US embassy cable - 05TAIPEI4210

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 004210 
 
SIPDIS 
 
DEPT FOR EAP/TC 
DEPT PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 10/17/2015 
TAGS: ECON, EAIR, PREL, CH, TW 
SUBJECT: CROSS-STRAIT CHARTER FLIGHTS AND TOURISM - 
PROGRESS  UNLIKELY BEFORE DECEMBER ELECTIONS 
 
REF: A. TAIPEI 3854 
     B. TAIPEI 3661 
     C. TAIPEI 3100 
     D. TAIPEI 2881 
     E. TAIPEI 2732 
     F. TAIPEI 2654 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.4 d 
 
Summary 
------- 
 
1. (C) Taipei Airlines Association Chairman Tony Fan told 
AIT/T that he has met at least twice with PRC aviation 
counterparts in Macau and has contact with them regularly 
by phone, e-mail and fax.  However, the two sides remain 
divided on several issues.  The PRC has been reluctant to 
give Taiwan the cargo charter flights it wants to Shanghai. 
Taiwan does not want to implement regular weekend passenger 
charters until PRC tourism to Taiwan has been liberalized. 
Taiwan Association of Travel Agents Assistant Chairman Yao 
Ta-kuang confirmed that a 60-member delegation from China's 
National Tourism Association will come to Taiwan October 28 
for a ten-day visit.  He emphasized that the two sides will 
not hold formal negotiations during the visit but predicted 
they would discuss some technical issues.  Both Fan and Yao 
reported recent developments that suggest Chen Shui-bian's 
support for these initiatives.  However, a breakthrough is 
unlikely before the December 3 local elections in Taiwan. 
End summary. 
 
Charter Flights - Channels Open but Obstacles Remain 
--------------------------------------------- ------- 
 
2. (C) AIT/T econoff met October 14, 2005 with Tony C.C. 
Fan, chairman of the Taipei Airlines Association, which the 
Taiwan government named to coordinate consultations with 
the PRC on cross-Strait charter flights.  Fan is also 
chairman of TransAsia Airways, one of Taiwan's four smaller 
airlines, and Askey Computer Corp., a manufacturer of 
modems and local area network equipment.  Fan began the 
discussion by pointing out that an October 12 article in 
Taiwan's Commercial Times that had cited him and Mainland 
Affairs Council (MAC) Chairman Joseph Wu as sources was 
actually the result of a conversation that Wu had with the 
newspaper's editor.  Fan emphasized that he was under a 
strict non-disclosure agreement with MAC.  Nevertheless, he 
went on to confirm most of the content of the article. 
 
3. (C) Fan reported that he has already had "two or three" 
informal meetings in Macau with his PRC counterparts to 
discuss charter flights.  They are also in regular contact by 
e- 
mail, fax and telephone.  He described their interaction as 
very smooth.  However, he believes that the PRC has been 
less willing to compromise than Taiwan. 
 
4. (C) One example Fan cited to show Taiwan's willingness 
to compromise was a decision by Taiwan not to push the PRC 
to agree to flight paths that would pass through Japan's or 
South Korea's airspace.  Taiwan had proposed using such 
routes on flights to Shanghai and Beijing.  2005 Lunar New 
Year charter flights all passed through Hong Kong air 
space, lengthening substantially the flying time to Beijing 
and Shanghai.  Taiwan insists that cross-Strait charter 
flights pass through the air space of a third jurisdiction. 
However, according to Fan, the PRC rejected Taiwan's 
suggestion of using Japan's or South Korea's airspace.  The 
PRC presumably wishes to avoid any perception that the 
charter flights are international flights.  Fan said that 
the PRC in turn proposed that the charter flights pass 
directly from Taiwan to PRC airspace on routes to Shanghai 
and Beijing.  Fan observed that Taiwan's Ministry of 
National Defense would not agree to such a proposal. 
 
5. (C) Fan noted several obstacles that need to be resolved 
before charter flights can take place.  First, the PRC has 
indicated that it will not be able to approve cargo charter 
flights to Shanghai.  Fan said that cargo flights to 
Shanghai are one of Taiwan's highest priorities because of 
the city's large volume of cross-Strait and trans-Pacific 
air cargo in the electronics industry that Taiwan airlines 
want to take advantage of using their large cargo 
capacities.  Fan reported that the PRC had offered cargo 
charter flights to Nanjing instead, which he believes would 
be an inadequate substitute.  According to Fan, the PRC 
claimed that Shanghai's Pudong Airport is too busy to 
accommodate cargo charter flights.  Fan questioned the 
PRC's sincerity noting that cargo charters could operate at 
non-peak hours or even at night and would not require gates 
at the terminal. 
6. (C) On the passenger side, Fan claimed that Taiwan 
wishes to first implement Lunar New Year charter flights, 
then proceed with charter flights on other holidays such as 
the Dragon Boat Festival and Mid-Autumn Festival, and 
finally implement regular weekend charters.  The PRC, on 
the other hand, wants to move immediately to regular 
weekend charters.  According to Fan, Taiwan is willing to 
move directly to weekend charters if charter flight 
implementation takes place along with the proposed opening 
of Taiwan to PRC tourists.  Fan argued that unless PRC 
tourists are able to visit Taiwan in sufficient numbers and 
use the charter flights, there will not be enough demand 
for the flights.  Without PRC tourists, PRC-bound planes 
will be empty at the start of each weekend, and Taiwan- 
bound flights will be empty at the end.  Fan believes the 
PRC is less willing to move quickly on the tourism 
initiative than Taiwan. 
 
7. (C) On a similar note, Fan reported that the PRC wants 
to expand the categories of passengers qualified to use the 
charter flights more broadly than does Taiwan.  According 
to Fan, Taiwan wants to limit the flights to Taiwan 
passport holders; China wants "qualified" Mainland Chinese 
to be able to use the flights as well.  However, which PRC 
travelers would qualify has not yet been clearly defined. 
(Lunar New Year charter flights in 2003 and 2005 were 
limited to Taiwan investors in the PRC.)  Fan said that 
Taiwan is willing to extend the charter flight service to 
include Mainland passengers, but only if tourism is also 
liberalized.  Comment: Taiwan's apparent effort to link 
tourism liberalization to passenger charter flights could 
delay progress on these flights given that tourism 
discussions are not as far advanced.  End comment. 
 
Prospects - Not Before Next Year 
-------------------------------- 
 
8. (C) Fan concurred with the Commercial Times article 
headline that charter flights would not occur before the 
start of next year.  He also indicated that he was not 
confident that the flights could be implemented by Lunar 
New Year (January 28).  Fan believes that while Taiwan is 
serious and willing to make compromises, the PRC may not 
be.  He did not dispute recent speculation that the PRC 
would not make any moves that might give Chen Shui-bian's 
Democratic Progressive Party a boost before December 3 
local elections in Taiwan. 
 
9. (C) Fan noted two key time periods that were 
approaching.  First, Fan said that the next three weeks 
would be particularly important.  Because his last meeting 
with PRC counterparts had been contentious, Fan said they 
had agreed to slow down discussions until late October- 
early November.  Fan suggested that progress could resume 
soon.  Separately, Fan pointed out that he will be visiting 
the PRC the week of October 16 to work on arrangements for 
a stock swap between his other firm Askey and Asustek 
Computer Inc.  Despite the possibility of renewed 
discussion, he warned us not to believe any news reports 
that he would be in the PRC to discuss cross-Strait 
charters. 
 
10. (C) The other important time period Fan mentioned was 
the days following the December 3 election.  Fan observed 
that Taiwan airlines had told the government that they 
would need about 45 days to prepare for charter flights, 
and were not willing to implement them in a matter of weeks 
as in 2005.  Fan suggested that if the two sides were not 
able to make rapid progress in mid-December, there would 
not be sufficient time to implement charter flights before 
the Lunar New Year.  (Note: Taiwan airlines made the same 
sort of comments last year when considering the window for 
negotiations between the December 11, 2004, Legislative 
Yuan elections and the 2005 Lunar New Year on February 9. 
Nevertheless, charter flights were implemented after a 
January 15 agreement.  End note.)  More broadly, Fan said 
that if the PRC did not show more flexibility in the days 
after the election, it would imply much worse prospects for 
charter flights in general.  Furthermore, if the DPP has a 
poor showing in the December 3 election, Fan speculated 
that it might want to slow down charter flight discussions 
in order to preserve support among its pro-independence 
base. 
 
Tourism - PRC Officials to Visit Taiwan 
--------------------------------------- 
 
11. (C) AIT/T econoff met October 13, 2005, with Yao Ta- 
kuang, assistant chairman of the Travel Agent Association 
of Taiwan (TAAT), which the Taiwan government has named to 
coordinate cross-Strait tourism discussions.  Yao confirmed 
media reports that TAAT's counterpart in the PRC, China's 
National Tourism Administration (CNTA), would send a 
delegation to visit Taiwan October 28.  CNTA Director 
General Shao Qiwei will lead the 60-member delegation on a 
ten-day visit. 
 
12. (C) Yao said that the visit should have a positive 
effect on efforts to open Taiwan to tourism from the PRC, 
but emphasized that no formal consultations would take 
place during the visit.  He explained that the CNTA group 
was coming so that members could familiarize themselves 
with Taiwan's tourism facilities.  However, he later noted 
that TAAT would discuss some technical issues during the 
visit, including tourist documentation, travel agent 
dispute settlement, travel safety and emergency management. 
 
13. (C) Noting that Chen Shui-bian had announced the visit 
earlier than expected, Yao said that the timing of the 
announcement had not yet affected the group's plans.  He 
said that the itinerary for the familiarization tour had 
not yet been set.  He commented that it would be difficult 
for CNTA to reschedule such a large delegation, especially 
with a national tourism forum scheduled for November in 
the PRC.  If for some reason the trip is postponed, Yao 
predicted it would not be rescheduled until next year. 
 
Prospects - Still Not Ready for Negotiations 
-------------------------------------------- 
 
14. (C) Yao added that he thought that Chen's decision to 
announce the trip indicated solid support for the tourism 
initiative.  Yao believes that Chen's attitude will be the 
deciding factor in how quickly PRC tourism in Taiwan can be 
liberalized.  He believes that Taiwan's election will also 
be an important factor and could delay significant progress 
until next year. 
 
Comment - Chen Supportive but Breakthrough Unlikely 
--------------------------------------------- ------ 
 
15. (C) Both Fan and Yao described recent developments that 
suggest the Chen administration is serious about engaging 
the PRC on cross-Strait charter flights and tourism 
liberalization.  Although Fan's comparison of each side's 
willingness to compromise seemed slanted, he did appear 
convinced of Chen's support.  However, both negotiators 
expressed doubts that there would be quick progress, citing 
the impact of Taiwan's election cycle.  The coming weeks 
may hold some opportunities for progress, but a 
breakthrough on either initiative seems increasingly 
unlikely before the December 3 election.  End comment. 
PAAL