Washington, USA, August 5, 2003 By Jose Katigbak, Star Washington Bureau  - The Philippines and the United States are laying the groundwork for last-ditch negotiations in the coming weeks to bridge differences over their 1982 air transport agreement before the "open skies" treaty goes into effect on Oct. 1.

Informed industry sources said exploratory talks on several tracks are going on in Manila and Washington to determine a common negotiating ground on which to build on for an 11th hour meeting. Restrictions on capacity, frequency and route of flights between both countries will be lifted on Oct. 1, unless new terms are agreed.

As part of these exploratory talks, Lourdes Yparraguirre, minister in charge of economic affairs at the Philippine Embassy in Washington met on Aug. 1 with Laura Faux-Gable, deputy director of the State Department’s Office of Aviation and Negotiations. No details of their discussions were available.

Faux-Gable headed the US team at the February negotiations in Washington and the July talks in Manila, both of which failed because the negotiating panels refused to budge from their positions. Given the rotating schedule of talks the make-or-break meeting is likely to be held in Washington.

The issues facing the negotiators are complex but industry officials believe an agreement is possible if both sides think outside the box. A quid pro quo need not necessarily be confined to air transport, they said.

The focus of the talks should be less on the plight of individual airlines and more on the importance of maximizing trade and national and regional growth, they added.

President George W. Bush’s state visit to the Philippines tentatively set for Oct. 17-18 and the admitted difficulty of renegotiating a treaty once it goes into effect give both sides added impetus to meet again to break the stalemate.

Since the RP-US air treaty was signed in 1982, the provision for "open skies" has been deferred five times owing to Manila’s admission its carriers cannot compete on an even footing with US airlines.

The Philippines wants "open skies" for passengers – the so-called 5th Freedom – postponed for 15 more years to give local carriers time to compete effectively.

Fifth Freedom would give carriers from the US and the Philippines the right to fly to each other’s territory and then on to a third country and in all sectors they can load and unload passengers.

The Americans in turn want 7th Freedom rights for cargo. They also want to institute a code sharing procedure under which one US airline offers a flight in its own name to the Philippines, but another airline from the same country or a third country provides some or all of the service.

Seventh Freedom would give US airlines the right to carry cargo to the Philippines and from there to nearby countries in a hub and spoke operation. Because of limited capabilities, the Philippines cannot avail of a similar right.

Implementation of the treaty as it stands is not likely to have much of an impact to both sides initially.

This is because the US, hobbled by an economic downturn, uses less than half the 36 flight frequencies it is currently allowed to Manila. Philippine Airlines has more flights to the US.

But Filipino officials fear that two or three years down the road when the US economy improves American carriers could swamp their Philippine counterparts.

As to cargo operations, Federal Express in Subic and United Parcel Service in Clark already enjoy what are basically 7th Freedom rights under separate agreements granted to them by previous administrations.

Reported by: Sol Jose Vanzi

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