US embassy cable - 05TAIPEI222

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000222 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 01/19/2015 
TAGS: EAIR, ECON, PREL, CH, TW, Cross Strait Economics, Cross Strait Politics 
SUBJECT: TAIWAN WORKING OUT CHARTER FLIGHT IMPLEMENTATION 
 
REF: A. A) 04 TAIPEI 3523 
 
     B. B) 05 TAIPEI 43 
     C. C) 05 TAIPEI 130 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.5 d 
 
Summary 
------- 
 
1. (C) Taiwan authorities and airlines are moving quickly to 
implement the agreement reached by Taiwan and PRC negotiators 
January 15 on cross-Strait Lunar New Year charter flights. 
Only Taiwan investors in the PRC, their families and Taiwan 
employees will be able to buy tickets, despite protests from 
Taiwan students on the Mainland.  According to Taiwan 
negotiator, Civil Aeronautics Administration Director General 
Billy Chang (Kuo-cheng), the negotiations proceeded more 
quickly than expected; the number of flights and the 
destinations were the only items that required real 
discussion.  Quick resolution of these issues as well as 
political concerns that turned out to be non-issues highlight 
the fact that lack of political will is the real obstacle to 
further cross-Strait economic liberalization.  (End Summary.) 
 
Moving Forward 
-------------- 
 
2. (U) On January 15 in Macao, Taiwan and PRC negotiators 
agreed to allow 96 direct cross-Strait charter flights -- 24 
round trips each -- to carry Taiwan businessmen and their 
families for the Lunar New Year.  The flights will connect 
Taipei and Kaohsiung with Beijing, Shanghai and Guangzhou. 
Although the aircraft will not be required to land in Hong 
Kong, as during the 2003 Lunar New Year charter flights, they 
must pass through the Hong Kong flight information region. 
Direct flights should cut more than an hour from travel time. 
 Although few fares have been announced, analysts predict the 
flights will be about 20 percent cheaper than regular 
flights.  Shanghai Airlines has already announced a 
Taipei-Shanghai fare that is more than one-third lower than 
the usual rate for flights connecting through Hong Kong. 
 
3. (U) Six airlines from each side of the Strait will be 
allowed to participate.  All of the Taiwan airlines ) China 
Airlines (CAL), Eva Air, Mandarin Airlines, Uni Air, Far 
Eastern Air Transport (FAT), and TransAsia ) will 
participate.  The PRC's aviation authorities announced on 
January 18 that Air China, China Eastern, Shanghai Airlines, 
China Southern, Hainan Airlines, and Xiamen Airlines from the 
PRC side would provide flights.  Each airline must coordinate 
with one or more from the other side of the Strait to provide 
ticketing and airport ground services.  For example, CAL 
executives have indicated that CAL will provide ground 
services in Taiwan for Hainan Airlines and Air China.  Air 
China will provide these services in Beijing for CAL and 
Mandarin Air.  China Southern will be their agent in 
Guangzhou. 
 
4. (U) Taiwan's Civil Aeronautics Administration (CAA) should 
announce charter flight application procedures January 19, 
but Taiwan firms have already begun to divvy up the flights 
among themselves and announce schedules.  Each plans four 
roundtrips.  CAL and EVA will both fly from Taipei to 
Beijing, Shanghai and Guangzhou.  Mandarin Air will provide 
Taipei-Shanghai and Taipei-Guangzhou service.  UNI will fly 
from Kaohsiung to Shanghai and Guangzhou.  FAT will service 
Guangzhou and Shanghai from Taipei, and TransAsia will only 
fly Taipei-Guangzhou routes. 
 
Just for Taishang 
----------------- 
 
5. (C) The two sides agreed that the charter flight tickets 
would be available only to Taiwan investors in the Mainland, 
their families and the Taiwan employees of their Mainland 
facilities, and then only if the investment had been approved 
by Taiwan's Ministry of Economic Affairs.  Airlines and 
travel agents will rely on Taiwan business associations to 
verify that travelers meet the qualifications.  Many have 
complained that Taiwan students studying in the PRC were 
excluded, but the Taiwan government has remained firm that 
only Taiwan investors, their employees and families will be 
allowed to buy tickets.  These restrictions will limit 
profitability for airlines and may make it especially 
difficult to fill PRC-bound planes before the Lunar New Year 
and Taiwan-bound planes afterward.  The Taiwan government's 
determination to restrict charter flight passengers appears 
to be aimed at maintaining control of the process of further 
liberalization of cross-Strait air links and limiting 
expectations and momentum that are emerging with charter 
flights. 
 
Few Items of Contention 
----------------------- 
 
6. (C) CAA Director General Billy Chang, who participated in 
the Macao negotiations, told AIT/T that the two sides reached 
an agreement very quickly.  They had planned a two-hour 
meeting, but only needed an hour.  They quickly consented to 
most of the terms, which had largely been worked out by the 
KMT-led delegation to Beijing a week earlier and other 
indirect or informal channels.  According to Chang only three 
items required real discussion.  For instance, Taiwan 
proposed that each side be permitted to fly 36 round trips, 
but the PRC insisted on limiting the number to 24. 
 
7. (C) The other two disagreements concerned which airports 
would be served by the flights.  The PRC proposed that 
flights to both Xiamen and Taichung be included in the 
agreement.  Taiwan rejected both.  For Xiamen flights to pass 
through a third territory's airspace and remain feasible, 
they would have to pass through Japanese instead of Hong Kong 
airspace.  Taiwan rejected this north-south path for security 
reasons.  The Taiwan side also noted the mini-links as a 
convenient option available to Xiamen travelers.  Taiwan 
refused to include Taichung because the airport serves both 
civil and military purposes.  CAA officials also pointed out 
that the civil facility is inadequate with a small terminal 
and limited space for larger planes.  (Note: Taichung Mayor 
and former Foreign Minister under the KMT Jason Hu in a 
speech to AmCham on January 19 lamented that Taichung was 
left of the list of Taiwan points to be served.  He said that 
there were thousands of Taichung natives working in Fujian 
across the Strait that would be inconvenienced by the DPP 
government declining to let flights land in Taichung. 
Further, Hu said the military area of the Taichung airport, 
formerly a USAF SAC base, is "quite small."  End Note.) 
 
"One China" 
----------- 
 
8. (C) There has been much speculation regarding how the 
charter flight framework would handle various sensitive 
cross-Strait concerns.  Most of these issues seemed to have 
been worked out with little difficulty.  CAA's Chang told us 
that during the discussions in Macao there was no reference 
to the flights as "international," "domestic," or "special" 
routes.  All discussions used the term "charter flights." 
Furthermore, both sides agreed to accept aircraft and pilot 
certifications provided by civil aviation authorities from 
the other side of the Strait.  MAC and CAA officials have 
assured us that PRC aircraft with the PRC flag would be 
allowed to participate.  Some had predicted that Air China 
would not be permitted by the PRC to provide charter flight 
service; because a direct translation of it's Chinese name is 
China International Airlines.  Nevertheless, Air China will 
participate. 
 
Comment ) Details Follow Easily with Political Will 
--------------------------------------------- ------ 
 
9. (C) Rapid negotiations, the easy handling of issues that 
Taiwan officials have previously described as very sensitive, 
and the speed of implementation all show that the technical 
barriers for improved cross-Strait economic relations are 
very small.  As working-level contacts have told us 
repeatedly, if the political leaders on both sides of the 
Strait want to work together, a framework for cooperation can 
be established almost instantly.  The 2005 Lunar New Year 
charter flights underscore once again that across a range of 
areas that includes not just travel and transportation, but 
also finance, telecommunications, trade and investment, the 
real obstacle to further cross-Strait economic liberalization 
is politics.  (End comment.) 
PAAL