well as one
inactive group, the Facilitation Committee, which includes the three
previous groups plus all other moving parts that are involved in the
operation of an airport. End Note.


13. This cable was cleared and coordinated with the Embassy in
Brasilia and Ambassador Sobel.

WHITE