US embassy cable - 05LIMA2053

UNCLAS SECTION 01 OF 02 LIMA 002053 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, EB/TRA/AN 
FAA FOR MIAMI 
 
E.O. 12958: N/A 
TAGS: EAIR, ECON, ETRD, EINV, CASC, PE 
SUBJECT: WILL AEROCONTINENTE RESUME FLIGHTS? 
 
REF: A) LIMA 1987   B) 04 LIMA 5082 
 
1. (SBU) Summary.  OFAC King Pin designate and owner of the 
now defunct AeroContinente airlines, Fernando Zevallos, 
recently announced plans to resume domestic service of his 
airline.  On May 1, AeroContinente announced job openings 
for pilots who can fly F28s, B737s, and B727s - all planes 
in the AeroContinente fleet.  Roberto Rodriguez, acting 
Director of the Directorate General of Civil Aviation 
confirmed that if AeroContinente meets the DGAC's financial 
and technical requirements, it will be granted permission to 
fly.  Rodriguez, however, noted that AeroContinente still 
faces financial difficulties with its creditors and former 
staff, and under the King Pin Act, is unable to purchase 
parts from Boeing.  Unless these problems were resolved 100 
percent, Rodriguez vowed that AeroContinente will not fly. 
End Summary. 
 
Plans to Fly... 
--------------- 
 
2.  (U) Fernando Zevallos, former owner of 
AeroContinente(before it was sold to staff in June and 
renamed NuevoContinente), announced on May 1 that he is 
exploring the possibility of restarting domestic 
AeroContinente flights by the end of June.  Taking advantage 
of Lan Peru's current legal issues (ref A), Zevallos argues 
that Peru's civil aviation sector is a disaster, with high 
prices dictated by a foreign competitor (Lan Peru/Lan 
Chile).  (Note: According to the DGAC, the GOP plans on 
initiating a civil case against Lan Peru over the video 
scandal.  End Note.)   Promising to restore lower rates on 
domestic flights, Zevallos claims there is no reason why 
AeroContinente cannot resume flights in Peru.  Zevallos 
informed the local press that AeroContinente has met all of 
MTC's requirements - the company has no legal problems, all 
financial debts have been repaid, and all technical issues 
resolved. 
 
3. (U) Despite his posturing to the press, Zevallos failed 
to indicate exactly how he planned to finance AeroContinente 
operations.  Under the King Pin Act, all of Zevallos' assets 
in the United States were frozen.  NuevoContinente (the new 
name after AeroContinente was "sold"), in fact, was grounded 
by the DGAC, not for safety and technical reasons, but 
because it lacked the financial solvency to pay its fuel 
bills and staff salaries(ref B). 
 
4.  (U) Zevallos claims that AeroContinente will use its six 
functioning planes to service key domestic routes in Peru, 
including Piura, Iquitos, Cusco, Tacna, and Juliaca.  The 
company issued an advertisement on May 1 calling for 
experienced pilots of F28s, B727s, and B737s - all planes in 
the former AeroContinente fleet.  He also explained that 
while AeroContinente was banned "for now" from flying to the 
United States, there is no legal reason why AeroContinente 
cannot fly to Europe and/or Asia. 
 
But Will AeroContinente Take Off? 
--------------------------------- 
 
5.  (SBU) We met with Roberto Rodriguez, acting Director 
General of the Directorate General of Civil Aviation (DGAC) 
on May 3 to discuss Zevallos' plans to resume flights. 
Rodriguez explained that he was unaware of Zevallos' 
intentions until he saw the job advertisement in last 
Sunday's paper.  Rodriguez will meet with Zevallos on 
Friday, May 6, to discuss AeroContinente's future. 
 
6.  (SBU)  Rodriguez informed us that legally, 
AeroContinente can fly in Peru.  However, the company must 
meet the DGAC's rigorous standards for recertification, 
which includes an investigation into the company's finances, 
as well as a full technical inspection.  Rodriguez indicated 
that when NuevoContinente was grounded in October, it only 
had one operating plane, not six.  He expects that the 
company's planes will not pass the technical inspections, 
given that Boeing is prohibited from selling spare parts to 
AeroContinente/NuevoContinente under the King Pin Act. 
Rodriguez did note that AeroContinente can purchase parts 
for the F28. 
 
7.  (SBU) Rodriguez indicated, however, that if Zevallos 
transferred ownership of the company to an independent 
person or entity (including the GOP), AeroContinente would 
then be able to purchase the necessary parts.  The MTC and 
DGAC would conduct a through investigation of the company, 
which could take up to nine months.  We noted that the 
Department of Treasury would also conduct its own 
investigation before allowing Boeing to sell parts to the 
new company. 
 
Comment 
------- 
 
8.  (SBU) AeroContinente has a long way to go before the 
DGAC will even consider granting it the proper flight 
permits.  It remains unclear whether Zevallos truly has 
plans for AeroContinente or if he is trying to take 
advantage of the current anti-Chile political climate. 
Either way, the DGAC remains committed to promoting a safe 
and secure civil aviation climate. 
 
STRUBLE