VZCZCXRO2527
RR RUEHDE RUEHDH RUEHDIR
DE RUEHJI #0414/01 3011513
ZNY CCCCC ZZH
R 281513Z OCT 09
FM AMCONSUL JEDDAH
TO RUEHC/SECSTATE WASHDC 1578
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHRH/AMEMBASSY RIYADH 8562
RUEHDH/AMCONSUL DHAHRAN 0145
RHEHAAA/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000414 
 
SIPDIS 
 
DEPT FOR NEA/ARP (HARRIS), NEA/PPD, EEB/TRA/AN (FINSTON), 
CA/FO 
 
E.O. 12958: DECL: 10/28/2019 
TAGS: CVIS EAIR ECON KTIA PREL SA
SUBJECT: SAUDIA AIRLINES HEAD ON OPEN SKIES, COMPETITION, 
AND VISAS 
 
REF: A. 09JEDDAH 0178 
     ¶B. 09JEDDAH 0146 
 
JEDDAH 00000414  001.2 OF 002 
 
 
Classified By: Classified By: CG Martin R. Quinn for reasons 1.4 (b) an 
d (d) 
 
Summary 
-------- 
 
¶1. (C) In an October 26 dinner conversation, the Director 
General of Saudi Arabian Airlines, Khalid Abdullah Almolhem, 
said that the company has no objection to an Open Skies 
Agreement (reftels) with the United States, stated that 
Saudia is not currently profitable because of government 
price caps on fares, dismissed competition from regional 
airlines, praised the American people, and complained about 
US visa procedures. End summary. 
 
 
Saudi Airlines doesn't oppose Open Skies Agreement with US 
--------------------------------------------- ------------- 
 
¶2. (C) Conversing at a small private dinner in Jeddah on 
October 26, Khalid Abdullah Almolhem, the Director General of 
Saudi Arabian Airlines, said his company does not object to 
an Open Skies agreement with the United States because the 
company knows US airlines have no interest in flying to Saudi 
Arabia and most of Saudia's passenger traffic is on domestic 
routes.  Saudia is on the verge of signing a code share 
agreement with Sky Team airline alliance (which includes 
Delta), he added. 
 
 
Saudia not profitable because of government price caps 
--------------------------------------------- -------- 
 
¶3. (C) Asked if Saudia is profitable, Almolhem replied that 
numbers can lie.  The government price cap on fares -- 
particularly for domestic routes -- keeps Saudia from turning 
a profit and has driven new bargain airline Sama to the verge 
of bankruptcy.  The government has refused to allow Saudia to 
raise fares even though operating costs, including fuel and 
labor have increased.  The government also mandates reduced 
fares for large numbers of travelers, from students to senior 
citizens to people with disabilities.  In the United States, 
in contrast, a board looks at costs for regulated industries 
like electricity and sets prices to allow for a reasonable 
rate of return.  The Kingdom lacks a transportation policy, 
Almolhem commented, and the opening of the planned railway 
service (between Jeddah and Mecca and Medinah, and 
cross-country) is likely to produce further confusion in 
transportation prices.  Once price caps are removed and the 
airline privatized in a few years, Almolhem expects Saudia to 
become profitable, despite a likely fall in the number of 
domestic passengers. 
 
 
GCC and all business-class airlines no competition 
--------------------------------------------- ----- 
 
¶4. (C) Asked about competition from all business class 
airlines and regional airlines like Qatar Airways, Emirates, 
and Etihad, Almolhem discounted them as true competitors. 
All business class airlines are not viable for the Saudi 
market, as Saudis will not be willing (or able) to purchase 
business class seats for their wives, many children and 
servants.  Saudia is not interested in emulating the Qatar or 
Dubai aviation strategies, he continued.  The majority of 
passengers flying into Qatar and the Emirates merely connect 
to other flights rather than staying and visiting and 
contributing to the local economy.  Saudia is not interested 
in becoming an air transit hub like Doha and Dubai.  It 
prefers to have passengers flying into the Kingdom for Haj 
and Umrah and staying on for several days in the Kingdom 
spending money.  Almolhem recalled the days when Saudia 
provided Qatar with planes and noted that the Qatari ruler 
subsequently decided to spend billions of dollars to purchase 
new aircraft.  At this time Saudia lacks the resources to 
modernize its fleet.  It has purchased some new Airbus 320 
planes, but is awaiting delivery of Boeing 787s -- which have 
been delayed with no anticipated delivery date specified. 
 
 
Saudia no longer the royal family's private fleet 
--------------------------------------------- ---- 
 
 
JEDDAH 00000414  002.2 OF 002 
 
 
¶5. (C) Asked if it is true (as commonly believed) that Saudi 
Arabian Airlines cancels flights unexpectedly whenever any 
member of the royal family wants to fly, Almolhem said this 
is not true -- although another guest with 14 years' 
experience flying in Jeddah disputed the statement.  Almolhem 
asserted that for the past 5 or 6 years, all requests by 
members of the royal family to use Saudia planes have 
required authorization by an agency of the royal court. 
Saudia sets aside a certain number of planes for the Al Saud 
family's use, and contracts with other airlines to provide 
service if necessary.  In the past few years, royals have 
become "more reasonable" and Saudia has been able to delay 
requests during peak periods. 
 
 
Americans are "the greatest people on Earth" 
-------------------------------------------- 
 
¶6. (C) Although critical of the Bush administration's foreign 
policy, Almolhem lauded Americans as "the greatest people on 
earth."  He recalled his days as a student in the United 
States fondly (including his TKE fraternity hazing) and said 
he would be happy to participate in Post outreach programs to 
promote US education to Saudi students.  One of his sons is 
currently a college student in Boston, although he prefers to 
spend time with other Saudis and Gulf Arabs -- defeating the 
purpose of an American education in Almolhem's view.  He also 
praised Americans for their friendly and courteous treatment 
of his hijab-wearing dauhters.  Almolhem criticized his own 
countrymen, aying they are most demanding and difficult 
custmers, and lack a work ethic from growing up withservants.  Almolhem attributed his own success to Sudi 
Aramco, where his father worked in food servces and which 
provided him with everyhing from vaccinations to an 
education. 
 
 
Visa issues 
----------- 
 
¶7. (C) Almolhem asked when the Jeddah Consulate will provide 
full visa services, complaining about the inconvenience and 
work time lost by crew members of the Jeddah-based airline 
having to apply for crew visas in Riyadh.  Looking around the 
table at the Saudis -- all prominent and US-educated -- 
Almolhem commented that by accepting thousands of Saudi 
students in the 1960s, 1970s, and 1980s, the United States 
had ensured contacts and supporters among the Saudi elite. 
He continued that after 9/11 the United States closed its 
doors and Britain stepped in offering quick and easy visas 
service -- costing the US future allies.  (Note: The British 
Deputy CG in Jeddah announced this week that its mission is 
opening a new VIP service aiming to issue visas within 48 
hours, while reporting to have issued 78,000 visas nationwide 
during 2008. End note.) 
QUINN