VZCZCXRO5431
PP RUEHDE
DE RUEHJI #0614/01 2610430
ZNY CCCCC ZZH
P 180430Z SEP 06
FM AMCONSUL JEDDAH
TO RUEHC/SECSTATE WASHDC PRIORITY 9514
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 4590
RUEHLO/AMEMBASSY LONDON PRIORITY 1532
RUEHFR/AMEMBASSY PARIS PRIORITY 1611
RUEHRH/AMEMBASSY RIYADH PRIORITY 6833
RHEHAAA/NSC WASHDC PRIORITY
RUEKJCS/DIA WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 JEDDAH 000614 
 
SIPDIS 
 
SIPDIS 
 
RIYADH, PLEASE PASS TO DHAHRAN; DEPARTMENT FOR NEA/ARP; 
PARIS FOR WALLER; LONDON FOR TSOU; ABU DHABI FOR PAUL BARTKO 
 
E.O. 12958: DECL: 09/17/2016 
TAGS: PGOV PREL BTIO EAIR ECON KISL KPRV SA
SUBJECT: AMBASSADOR BRIEFED ON SAUDIA FUTURE 
 
REF: A. A) JEDDAH 244 
     ¶B. B) JEDDAH 452 
 
Classified By: Ambassador James C. Oberwetter 
for reasons 1.4 (b) and (d). 
 
¶1. (C)  SUMMARY:  On September 10, the Ambassador and 
Consulate General Jeddah, and FCS staff met the New 
Director General of Saudi Arabian Airlines (Saudia) and 
his senior staff. The Director General offered an optimistic 
assessment of the airline's future.  Privatization is planned 
over the next two or three years.  A number of non-core activities 
will be developed into separate businesses.  The fleet will 
be modernized.  The management staff were favorable towards 
Boeing, but guarded in discussing future purchases.  The 
managers expressed concern that the manufacturer would have 
to provide logistical support and suggested that Embassy 
assurances that airline staff could travel for training and 
administration in support of a purchase would be important 
considerations.  The Saudi government is making major 
investments in infrastructure, including aviation and 
airports, in the Hejaz.  END SUMMARY. 
 
PROMISING FUTURE FOR SAUDIA 
 
¶2.  (C) On September 10 the Ambassador met with the new 
Director General of Saudia, Khalid Molhem, and his senior 
operations staff.  Also present were Riyadh FCS Counselor 
and Jeddah Pol/Econ Chief.  Molhem gave the Ambassador an 
optimistic picture of the airline's future.  He noted that 
in the two weeks ending on September 5, Saudia carried 
348,000 passengers on 1,200 international flights.  Saudia 
officials said that the airline could fill 15 to 20 flights 
from the Kingdom to Egypt every day.  These figures did not 
include their domestic flights which are usually filled to 
capacity. 
 
FUTURE TIED TO ECONOMY AND PILGRIMS 
 
¶3.  (C) Unlike other airlines in the Gulf region that 
strive to increase transit passengers, Saudia management is 
pursuing a stable, long-term market aimed at passengers 
coming to the Kingdom, rather than passing through to 
elsewhere.  This strategy depends in part on continued 
economic growth in Saudi Arabia attracting business from 
throughout the world.  Another element of this strategy is 
pursuit of the uniquely Muslim pilgrimage traveler.  Haj 
dominates passenger travel in Saudi Arabia, attracting some 
3 million travelers every year, the majority of whom travel 
on Saudia.  This traffic is limited by quotas set by the 
Saudi Arabian government and cannot increase appreciably in 
the near future.  However, umrah, or the little pilgrimage, 
which can be conducted anytime during the year, is a 
rapidly growing market.  Currently umrah brings 8-10 
million visitors to the Kingdom, and Molhem speculated that 
it could easily increase to 20 million passengers per year. 
 
COMPETITION WELCOMED 
 
¶4.  (C) Saudia management insisted it is not afraid of 
competition in the heretofore closed Saudi Arabian aviation 
sector.  In fact, they count on competition to increase 
passenger numbers.  Currently, fares are high and the 
millions of expatriate and budget travelers in Saudi Arabia 
travel only occasionally.  They theorize that cheaper fares 
would encourage more frequent travel by these customers. 
 
SELECTIVE SECURITY REQUIREMENTS 
 
¶5.  (C) The Ambassador, relating his own experience the 
previous day boarding a Saudia flight from Nairobi to 
Jeddah, said he had never gone through such a stringent 
security screening.  The Director General responded that on 
flights to and from certain destinations, Beirut and 
Nairobi notable among them, the Ministry of Interior issue 
special security directives and supplies specialy trained 
security agents, although they wear Saudia uniforms, to 
inspect passengers and baggage. 
 
PRIVATIZATION PREPARATIONS 
 
 
JEDDAH 00000614  002 OF 003 
 
 
¶6.  (C) Molhem was optimistic that full privatization of 
Saudia can be effected in the course of the next two or 
three years.  The airline is presently involved in an 
aggressive campaign to cut its costs.  It is divesting 
itself of its catering operations, which are seen as an 
attractive investment.  They have received 48 inquiries, 
including 10 substantial offers from European concerns. 
 
¶7.  (C) The airline is also preparing to spin-off its 
training facilities.  In a candid statement, the Director 
General stated that he would like to see interest from U.S. 
concerns in this portion of the operations.  They are also 
preparing to divest the maintenance facility which would 
remove more than 5,000 people from their work force. 
Maintenance accounts for some SR 5 billion in revenue. 
Ground handling services, which are expected to be a 
lucrative activity as more airlines begin operating to and 
within Saudi Arabia will also be made into a separate 
company.  The cargo operations will also be separated, 
leaving the airline to its primary mission--flight 
services. 
 
NEW FLEET - BOEING? 
 
¶8.  (C) Saudia anticipates spending over USD 12 billion on 
new aircraft over the next few years.  Prominent on the 
coffee table around which the Ambassador and Saudia 
officials held their discussions was a model of the new 
Airbus A-380.  However, the Ambassador and FCS Counselor 
aggressively advocated for Boeing.  The airline staff are 
well-disposed towards Boeing products, but cautioned that 
Boeing must accommodate their logistical needs. 
 
CONSULATE WILL TRY TO ACCOMMODATE SAUDIA 
 
¶9.  (C) The airline managers also suggested the ability for 
their staff to travel to the United states would be a major 
factor in their purchase decision.  The Director of Flight 
Operations noted that obtaining a visa in Riyadh could 
result in air crew members being unavailable for as many as 
four days, a serious problem considering the stringent 
regulations that govern air crew activities.  (Note: 
Saudia currently employs 1,200 cockpit crew and 4,200 cabin 
crew among its approximately 24,000 employees.  End note.) 
 
¶10.  (C) Although the airline trains crews in France, 
Helsinki, and the Emirates, many of these air crew members, 
as well as hundreds of other staff, would have to travel to 
the U.S. for training if new aircraft are purchased. 
Consequently, they asked if the Embassy could assure them 
that their staff could travel when necessary for training 
and administration connected with any major purchases.  The 
Ambassador suggested that the Embassy would explore options 
such as those employed by ARAMCO and a few other major 
companies to facilitate visa issuance. 
 
AIRPORT MANAGEMENT 
 
¶11.  (C) Airport management in Saudi Arabia is under the 
administration of the General Authority of Civil Aviation 
(GACA).  Saudia management has had intensive discussions 
with them, because airport improvements are vital to their 
future success.  As currently configured, Jeddah's King 
Abdul Aziz Airport is not suitable to act as an 
international hub, and the airline is anxious that future 
improvements and new airports constructed in the Kingdom 
are compatible with its future operations. 
 
¶12.  (C) However, potential developments are especially 
promising for western Saudia Arabia.  Mecca recently became 
an international airport.  Molhem predicted that Taif and 
Tabuk would follow suit.  He thought that Saudi Arabia 
could have as many as seven or eight international airports 
in the next decade. 
 
MAJOR INFRASTRUCTURE DEVELOPMENT IN THE WEST 
 
¶13.  (C) The Ambassador was impressed to learn that USD 30 
billion is being committed to economic development projects 
in the Hejaz, including redevelopment of King Abdul Aziz 
Airport in Jeddah, planning for an entirely new airport 
 
JEDDAH 00000614  003 OF 003 
 
 
that could accommodate an international airport hub 
operation by Saudia and upgrading other airports.  Added to 
the funds earmarked for new aircraft, and the development 
projects, such as King Abdullah Economic City, 
infrastructure investment in western Saudi Arabia may well 
equal or exceed the 50 billion investment in ARAMCO in the 
Eastern Province. 
 
TONEY