US, ARGENTINA DISCUSS OPEN SKIES FOR CARGO

US, ARGENTINA DISCUSS OPEN SKIES FOR CARGO

A declaration by the Argentine government of free trade for all-cargo airlines could mean unrestricted access by Federal Express and others to one of the hemisphere's most tightly controlled markets, possibly leading to lower air freight rates.

U.S. negotiators have spent the last two days in Buenos Aires discussing more open aviation relations with the Argentines. When they return today, they could have in hand ''open skies,'' or the outlines of such, for U.S freight airlines flying to Argentina.The Argentine government late last month declared that its markets must become more open, and directed officials to completely deregulate the all-cargo air market for the next four years.

Argentine officials could not say why the open-skies decree was scheduled to last only for four years.

The new arrangement would allow freight airlines to fly into Argentina and beyond to other countries without restriction, as long as Argentine carriers can do the same in the partner countries.

OTHER INDUSTRIES

The decree comes as part of Argentina's push to deregulate all of its major industries. The oil and energy sectors are being deregulated, and the government recently said it plans to free up telecommunications next.

''Our whole policy is to push for deregulation because this is the best way to attract more investment,'' said a senior official at the Argentine Embassy here.

The agreement could open up trade with one of Washington's most restrictive partners and one of the most important economies in the crucial South American Mercosur trade bloc.

Argentina is one of the least active U.S. trading partners in South America, largely because of the restrictive agreements.

Only 19,000 metric tons of beef, fruit, live fish, clothing, cotton and leather moved by freighter from Argentina to the United States in 1997, compared with 152,000 tons from Colombia.

American shippers sent 347,000 tons of computer and automotive parts, telecommunications and other technical equipment to Argentina's emerging market.

A cargo analysis firm, MergeGlobal, predicts those figures could grow more than 6 percent in both directions by 2002. If Argentina eventually enters the North American Free Trade Agreement, an analyst there said, those figures could rise even more.

Open skies for cargo also would end a struggle between U.S. freight airlines for more access to Argentina. U.S. cargo carriers are allowed only 12 flights a week under the current air treaty.

FedEx, which controls five of those, has been trying to buy three more from other airlines, a move that opponents say would give FedEx 75 percent of the restricted market.

But that issue, which has been pending before the U.S. Department of Transportation since May 1997, would become moot if all airlines were allowed free access to the market.

''It's no Japan, and it's no U.K., but I do think this is an important development because it will also add a lot of operational flexibility,'' said Brian Campbell, president of aviation specialists Campbell Group. ''If we get true open skies, carriers will be able to . . . set up some operational hubbing in Buenos Aires.''

SNAGS POSSIBLE

The talks could snag on several issues, however. Washington seems prepared to get what it can for the cargo side in this round, despite officials' traditional reluctance to negotiate cargo rights separately from passenger rights, thereby forfeiting it as a bargaining chip.

But the two sides could run into trouble on semantics, the bane of many negotiations.

''The devil is in the details,'' said Ted Scherck, president of Colography Group, a market research firm.

''I would be very surprised if there weren't definitional differences in what the Argentine government is calling open skies and what the U.S. (side) is calling open skies.''

Though the sessions today and Thursday will address both passenger and cargo rights, they are being spurred by American Airlines' proposed alliance with, and partial purchase of, Argentine flag carrier Aerolineas Argentinas. The current bilateral agreement must be amended before the airlines can perform any joint operations.

Most U.S. cargo airlines are already considering how they would use a possible open-skies agreement. Polar Air Cargo already flies once a week with a 747 freighter, and would put a second on as soon as possible. Fine Air would launch Argentina service with an L-1011.

FedEx officials seemed more cautious, however, refusing to comment on the talks with Argentina or the company's plans for the region.

Instead, a spokesman said, the company remains focused on its pending application for routes at DOT.

'BUSINESS AS USUAL'

''Nothing is certain at this point,'' said Brian Philips, FedEx managing director for marketing in Latin America. ''We are just 'business as usual' and will continue to pursue the frequencies.''

FedEx would use the extra rights it would win in that proceeding to convert its five weekly 727 flights into widebody flights.

If U.S. cargo airlines do get open skies with Argentina, carriers are likely to flood the market with capacity, some analysts said, and rates could suffer.

''I'm afraid the carriers are doomed to repeat over and over again dumping too much capacity,'' Mr. Scherck said. ''I've been in the business for 25 years, and half a dozen times during those 25 years, I've seen the same mistake made. I have absolutely no expectation it won't continue to be made.''