VZCZCXRO9354
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHAM #3286/01 2141354
ZNR UUUUU ZZH
R 021354Z AUG 07
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 9768
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHUP/AMEMBASSY BUDAPEST 0039
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHMT/AMCONSUL MONTREAL 0019
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 AMMAN 003286 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB/TRA 
MONTREAL FOR U.S. MISSION TO ICAO 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EINV KPRV JO
SUBJECT: CHANGE IS IN THE AIR: JORDAN'S AVIATION PRIVATIZATION 
EFFORTS 
 
Sensitive but unclassified; please protect accordingly. Contains 
proprietary information - not for distribution outside the USG. 
 
REF: A. AMMAN 483 
¶B. AMMAN 1299 
 
¶1. (U) Summary: Several privatization and restructuring efforts 
continue in Jordan's aviation sector with the support of the King 
and Parliament (ref A).  The Cabinet approved privatization of 74% 
of Royal Jordanian's stock shares.  A contract has been signed for 
the expansion and private management of Queen Alia International 
Airport (QAIA).  Queen Noor Aviation College (QNAC) which trains 
regional air traffic controllers, is also up for bid.  To complement 
these privatization efforts, the Jordan Civil Aviation Authority 
became the Jordan Civil Aviation Commission, a regulatory body, 
effective August 1.  End Summary. 
 
74% of Royal Jordanian Airlines to Be Privatized 
--------------------------------------------- --- 
 
¶2. (SBU) In a July 18 meeting with the Ambassador, Minister of 
Transport Saud Nseirat said that the Cabinet had agreed to the Royal 
Jordanian (RJ) deal to privatize 74% of Royal Jordanian stock 
shares, with the government keeping 26%.  The shares to be sold to 
non-Jordanians will be capped at 49%.  An initial public offering 
(IPO) is expected this year.  The Minister said that RJ was doing 
well overall.  This week, RJ began non-stop service to Budapest and 
now serves 54 cities - including Chicago, Detroit, and New York -- 
on four continents.  Previously this year, RJ announced plans to 
acquire up to twelve Boeing 787s through direct purchase and lease 
contracts (reftel B). 
 
Ongoing Negotiations on Open Skies 
---------------------------------- 
 
¶3. (SBU) Minister Nseirat added that Jordan has Open Skies 
agreements with Kuwait, Oman, and Saudi Arabia.  He said he has been 
working aggressively to sign an agreement with Egypt, but that the 
discussions have been difficult.  The Minister said the Government 
of Jordan (GoJ) is also in Open Skies discussions with Tunisia and 
Algeria.  NOTE: Jordan and the United States implemented an Open 
Skies agreement in 1996, the United States' first outside of Europe. 
 END NOTE. Currently, U.S. carriers fly to Jordan using code-share 
partners. 
 
Expansion of Queen Alia International Airport 
--------------------------------------------- 
 
¶4. (SBU) This spring, the international ADP consortium won the bid 
for the extension, establishment, and management of Queen Alia 
International Airport (QAIA).  The ADP consortium is comprised of 
international investment houses, construction companies and 
management firms, including Aeroport de Paris Management which 
operates 23 airports worldwide.  Abu Dhabi Investment Corporation 
will have the largest stake.  The Minister predicted that the new 
QAIA will be ready by 2010 and that construction work will begin in 
three months.  ADP will spend an estimated $10-$15 million to 
improve the current facilities, and $550 million on new facilities 
to triple the airport's capacity.  The Minister said that he 
believed Jordan got a great deal on this investment, which includes 
ADP paying 50% of the airport's annual revenue to the Jordanian 
government.  ADP won the bid by submitting the highest concession 
fees offer to the GoJ. 
 
¶5. (U) Five consortia were short-listed during the bidding process, 
and the International Finance Corporation (IFC) - the private sector 
arm of the World Bank Group was brought in as an independent advisor 
to the Government.  During a July 25 meeting with EconOffs, the CEO 
of a Jordanian-Kuwaiti investment firm that did not win the final 
bid complimented the airport bidding process for its transparency, 
project management, and speed.  Although disappointed that her firm 
was not selected, she felt that the process served Jordan well and 
was fair.  She also said that the use of an external financial 
advisor should be replicated on other large government projects. 
 
¶6. (SBU) During a July 23 meeting with EconOff, QAIA's air traffic 
control tower manager and his colleagues expressed concerns about 
job security after the ADP consortium take-over, but were excited 
about the projected growth in capacity.  The tower manager and 
several supervisors also shared with EconOff additional concerns 
about low wages and insufficient manning for air traffic 
controllers. 
 
Queen Noor Aviation College Up for Bid 
 
AMMAN 00003286  002 OF 002 
 
 
--------------------------------------- 
 
¶7. (SBU) Queen Noor Aviation College was founded in 1973 and serves 
as one of the region's training centers for air traffic controllers. 
 60% of its students are from Jordan, and 40% come from other 
countries in the Middle East.  Jordan's Executive Privatization 
Commission designated the school as a "potential investment 
opportunity," and Minister Nseirat reported that the Government had 
received three bids for the college.  According to the school's 
dean, the bidders include a New Zealand company and Royal Jordanian 
Air Academy, a flight school which was itself previously privatized. 
 
 
¶8. (SBU) During a July 22 meeting, the dean and his team expressed 
some concerns about the scope of change that may result from 
privatization, but emphasized their commitment to training.  A 
visiting delegation of FAA, United States Air Force, and British 
Royal Air Force officials described the school's facilities as good, 
but not state-of-the-art. 
 
Jordan Civil Aviation from Authority to Commission 
--------------------------------------------- ----- 
 
¶9. (U) As part of the privatization process in the aviation sector, 
Jordan has also been developing a clearer regulatory role for the 
Jordan Civil Aviation Authority (JCAA).  As of August 1, the JCAA 
became the Jordan Civil Aviation Commission (JCAC); the names of the 
new commissioners are expected to be released soon.  During an 
August 1 meeting with JCAC, its Director of Civil Aviation Security 
said he expected that the staff at JCAC would be streamlined to a 
core team focused on policy.  He also expected the new commission 
would be more independent from the Ministry of Transport. 
 
¶10. (U) Jordan's new Civil Aviation Law stipulates that the 
Commission will be responsible for organizing civil aviation issues 
including aviation safety, economic, and environmental organization. 
 It will also assume responsibility for contracting with investors, 
executing Ministry policy, and studying and negotiating discussions 
in preparation for international treaties and agreements in civil 
aviation.  Article 8 of the Law emphasizes that the Commission will 
temporarily continue to operate and manage civil aviation utilities, 
such as the airports and the college that have been operated and 
managed by the Civil Aviation Authority, until the investor 
contracts are finalized. 
 
Comment 
-------- 
 
¶11. (SBU) In addition to increased government revenue, the major aim 
of these privatization moves is increased competition in the 
country's aviation sector.  The lack of excess capacity at QAIA has 
until now limited Jordan's ability to embrace a comprehensive Open 
Skies policy.  Theoretically, under bi-lateral or multi-lateral Open 
Skies agreements any airline operator should have a fair and equal 
ability to compete.  Until now, however, limited capacity has 
maintained the status quo in terms of flight and passenger loads, 
and Royal Jordanian Airlines has continued to dominate the local 
market.  Tourism industry officials have also said that the limited 
capacity at the airport, and the relative high cost of RJ tickets, 
has thus far limited Jordan's ability to expand its tourism sector. 
These privatization steps and associated changes in government 
structure should serve to support Jordan's growing aviation and 
tourism sectors.  Correspondingly however, the challenges inherent 
in transition to privatization, such as low manning and low salaries 
could potentially become a serious safety and security concern for 
Jordan's airspace and airports if not proactively addressed. 
 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
HALE