NETHERLANDS: UPDATE ON KEY AVIATION ISSUES

UNCLAS SECTION 01 OF 03 THE HAGUE 000197

SENSITIVE
SIPDIS

STATE FOR EEB/TRA/OTP AND EUR/ERA
MONTREAL PASS USICAO
BRUSSELS PASS FAA CBARKS

E.O. 12958: N/A
TAGS: EAIR ECON ETRD SENV EU NL
SUBJECT: NETHERLANDS: UPDATE ON KEY AVIATION ISSUES

Ref: (A) THE HAGUE 177, (B) THE HAGUE 885

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1. (U) Summary: The Dutch government and KLM are both keen to learn
the details of the new U.S. Administration's aviation policy,
especially as it relates to the Second Stage of the U.S.-EU Air
Transport Negotiations. The aviation tax, implemented in July 2008,
continues to cause controversy and is opposed by the Transport
Ministry and industry. The Dutch government is more seriously
investigating the prevention of bird strikes, particularly in the
wake of U.S. Airways flight 1549's crash into the Hudson.
Privatization of Schiphol Airport is opposed by KLM and not even on
the current Cabinet's agenda. The airport and its operator are
experiencing hard times due to the economic crisis and the impact of
the aviation tax on passenger numbers.

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U.S.-EU AIR TRANSPORT NEGOTIATIONS
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2. (SBU) On February 4, 2009, Senior FAA Rep and Econoff held
introductory meetings with Dutch Transport Ministry aviation
officials Ellen Bien, Director for Civil Aviation, Michael Lunter,
Deputy Head for International Affairs Civil Aviation and Market
Access, and Jan Busstra, Head of Unit Civil Aviation Safety and
Security Department. Regarding the second round of the Second Stage
of the U.S.-EU Air Transport Negotiations, the Transport Ministry
officials indicated that the GONL was waiting for the United States
to make the next move and announce its position. Emboffs met later
on March 13 with Dutch MFA Transport Advisor Peter Post who echoed
his Transport Ministry colleagues' comments in stating the GONL is
in a holding pattern on this issue at the moment. He added,
however, that the United States and the GONL may have to reopen
their former bilateral Open Skies agreement to address current,
ongoing discussions within the Kingdom of the Netherlands on
devolution of the Netherlands Antilles. At present, the islands
fall under Dutch aviation law, and thereby EU aviation agreements,
but should some of the islands gain full sovereignty, the United
States would likely have to renegotiate Open Skies agreements with
each individual island.


3. (SBU) Emboffs met February 2 with senior KLM officials Willem de
Jonge, Vice President of Government and Industry Affairs, and
Michiel Laumans, Director of European Affairs (Brussels office),to
discuss a wide range of industry issues. KLM stated that the First
Stage of the negotiations was the most important for its airline
because it established the European nationality principle. As for
the Second Stage, KLM's top priority is simply for it to be
successful so that the two sides are not forced to return to the
First Stage. KLM believes there is uncertainty surrounding the
Second Stage, especially in the UK's position, and KLM has concern
the entire agreement could be nullified if negotiations run out of
time. KLM is interested in learning the position of the new U.S.
Administration and has heard rumors that the U.S. will be less
likely to allow European airlines to acquire U.S. carriers.

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AVIATION TAX
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4. (SBU) During the February 4 meeting, Transport Ministry officials
maintained that the aviation tax (see ref B) is more political than
it is fiscal, as the tax was included in the three-party coalition
platform which established the current government. Transport
Qplatform which established the current government. Transport
Minister Camiel Eurlings (Christian-Democrat - CDA) was
"energetically" discussing the issue within the Cabinet to voice
industry concerns that the tax is negatively impacting the sector.
The Transport Ministry would like to see the tax abolished as soon
as other sources of revenue can be identified for the Finance
Ministry (headed by the Labor Party - PvdA). According to the
Transport Ministry officials, the tax is clearly causing unintended
economic and environmental costs that outweigh any financial benefit
to the Finance Ministry. While it is difficult to say whether the
tax will be abolished, because of its political underpinnings, the
Transport Ministry hoped the tax would be eliminated at least by
2012 when aviation is to be included in the EU's Emissions Trading
Scheme (ETS-see ref A).


5. (U) In late December 2008, Finance State Secretary Jan Kees de
Jager sent a letter to Parliament addressing the impact of the ETS
on the aviation tax. De Jager claimed it was still too early to make
any definitive assessments and explained how the two measures could
co-exist at the same time since they have different objectives: the
aviation tax, while billed as a "green" measure, is simply a regular
tax while the ETS is an environmental tax. De Jager indicated that

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the Economic Affairs Ministry would monitor the first signals of the
tax's impact on operations at Schiphol, as well as its impact on
tourism, and report back to Parliament before summer 2009.


6. (SBU) In the February 2 KLM meeting, KLM officials insisted that
the aviation tax should not be billed a "green" tax as some
politicians have done since there is no evidence the revenue stream
has been contributing to improving the environment. KLM was opposed
to the tax and casts its hope in the public words of Prime Minister
Jan Peter Balkenende who stated it would be abolished by 2012. KLM
also relayed how it had heard from its Transport Ministry contacts
that the tax was not working out well which is blamed on the Finance
Ministry. While KLM lacked concrete data, the officials claimed
that Schiphol Airport has lost anywhere between 500,000-1 million
passengers since the tax began on July 1, 2008. While it is
difficult to estimate how much of this decrease is attributed to the
tax or the worsening economy, data suggests passenger numbers are
rising in neighboring countries' airports.


7. (SBU) In a December 18, 2008, meeting, Patricia Epting, Managing
Director, Atlantic Region, Northwest/Delta Airlines, told Emboffs
her airline found the tax inappropriate and responsible for
diminishing passenger numbers at Dutch airports. Epting also
praised KLM lobbying efforts which succeeded in convincing the
Finance Ministry to exempt transit passengers from this tax since
transit passengers make up KLM's core business out of Schiphol. She
did not fault the government for backing KLM on this, even though
some critics rightfully complain that the tax unfairly targets other
airlines, because of the central role that KLM plays at Schiphol and
thus within the overall DQh economy.



8. (U) According to a March 2009 study conducted by the Dutch
Association of Travel Agents and Tour Operations, the tax costs the
Dutch economy, particularly tourism, EUR 1.3 billion per year, as
well as a loss of 1 million airline passengers to airports across
the border. According to the study, there are 11 percent less
passengers at Schiphol due to the aviation tax, as travelers have
chosen other transport methods or other airports just across Dutch
boarders. The aviation tax means an income loss for the Dutch
airports worth EUR 90 million, for the airlines EUR 940 million, for
Dutch travel agencies and tour operators EUR 120-300 million and for
other tourism service providers (hotels, restaurants) EUR 83
million, the study estimated.

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BIRD STRIKES
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9. (SBU) During the February 4 meeting, Transport Ministry officials
also asked about U.S. approaches for dealing with bird strikes, in
light of the January 15 crash of U.S. Airways Flight 1549 into the
Hudson River. The Dutch indicated they experienced similar problems
at Schiphol Airport, particularly with geese, and were hoping to
learn "best practices" from the United States. The threat of bird
strikes is increasingly impacting slot allocations, and the
Transport Ministry is actively working with the Agriculture Ministry
on how to address this problem by looking at migration patterns and
how certain vegetation could help keep birds at bay. Additionally,
Transport Ministry officials expressed reservations about the EU
imposing solutions on how to address aviation safety, security and
Qimposing solutions on how to address aviation safety, security and
environmental concerns, preferring to keep these issues at the
member state level.

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STATE OF SCHIPHOL
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10. (SBU) During the February 2 KLM meeting, KLM officials indicated
that public ownership of Schiphol Airport has never been a problem
for the airline. KLM would, therefore, oppose the airport's
privatization out of concern more investment under private ownership
would go into non-aviation components, such as the office complex,
rather than runways and other infrastructure projects that benefit
airlines directly. Transport Ministry officials have repeatedly
told Emboffs privatization of Schiphol is a dead issue within the
current coalition government.


11. (U) In early January, Jos Nijhuis, new CEO of the Schiphol Group
(which operates Schiphol Airport),declared in his New Year's speech
the airport had been severely Q by the economic crisis. According
to his data, the number of passenger flights out of Schiphol had
dropped 1.8% and cargo flights by 1.4% in 2008. Nijhuis expects
passenger flights to drop by a further 8-10% and cargo flights by an

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additional 10%. Nijhuis blamed the economic crisis as well as the
aviation tax for the current difficulties facing his company.
Accordingly, the Schiphol Group will be forced to reconsider its
current strategy in order to weather the downturn, including
postponing major new investment projects, such as the renovation of
departure terminal 3, until April 2009 at the earliest.


12. (U) Also in January, Transport Minister Eurlings expressed his
concern to Parliament about the increasing costs of tickets when
flying out of Schiphol and announced his Ministry's intention to
study measures on how to improve the airport's international
competitiveness. While he made no mention of the aviation tax in
particular, he stressed that all measures will be under
consideration.


GALLAGHER