US embassy cable - 04ABUJA2135

UNCLAS SECTION 01 OF 02 ABUJA 002135 
 
SIPDIS 
 
PASS DOT FOR OIA, ALSO FAA 
 
E.O. 12958: N/A 
TAGS: EAIR, EINV, PREL, NI 
SUBJECT: GON AVIATION MINISTER PROTESTS EMBASSY PRESS 
BRIEFING ON VIRGIN NIGERIA AIRLINES 
 
REF:  (A) ABUJA 2118, (B) ABUJA 2119, (C) ABUJA 2121 
 
1.  Following is the proposed letter to Nigeria's Minister 
of Aviation mentioned in ref A. 
 
2.  Begin text. 
 
Mr. Minister: 
 
Thank you for your letter of December 21, 2004 in response 
to the media briefing on Virgin Nigeria by the U.S. 
Embassy's Economic Counselor on December 16 
(FMA/20/2004/1/152).  You have protested the briefing  -- 
which the newspaper This Day publicized on December 17 -- 
for it was, in your words, an "unwholesome development 
whereby confidential governmental business and diplomatic 
matters are made subject of newspaper discourse." 
 
Your assertion surprised me, since your Ministry's position 
on Virgin Nigeria has often been reported by your country's 
media services.  On December 16, for example, The Guardian 
reported that at "the signing of a Memorandum of 
Understanding..., [Minister] Yuguda said that Virgin Nigeria 
would be granted an unspecified period of protection on the 
plum routes as [an] incentive for the investors."  The 
Guardian further noted that you "ordered that the clause 
[conferring a seven year monopoly] be included in the 
agreement signed with Virgin Atlantic Airways, when the 
British carrier insisted it would not close the deal unless 
the demand was acceded to." 
 
In your letter, you also referred to one dated October 14 
(FMA//LU/2004/1/19) to which you said you were awaiting a 
reply.  In the fourth paragraph of that letter, you stated 
that "I consider it most pertinent to provide further 
clarifications on the matter as certain representations... 
are unfortunately not reflective of the situation at hand." 
You then explained why you believe Virgin Nigeria Airways is 
substantially owned and effectively controlled by your 
government.  You therefore expressed "deep concern about the 
attempts being made by the United States to link Virgin 
Nigeria... with the U.K. registered Virgin Atlantic 
Limited." 
 
Toward the end of your letter of October 14, you asked my 
"understanding and cooperation in enlightening further the 
Government of the United States, its relevant authorities 
and agencies on the true position of the matter with a view 
to... paving the way for the prompt acceptance of the 
designation of the Nigerian flag carrier."  Unfortunately, I 
did not conclude from your remarks that you were expecting a 
reply from me.  On the other hand, U.S. Government officials 
consulted among themselves following their receipt of the 
detailed report on the meeting that you and the Embassy's 
Economic Counselor had on September 27.  Those consultations 
led to the U.S. officials' decision to recommend the press 
briefing, the subject of your protest. 
 
Mr. Minister, in paragraph nine of your letter of December 
21 you stated that the "emphasis apparently being placed by 
the U.S. Government... is that the airline is an entirely 
Virgin Atlantic [UK]... matter.  The newspaper report 
regrettably goes on to name some foreign airlines, which the 
United States expects Nigeria to partner with... without 
considering the issue of the sovereign rights of Nigeria to 
make its own decision on the choice of a suitable partner." 
 
I assure you that the U.S. Government understands that 
Virgin Nigeria is not "entirely" a Virgin Atlantic affair. 
We know that the latter holds 49 percent of the equity.  The 
U.S. Government also respects the right of the Government of 
Nigeria to choose its own partners in whatever ventures. 
The exercise of such rights may have implications for third 
parties, however.  The Embassy Counselor mentioned foreign 
airlines nominally during the briefing to emphasize that 
those implications have greater or lesser import depending 
on the airlines' normal places of doing business. 
 
In paragraph 11 of your letter of December 21, you indicated 
that "suffice it to state at this juncture that the report 
further referred to the proposed operations of Continental 
Air into Nigeria by April 2005 without taking into 
consideration the principle of reciprocity in the bilateral 
air transport relations between the two sovereign countries. 
Such proposals by the United States in respect of its own 
designated airline may legitimately be attended on a quid 
pro quo basis."   I infer that you meant to establish a 
direct link between Nigeria's recognition of Continental 
Airlines as a designated carrier by the United States, and 
the latter's recognition of Virgin Nigeria as your 
government's designated carrier, under our bilateral 
aviation services agreement (open skies).  Establishing such 
a link would be neither in the spirit of our agreement nor 
in the interests of our respective countries. 
 
Continental Airlines is substantially owned by citizens of 
the United States and under their "effective control." 
Effective control is a term employed by the U. S. Department 
of Transportation (DOT) in determining whether an airline 
meets the US citizenship requirements of US aviation law. 
DOT uses a two-pronged test for citizenship: whether at 
least 75 percent of the voting stock of the carrier is owned 
by US citizens (as well as the president and two-thirds of 
the board of directors of the carrier being US citizens), 
and whether the carrier is under the "effective control" of 
US citizens. The first prong is an objective numerical test. 
The second prong is subjective because there is no fixed 
legal definition of "effective control"; DOT looks at all of 
the factual circumstances involved in the management of the 
carrier and determines case by case where "effective 
control" lies.  Generally, DOT distinguishes "apparent" 
control from "actual" control and, as a general proposition, 
it usually decides that the party that actually makes, or 
has the authority to make, the day-to-day operational 
decisions for the carrier is the party that is in "effective 
control" of the company. 
 
In exercising its discretion, DOT considers public-policy 
factors including the impact of its determination on 
domestic and international competition.  The latter point is 
important because the focus of U.S. aviation policy is to 
promote competition to benefit U.S. consumers.  Because the 
relevant U.S. statute gives DOT discretion to define "actual 
control," DOT takes into account whether the United States 
has a liberal aviation relationship with the country the 
nationals of which want to do business with the United 
States.  DOT interprets ownership and control requirements 
differently depending on the level of access U.S. carriers 
enjoy to the relevant foreign market.  DOT does this to 
prevent free riding by a carrier from a country with which 
the United States has restrictive airline rights.  As noted 
in paragraph five of your letter of December 21, the United 
Kingdom is a country whose aviation restrictions are 
adversely affecting the interests of the United States.  The 
Ministry does not contest that Virgin Atlantic Limited, 
which holds 49 percent equity in Virgin Nigeria, is a UK- 
registered airline. 
 
Mr. Minister, I hope I have clarified the U.S. Government's 
position to your satisfaction.  I assure you that it, too, 
is committed to the faithful implementation of our Open 
Skies Agreement of August 2000.  In your own words, we look 
to its being implemented "in the true spirit of the cordial 
relationship that exists between our two governments." 
 
End text. 
 
FUREY