Sep 182014
 

http://wikileaks.org/cable/2007/01/07MANILA281.html#

Reference ID Created Released Classification Origin
07MANILA335 2007-01-30 09:20 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Manila
VZCZCXRO2204
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #0335/01 0300920
ZNR UUUUU ZZH
O 300920Z JAN 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4978
INFO RULSDMK/DEPT OF TRANSPORTATION WASHDC IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RUEATSA/TSA WASHINGTON DC IMMEDIATE
RHMCSUU/FAA NATIONAL HQ WASHDC IMMEDIATE
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 3042
UNCLAS SECTION 01 OF 02 MANILA 000335

SIPDIS

SIPDIS

SENSITIVE

STATE FOR EAP/MTS AND EB/TRA
FAA FOR TOKYO
SINGAPORE AND TOKYO FOR FAA
COMMERCE FOR BERLINGUETTE

E.O. 12958: N/A
TAGS: EAIR ECON EINV ETRD RP
SUBJECT: Airlines Jostle for Terminal Space and Lower Fees

REF: A) 06 MANILA 3743

B) 06 MANILA 3596

Sensitive but Unclassified – Protect Accordingly

——-
Summary
——-

¶1. (SBU) In a highly advantageous deal for the national carrier,
the Philippine Government agreed to let Philippine Airlines (PAL)
shift its international and domestic operations to the
long-mothballed new terminal and to allocate remaining space to
foreign carriers. The government is planning a trial run for March
2007 but continuing legal battles over payment and ownership and
necessary construction work will delay full terminal use. U.S.
carrier Northwest Airlines (NWA) is seeking GRP financial protection
in case structural defects or court orders interrupt service but is
anxious to reserve gates for its twice daily flights to and from
Japan and the U.S. NWA is also protesting the capricious doubling
of fees assessed airlines for the overtime, meals, and transport
costs of Customs officials at the airport. End Summary.

————————————–
PAL Moving Operations to New Terminal
————————————–

¶2. (SBU) In a meeting January 12, Northwest Airlines (NWA) General
Manager Todd Anderson told econoffs the Manila International Airport
Authority (MIAA) is letting national carrier Philippine Airlines
(PAL) move all its domestic and international operations to the
long-mothballed new terminal, Terminal Three. MIAA is preparing for
a trial run in March 2007. Anderson heard reports that PAL had
simultaneously agreed to pay MIAA about three billion pesos ($60
million) to cover its arrears on landing fees, although there are no
commitments in writing yet. Speculation has it that Asian Emerging
Dragon Corp. (AEDC) may also withdraw its court case seeking control
of Terminal Three as part of this deal. AEDC, like PAL, is owned by
Philippine-Chinese magnate Lucio Tan.

¶3. (SBU) Anderson complained that MIAA planned to give top
priority in allocating space at Terminal Three to those airlines
using PAL’s ground handling service. (Note: Embassy understands
that MIAA will also use conventional criteria such as passenger and
cargo capacity and flight frequencies. End note.) Airlines, such
as NWA, that use other baggage handling companies, may be relegated
to the deficient Terminal Two vacated by PAL. Anderson commented
that excluding NWA from Terminal Three would put the company “in a
very untenable and uncompetitive position.” NWA does not want to
move to Terminal Two. Even though it is a newer facility than the
decrepit Terminal One, it does not have sufficient space to handle
overseas luggage or to efficiently process passengers through
immigration, customs, quarantine, and security.

¶4. (SBU) The airlines had collectively insisted on guarantees
against disrupted operations from MIAA as a pre-requisite for
relocating to Terminal Three. Their demand was the result of
uncertainties caused by continuing legal squabbles over ownership
and payment and a partial ceiling collapse last March that suggests
there may be structural defects in the terminal (Ref A). Anderson
said PAL broke ranks with the Board of Airline Representatives (BAR)
over the demand for financial guarantees, in order to move all its
operations under one roof.

¶5. (SBU) In a separate meeting, BAR Chair and PAL VP for Marketing
Felix Cruz said the move to the new terminal was a part of the
national carrier’s Government-approved rehabilitation plan. He
likened the savings of operating from just one terminal to the
equivalent value of two planes. He said BAR was still advocating
for a standard leasing agreement with uniform conditions for all
airlines.

¶6. (SBU) Anderson said NWA is otherwise faring well in the
Philippines. During the build-up to the Christmas holidays, it
filled over 92% of its 820-plus seats on twice daily routes to and
from Japan and the U.S., as compared to about 88% throughout Asia.
It cannot accommodate a third flight to Manila per day, however,
because of less hefty demand during off-peak seasons.

——————–

MANILA 00000335 002 OF 002

Customs Fees Doubled
——————–

¶7. (SBU) Airlines are also seeking repeal of a Customs Order
dramatically increasing the rates charged for aviation services,
according to NWA Finance Manager Ceazar Veneracion. He told
econoffs that airlines pay overtime, meals, and transport for
Customs, Immigration, and Quarantine officers at the airport. These
assessments were valid when offices for these services were not
located at the airport and officials had to make special trips after
hours to accommodate international flights. Now that agencies have
full-time staff right at the terminal, the airlines should be
excused from these fees altogether, he said. “These services are
the government’s responsibility.” Instead, the Customs Order
effectively doubled the assessment, raising the annual overtime
charge from 115 million pesos in 2005 to 230 million pesos ($4.8
million) in 2006. The BAR argues the rate increases are
inappropriately justified by the depreciation of the peso even
though none of the services incur foreign currency expenses.
Veneracion said the airlines protested the increase to the Bureau of
Customs and are awaiting its response.

¶8. (SBU) According to Veneracion, the increase is ill-timed
because the airline industry is still reeling from the higher fuel
costs and SARS. Many airlines have ceased flights to the
Philippines in recent years because of the low rate of return. BAR
is seeking permission from the Philippine Civil Aeronautics Board to
charge $1 for each ticket to pass these costs to passengers.
Veneracion said the consumers of these services should pay for them,
not the airlines. He said the Board has deferred its decision in
order to study its jurisdiction over the matter. In the meantime,
the airlines are worried that other agencies drawing stipends from
the airlines may soon impose new and heavier fees.

¶9. (SBU) MIAA General Manager Alfonso Cusi told econoffs that he
supported reforming the airline assessments, but said it can only be
changed by legislation. Cusi said the Philippines is one of the few
countries in the world to charge such fees. He is discussing other
options with the Department of Transportation and Communications,
such as embedding costs into terminal fees or ticket prices.

——-
Comment
——-

¶10. (U) The Embassy is encouraging the Philippine Government to
use a transparent process in assigning terminal space. We support
NWA’s efforts to operate from the new terminal and to seek fair
resolution to the disputed airport fees.

Kenney

   

 

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