VZCZCXRO2507
RR RUEHDE RUEHDH RUEHDIR
DE RUEHJI #0444/01 3231129
ZNY CCCCC ZZH
R 191129Z NOV 09
FM AMCONSUL JEDDAH
TO RUEHC/SECSTATE WASHDC 1604
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHRH/AMEMBASSY RIYADH 8584
RUEHDH/AMCONSUL DHAHRAN 0159

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000444 
 
SIPDIS 
 
DEPT FOR NEA/ARP (HARRIS), EEB/TRA/AN (FINSTON) 
 
E.O. 12958: DECL: 11/19/2019 
TAGS: CVIS EAIR ECON KTIA PREL SA
SUBJECT: SAUDI PROPOSED OPEN SKIES AGREEMENT 
 
REF: A. 09JEDDAH414 
     ¶B. 09JEDDAH178 
     ¶C. 09JEDDAH146 
 
JEDDAH 00000444  001.2 OF 002 
 
 
Classified By: Consul General Martin R. Quinn for reasons 1.4 (b) and ( 
d) 
 
¶1. (U) This is an action request. Please see paragraph 11. 
 
¶2. (C) Summary: On November 16, Captain Mohammad Ali Jamjoom, 
Vice President Safety and Economic Regulation at the Saudi 
General Authority of Civil Aviation (GACA), presented 
EconCounselor and PolEconOff with further revisions to the 
Department's Model Open Skies Agreement text reflecting 
concerns from Saudi Arabian Airlines.  The key change 
requested (again) is the deletion from the agreement of the 
right to operate from points behind.  If the revisions 
proposed by Saudi Arabia are not acceptable to the United 
States, Jamjoom suggested we might be able to put the points 
in an annex and gradually phase in the provisions 
automatically.  If the revised text meets US requirements, 
Jamjoom stated that an Open Skies agreement can be signed 
without delay. The proposed language has been received by 
ConGen Jeddah and forwarded via electronic mail.  Jamjoom 
stressed that the Saudis -- particularly the civil aviation 
community -- are eager to conclude an Open Skies Agreement 
with the United States.  He also requested immediate US 
approval of the codeshare agreement Saudia Airlines has 
negotiated with a US carrier.  End summary. 
 
¶3. (SBU) The remaining critical point in concluding an Open 
Skies agreement with Saudi Arabia concerns the language in 
section II which refers to "points behind."  The Saudis 
continue to wish to delete from the agreement the right to 
operate from points behind.  Saudia Airlines regards this 
right as tantamount to Sixth Freedom rights and is concerned 
about marketing competition.  Jamjoom noted that while Saudi 
Arabia has Open Skies agreements with some regional 
countries, the Open Skies agreement with the United States 
would be Saudi Arabia's biggest agreement.  Operators (i.e., 
Saudi Arabian Airlines) are very concerned about how the 
agreement will affect business.  Although they see 
opportunity to expand service on their most profitable routes 
-- to the United States -- they also are worried about the 
potential competition from large US operators. 
 
¶4. (C) Jamjoom concluded by noting that in the event the 
proposed changes are not acceptable to the United States, it 
might be possible to include some additional language in 
Annex II that might use the same staged approach, 
automatically removing restrictions over several years. 
 
 
U.S. routes a goldmine but eastern and domestic routes 
--------------------------------------------- --------- 
unprofitable 
------------ 
 
¶5. (C)  Saudi Arabia's desire for an Open Skies agreement 
seems motivated by a desire to increase profitable flights to 
the United States, which are now limited in frequency under 
the 1993 agreement.  Domestic routes are "breaking the back 
of operators," despite gradual attempts to "liberate prices" 
and decrease the number of PSOs so that operators can operate 
according to strategic plans.  Because airplanes are the only 
transportation available to some parts of Saudi Arabia, the 
government mandates frequent flights and caps prices. 
 
¶6. (C) Operators are barely recovering costs on routes east 
from Saudi Arabia, Jamjoom continued; because of high 
competition, prices are at rock bottom.  Saudi operators are 
much more interested in the western option, with the route to 
the United States "the most tempting."  Up to September 11 
those routes "were a goldmine" -- so profitable that Saudi 
Arabian Airlines bought five 747s just to serve that route. 
Travel to the United States is increasing with the easing of 
visa restrictions and improvements in the immigration 
process.  When the visa issue is "solved" -- including 
re-establishment of full visa operations at ConGen Jeddah -- 
Jamjoom expects large numbers of Saudis will travel to the 
United States because it is relatively inexpensive -- even 
compared to regional countries -- and has much more variety. 
The money route is to the United States, Jamjoom concluded. 
 
 
The future: more services, bigger airports, simpler 
--------------------------------------------- ------ 
regulations 
----------- 
 
JEDDAH 00000444  002.2 OF 002 
 
 
 
¶7. (C) Asked how Saudi carriers see the future, Jamjoom 
replied that the cargo sector hasn't been explored to the 
full potential of the market.  Although Saudi Arabia has 
space to create huge cargo areas, there have been few 
attempts to establish bases.  The new cargo service spun off 
from Saudi Arabian Airlines needs time to get established 
(i.e., GACA will look to shelter it from international 
competition).  Over the long-term, Jamjoom believes that the 
aviation sector needs to grow, both for cargo and passengers, 
because the number of operators is below that needed for a 
country of the size and with the population of Saudi Arabia. 
Jamjoom commented that there is a sufficiently large customer 
base to support and expanded sector, although facilities need 
to be expanded.  Most Saudi airports are undergoing 
renovations, he added, citing the Medina airport as an 
example of a Saudi airport that is too small for the existing 
passenger traffic. Saudi Arabia plans to open several 
regional airports (e.g., Abha and Tabouk) for international 
service as part of the SAG's effort to develop tourism, 
including religious tourism. 
 
¶8. (C) GACA is about to sign a contract with a US-based 
company to simplify and streamline its regulations, most of 
which are based on FAA rules and regulations.  Although the 
US now has the best system in aviation, the multiple layers 
of regulations were built incrementally to incorporate the 
viewpoints of all stakeholders in the huge American aviation 
network.  Jamjoom said that Saudi Arabia's aviation sector is 
much simpler, and the contractor will look to distill the 
most relevant parts of the existing regulations to make it 
more applicable to the Saudi case, and easier for carriers to 
comply.  GACA is automating operations specifications so that 
carriers can do this online.  GACA is also working with other 
Arab civil aviation bodies attempting to unify processes, for 
example moving toward single certification of flight schools 
and maintenance organizations.  Arab civil aviation 
authorities need more authority so that decisions are removed 
from political pressure, said Jamjoom, noting it is 
politically sensitive to certify or deny certification. 
 
 
Immediate codeshare approval requested by Saudis 
--------------------------------------------- --- 
 
¶9. (SBU) Jamjoom emphasized that Saudi Arabia wants to 
proceed immediately with the codeshare agreement between 
Saudi Arabian Airlines and a US carrier.  (He believed it was 
American Airlines; the Director General of Saudia said he was 
negotiating with Delta Airlines.) The airline has filed for 
codesharing, and Saudi Arabia is hoping for favorable 
results. 
 
¶10. (SBU) Comment: Jamjoom repeatedly stressed the SAG's 
interest in concluding this agreement as quickly as possible. 
 We believe GACA and Saudi Arabian Airlines are genuinely 
interested in capitalizing on the opportunity of greater 
Saudi traffic to the United States.  He was also very aware 
of the positive political signal that concluding an Open 
Skies agreement would send about the strength of our 
bilateral relations.  While we believe Saudia is seriously 
concerned about competition from US carriers, we also 
believe, based on Jamjoom,s presentation of the language, 
that GACA wants to find a way to agree on the text. 
 
¶11. (SBU) ACTION REQUEST: Post requests EEB/TRA/AN respond 
indicating whether Saudi Arabia's proposed changes are 
acceptable, negotiable, or non-negotiable. 
QUINN