JORDANIAN REPLY REGARDING USG PROPOSAL TO AMEND

UNCLAS AMMAN 007508

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EAIR KTIA JO
SUBJECT: JORDANIAN REPLY REGARDING USG PROPOSAL TO AMEND
CRS PROVISIONS OF AIR SERVICES AGREEMENT

REF: STATE 155586


1. (U) Embassy received on September 7 the following letter
from Jordan's Director General of Civil Aviation Authority:

BEGIN TEXT:

Dear Mr. Eason,

With reference to your letter of August 31, 2004, concerning
the U.S. Government proposal to amend the U.S./Jordan Air
Services agreement by deleting Annex III of the Agreement.
Kindly note that we are considering the above proposal with
cautious due to the following reasons:


1. We strong believe that the Justification for keeping
Annex III is still prevailing in the Jordanian market.

2. The Non-Discrimination clauses do serve the Jordanian
economy and air transport in Jordan. CRS's have substantial
market power over most airlines in the world, let alone small
carriers operating from/into Jordan.

3. The Internet e-commerce penetration is still low in
Jordan and in the Middle East, Credit card holders and usage
is not comparable to US penetration. Thus Internet
e-commerce is not yet an alternative channel for airlines to
use in our region. Carriers are still largely dependant on
dominant CRS's in Jordan to sell its inventory.

4. Removing Annex III opens the doors for these huge
dominant CRS's to bias against smaller carriers in the
following areas:
a. Increasing the distribution cost to smaller carriers.
b. Reducing distribution cost for larger carriers and giving
them an extra advantage.
c. Display bias with large carriers and against smaller
carriers whereby, large carriers can give priority for their
services to be shown in the first display, which is in this
case gives them a better chance to attract more passengers.
d. Display bias used in a travel agency dominant channel
will also affect customers and they will end up manipulated
through the dominate large Airlines or GDS's.

Based on the above mentioned you are kindly requested to
advise us the reasons to delete the Annex in question.
With my best personal regards
Sincerely yours,
Hanna Najjar
Director General
Civil Aviation Authority

END TEXT.


2. (SBU) COMMENT: The above draft was formulated primarily by
the state-owned Royal Jordanian Airlines. Their initial
position on the deletion was very negative, but the CAA DG
softened the response, partially in response to Post's advice
that other Open Skies partners had responded positively and
none had so far responded negatively. Nonetheless, RJ will
likely require some strong reasons for the deletion before
surrendering what they feel to be a protection for a
disadvantaged airline already on the edge.
HALE