US embassy cable - 05SANTODOMINGO612

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 000612 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PASS USDOT 
STATE FOR EB/TRA/AV, EB/CBA, WHA/CAR; NSC FOR SHANNON 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH 
 
E.O. 12958: N/A 
TAGS: EAIR, ECON, KTIA, PREL, DR, CA 
SUBJECT: AMERICAN AIRLINES DISPUTE WITH DOMINICAN AIRPORTS 
AUTHORITY OVER GROUND-HANDLING 
 
REF: A. 03 SANTO DOMINGO 681 
 
     B. 05 STATE 2526 
 
1. (SBU)  SUMMARY:  The Ambassador and Embassy officers have 
raised with Dominican authorities the American Airlines (AA) 
notification that it will end ground-handling services for 
all other carriers at Santo Domingo Las Americas Airport 
(AILA) and will assume self-handling of its flights on April 
1.  Dominican airports authority Aerodom asserts that AA has 
no legal right to self-handle.  Dominican Director General of 
Civil Aviation Norge Botello agrees with Aerodom and asserts 
that the US-Dominican Bilateral Agreement of 1949 is the only 
agreement in force.  Aerodom and AA have exchanged views.  If 
this business dispute is not resolved before April 1, Aerodom 
could attempt to lock out AA employees in its efforts to deny 
AA's attempt to self-handle.  END SUMMARY. 
 
2. (SBU)  The Ambassador and Embassy officers have raised 
with Dominican authorities the American Airlines (AA) 
notification to Aeropuertos Dominicanos Siglo XXI, S.A. 
(Aerodom) that it will close its wholly-owned subsidiary  on 
April 1, ending ground-handling services for all other 
carriers at Santo Domingo Las Americas Airport (AILA).  AA 
will assume self-handling of all AA and American Eagle 
flights on that date.  Aerodom has contracted the services of 
British-owned Menzies Aviation Group to provide ground 
handling services of all flights, both cargo and passenger, 
on April 1.  Menzies is a international provider of 
ground-handling services and currently has operations at the 
international airport in Puerto Plata and handles UPS and 
FEDEX cargo planes at AILA. 
 
3. (U)  Aerodom asserts that AA has no legal right to 
self-handle claiming that the 1986 and 1999 US-Dominican Air 
Transport Agreements have never been ratified by the 
Dominican Congress and are not in force. The Dominican 
Director General of Civil Aeronautics, Norge Botello, agrees 
with Aerodom and asserts that the US-Dominican Bilateral 
Agreement of 1949 is the only agreement in force.  Embassy 
provided guidance to President Fernandez and the Dominican 
civil aviation authorities (ref. B) that AA should be able to 
self-handle according to the 1986 Air Transport Agreement 
(REF B). 
 
4. (U) Although a meeting arranged by the Ambassador to bring 
together AA and Aerodom failed to resolve the companies' 
dispute over ground-handling services at AILA, Aerodom and AA 
have exchanged views. At this time Aerodom continues with its 
plans to turn AILA ground-handling operations over to 
Menzies, and AA is planning to self-handle on April 1. If 
this business dispute is not resolved before then, Aerodom 
may attempt to lock out AA employees in its efforts to deny 
AA's attempt to self-handle. 
 
AERODOM,S POSITION 
 
5. (U) In 1999 the Dominican Government awarded Aerodom an 
exclusive 25-year concession, including exclusivity of ramp 
handling services, over AILA and three other international 
airports.  Aerodom argues that they retain control of all 
ground-handling services through their exclusive agreement 
with the Dominican Government.  After repeated attempts to 
reach an agreement with AA over ground-handling services, 
Aerodom notified AA it was terminating the agreement and AA 
had 120 days to transfer ground-handling activities to 
Aerodom. 
 
6. (U) Aerodom asserts that the US-Dominican Bilateral 
Agreement of 1949 is the only valid agreement because it is 
the only agreement ratified by the Dominican Congress. 
According to Aerodom, the 1986 Air Transport Agreement and 
1999 Open-Skies Agreement have not been ratified by the 
Dominican Congress and language authorizing provisional 
ratification is unconstitutional.  In a January 27 meeting 
with the Ambassador, Jose Luis Abraham, Vice President of the 
Board of Aerodom, said that even if the 1999 Open-Skies 
Agreement were ratified, Aerodom would not allow AA to 
self-handle because of the security exception in the 1988 and 
1999 agreements. 
 
7. (SBU) Aerodom is currently negotiating with the World 
Bank,s International Finance Corporation (IFC) for a $100 
million soft loan and with Export Development Canada (EDC) 
for $40 million to cover the cost of contractually required 
improvements to AILA.  Aerodom's managers have expressed 
concern that the business conflict between AA and Aerodom may 
disrupt or delay negotiations over these loans.  Both the 
Canadian and British Ambassadors to the Dominican Republic 
have raised this issue with the Ambassador. Vancouver Air 
Services provides airport management services to Aerodom on a 
long-term contract and has one seat on the Aerodom board. 
 
AMERICAN AIRLINES POSITION 
 
8. (SBU) AA wished to terminate its DSA ground-handling 
services contract at AILA in order to focus on its core 
business of passenger service and to reduce costs associated 
with ground handling.  AA officials believe the firm made a 
mistake by entering into a costly agreement with Aerodom, 
where AA was required to pay over 40 percent of gross, and by 
providing service to its competitors at AILA. AA wants to 
self-handle in order to reduce costs and maintains it cannot 
turn its ground-handling services over to Menzies because it 
is required to fulfill its obligations with the USG under the 
Supercarrier Initiative.  AA says that it cancelled an 
initialed term sheet with Aerodom earlier this year because 
Aerodom attorneys changed the agreement and inserted language 
that required AA to abandon its claim to self-handling after 
2008.  AA has formally offered to pay Aerodom a 30 percent 
royalty/franchise/no objection fee starting April 1.  AA has 
indicated a willingness to be flexible on the dates for 
transition. 
HERTELL