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Viewing cable 08HANOI1215, U.S. AND VIETNAM AGREE TO OPEN SKIES CARGO REGIME

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Reference ID Created Released Classification Origin
08HANOI1215 2008-10-28 04:04 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Hanoi
VZCZCXRO6171
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #1215/01 3020404
ZNR UUUUU ZZH
R 280404Z OCT 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 8669
INFO RUEHHM/AMCONSUL HO CHI MINH 5248
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGP/AMEMBASSY SINGAPORE 2667
RUEHKO/AMEMBASSY TOKYO 5929
UNCLAS SECTION 01 OF 02 HANOI 001215 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND EEB/TRA 
STATE FOR EEB/TRA TERRI ROBL AND VIKI LIMAYE-DAVIS 
SINGAPORE FOR FAA MARY WALSH 
USTR FOR DBISBEE 
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO 
 
E.O. 12958: N/A 
TAGS: ECON EAIR EIND EINV ETRD VM
SUBJECT: U.S. AND VIETNAM AGREE TO OPEN SKIES CARGO REGIME 
 
REF: HANOI 1113 
 
HANOI 00001215  001.2 OF 002 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED (SBU).  NOT FOR 
INTERNET DISTRIBUTION. 
 
1. (U) Summary:  Delegations from the United States and Vietnam 
agreed ad referendum to an Open Skies regime for cargo services on 
October 7 following two days of talks in Hanoi.  The new agreement 
will renew the 2003 Air Transport Agreement for three years and the 
delegations intend to meet within two years to work toward further 
liberalization, including a possible exchange of fifth freedom 
passenger rights.  The main impediment to a full Open Skies 
Agreement was the GVN's unwillingness to grant U.S. carriers fifth 
freedom passenger rights over Japan.  End summary. 
 
VIETNAM AGREES TO OPEN SKIES CARGO REGIME 
----------------------------------------- 
 
2. (U) Delegations from the United States and Vietnam agreed ad 
referendum to a new Open Skies regime for cargo services following 
two days of talks in Hanoi, October 6-7 2008.  The cargo 
arrangement, which incorporates seventh freedom rights, provides 
increased flexibility for U.S. cargo carriers such as FedEx Express 
and UPS, which currently operate in Vietnam, including the right to 
move goods between Vietnam and third countries.  While the agreement 
does not permit intermodal cargo surface transport across Vietnam's 
border, the GVN's Ministry of Transport indicated that it may lift 
that restriction after further consideration. 
 
3. (SBU) Lai Xuan Thanh, the Deputy Director General of the Civil 
Aviation Administration of Vietnam (CAAV), who led the Vietnamese 
side at the talks, pressed the U.S. to introduce new language into 
the agreement that would have restricted U.S. cargo carriers from 
establishing hubs at Hanoi's Noi Bai and Ho Chi Minh City's (HCMC) 
Ton Son Nhat International Airports.  Thanh, moreover, sought the 
introduction of a provision specifying central Vietnam's Chu Lai 
International Airport as the only airfield in Vietnam where U.S. 
cargo carriers could establish hubs.  (Note:  The GVN is spending 
$700 million to transform Chu Lai Airport into an air cargo 
transport hub as part of a greater economic development plan for 
central Vietnam.  End note). 
 
4. (SBU) The U.S. side retorted that new restrictions on where cargo 
operations could be based would revoke rights already held by the 
USG under the current agreement.  The GVN ultimately agreed to 
exclude new language from the agreement and to allow cargo-basing to 
be determined by conditions at the relevant airports.  Vietnam's 
interest in developing the Chu Lai airport was noted in the 
Memorandum of Consultations. 
 
PASSENGER FIFTHS STILL A PROBLEM 
-------------------------------- 
 
5. (SBU) The negotiation discussions on liberalizing passenger 
services were problematic.  Although the Vietnamese delegation 
offered to eliminate designation and frequency restrictions on 
passenger routes contained in the old agreement, Vietnam remained 
unwilling to grant U.S. carriers fifth freedom passenger rights over 
Japan.  (Comment:  According to U.S. carriers, fifth freedom rights 
are essential for commercially viable new service to Vietnam.  The 
failure to conclude an agreement on fifths means that new U.S. 
passenger service to Vietnam is unlikely in the short term, 
including flights by Northwest Airlines, which had hoped to expand 
its route network by initiating service on the underserved 
Tokyo-HCMC route.  For now, United Airlines remains the only U.S. 
carrier to offer direct service from the United States to Vietnam. 
End Comment). 
 
6. (SBU) Explaining the GVN's unwillingness to exchange fifth 
freedom rights with the USG, Thanh claimed Vietnam had tried but 
failed to secure fifths from the Government of Japan (GOJ) during 
bilateral aviation talks in May 2007 and noted that such rights were 
necessary for Vietnam to offer direct services to the U.S.  The U.S. 
side pointed to evidence on the website of the GOJ's Ministry of 
Land, Infrastructure, Transport and Tourism (MLIT) indicating that 
Japan, in fact, did offer Vietnam limited fifth freedom traffic 
rights at the 2007 talks. 
 
7. (SBU) Thanh responded that the 2007 agreement merely gave 
Vietnam's carriers the right to make technical stops in Japan (i.e., 
refuel without taking on passengers).  (Note:  Members of the U.S. 
delegation had heard from Japanese sources that Vietnam had either 
refused the fifth freedom rights offered by Japan or asked Japan to 
 
HANOI 00001215  002.2 OF 002 
 
 
defer the rights for several years until Vietnam Airlines was 
prepared to begin flights on its long-planned HCMC-Osaka-Los Angeles 
(LAX) route.  End note.) 
 
8. (U) Thanh concluded that while Vietnam recognized the economic 
benefits that expanded passenger services would bring, the GVN 
needed to provide for "minimal equality" of opportunity for Vietnam 
Airlines and a "balance of interests" between the passenger carriers 
of both sides.  The U.S. side countered that broader economic 
interests would be served by opening new service, and that the USG 
does not perceive aviation relations as a zero sum game.  The two 
sides intend to meet again within two years to work toward further 
liberalization, including a possible exchange of fifth freedom 
passenger rights. 
 
MICHALAK 
 
 
 
1