FEDEX LETTER FOR CAAC

UNCLAS SECTION 01 OF 02 STATE 026667 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EAIR CH KTIA SUBJECT: FEDEX LETTER FOR CAAC REF: A. STATE 24279 ¶B. MARCH 2009 KACHUR--LIMAYE-DAVIS EMAILS ¶1. (SBU) Action Request: Washington agencies request the Embassy deliver the following letter to Vice Minister Yang Guoqing, when Embassy meets with the General Administration of Civil Aviation, or earlier if that appointment is delayed beyond Monday. A signed and scanned copy of the letter will be emailed to the civil aviation officer in Beijing. Text of letter follows: The Honorable Yang Guoqing Vice Minister General Administration of Civil Aviation of China 155 Dongsi Street West Beijing, China 100710. Dear Mr. Vice Minister: We appreciate very much the partnership that the General Administration of Civil Aviation of China (CAAC) and the United States Government have developed over many years. During this time, our close partnership has produced a number of expanded air services agreements and spawned an Aviation Cooperation Program. Drawing on this spirit of continued cooperation, we are writing to you concerning certain operations of the FedEx Corporation (FedEx). According to U.S. Embassy Beijing and FedEx, CAAC has expressed concern regarding the Shanghai-Guangzhou segment of FedEx's planned Osaka-Shanghai-Guangzhou-Almaty-Frankfurt-Par is-Memphis flights as proposed in its Summer 2009 schedule. This route is an adjustment of FedEx's previously approved Nagoya-Shanghai-Frankfurt-Almaty-Paris-Memphi s route to reflect the February 6, 2009 opening of the FedEx hub at Guangzhou. Specifically, we understand that CAAC pointed to a unilateral "Operating Approval" it issued in January in objecting to this flight routing. The United States Government has carefully reviewed FedEx's proposed schedule and we believe it is fully consistent with the terms of the United States-China Civil Air Transport Agreement, as amended ("the Agreement"). Under Annex I, Section I.B. of the Agreement, airlines designated by the United States are entitled to operate all-cargo services with full traffic rights from any points in the United States, via any intermediate points, to any points in China and beyond to any points outside of China. The Agreement specifically contemplated the type of operations from a hub for which FedEx has applied in its Summer 2009 Schedule, and provides that a cargo hub operator, which FedEx has been since opening its Guangzhou hub on February 6, 2009, shall be allowed "to determine the frequency and capacity of the international air services it offers at the hub based upon commercial considerations in the marketplace." (Paragraph 2(a) of Article 11bis.) Specifically, the Agreement states that "...Consistent with this right, neither Party shall unilaterally limit the volume of traffic, frequency or regularity of service, or the aircraft type or types operated by the airline at the hub, except as may be required for customs, technical, operational, or environmental reasons under uniform conditions consistent with Article 15 of the Convention." Given that the addition of the Guangzhou segment would not add any new departures, arrivals, operations, or capacity at Shanghai Pudong airport, we see no justification for unilateral limits on reciprocal rights clearly established under the Agreement. While flights to Shanghai would not be added under FedEx,s proposed schedule, Guangzhou,s airport would benefit from new landings and takeoffs and the associated increase in landing fees and revenue. We believe the "Operating Approval" as applied by the CAAC unilaterally imposes conditions that are inconsistent with the Agreement. On this basis, we urge CAAC to approve FedEx's Summer 2009 Schedule so that FedEx can commence operating under that schedule on March 28. CAAC's prompt approval of the summer schedule -- even if on a temporary basis to allow time for our two governments to resolve issues -- will provide essential certainty to FedEx and to the shipping public, which along with the associated benefits of continued cargo STATE 00026667 002 OF 002 capacity and operational flexibility, is in the interests of both of our economies. The Departments of State and Transportation have long enjoyed excellent working relations with CAAC. We are confident that our good relationship and ongoing cooperation will allow us to resolve this issue. If that cannot be done by correspondence, we would look to schedule a visit to Beijing for our technical team in the very near future. Thank you for your consideration. Sincerely, David D. Nelson Acting Assistant Secretary Bureau of Economic, Energy and Business Affairs U.S. Department of State Susan McDermott Acting Assistant Secretary for Aviation and International Affairs U.S. Department of Transportation. ¶2. Washington agencies appreciate Post's ongoing assistance. CLINTON