SAUDIA TECHNICAL INSPECTION AND PROSPECTS FOR

C O N F I D E N T I A L SECTION 01 OF 03 JEDDAH 000244

SIPDIS

SIPDIS

RIYADH, PLEASE PASS TO DHAHRAN; DEPARTMENT OF NEA/ARP;
PARIS FOR ZEYA; LONDON FOR TSOU

E.O. 12958: DECL: 03/26/2015
TAGS: EAIR ECON KISL PREL SA
SUBJECT: SAUDIA TECHNICAL INSPECTION AND PROSPECTS FOR
PRIVATIZATION

REF: 05 JEDDAH 4961

Classified By: Consul General Tatiana Gfoeller, for reasons
1.4 (b) and (d).


1. SUMMARY. This is one in a series of cables reporting on
the civil aviation sector in Saudi Arabia. Saudi Arabian
Airlines (Saudia) technical repair facility in Jeddah was
subject to an FAA re-certification inspection in mid-March.
The inspectors found no serious deficiencies. Corrective
action was immediately undertaken by the airlines, although
some remedial steps may take as much as a year to complete.
Saudia's training academy was praised by one inspector. The
results of the inspection suggest that Saudia's preparation
for privatization could impose difficult budget demands and
require significant reductions in personnel. END SUMMARY.

FAA INSPECTS SAUDIA TECHNICAL CAPABILITIES


2. (C) On March 22, Saudi newspapers reported that the
Supreme Economic Council had approved the plan presented by
Saudia management for the privatization of the Company. This
announcement chanced to come the week after an FAA technical
re-certification inspection team was in Jeddah to assess the
Saudia maintenance facility's compliance with FAA guidelines.
Jeddah Pol/Econ Chief attended their initial and final
briefing with Saudia Quality Control executives. (Note: The
final briefing was also attended by ConOff. End Note.).
Pol/Econ Chief also accompanied one of the FAA inspectors
during his tour of Saudia's Prince Sultan Aviation Academy
facility for training aircraft maintenance technicians. The
results of the technical evaluation, the expert assessment of
the FAA inspectors provided to Pol/Econ Chief, and
observation of Saudia management's response to the team's
findings provide insight into the airline's performance and
potential for successful privatization. The FAA has not
cleared this cable.

TECHNICAL CONDITION TYPICAL


3. (C) The FAA team characterized their findings concerning
the Saudia maintenance facility as routine. No major,
serious deficiencies were discovered. Many of the repair
stations they examined were judged to be well-maintained and
managed and staffed by knowledgeable and competent staff.
However, they did find a number of practices and conditions
that deviated from the standards specified by FAA regulations.

AREAS IN NEED OF ATTENTION


4. (C) The technical library, the inspectors discovered, was
not verifying that manuals Saudia used were current, but the
inspectors were confident that this problem could be
corrected quickly. A greater problem was the repair
facility's "High Bay" spare parts store, a large warehouse
with parts storage drawers twenty feet high, storing all
spare parts for the repair facility and the airline. The
team found "the entire place was very dirty and there were a
lot of parts that did not have paperwork to trace where they
came from. They seem to have a pretty good handle on how to
correct this, but it will take several months, if not an
entire year to accomplish this." Re-certification
requirements will be satisfied when the FAA receives a copy
of an acceptable corrective plan from Saudia.

INSPECTORS IMPRESSED BY MANAGEMENT ATTITUDE


5. (C) In an aside to Pol/Econ Chief, the FAA examiners
unanimously complimented the Saudia managers with which they
worked for their willingness to rectify the deficiencies
cited. Saudia management accepted the findings and planned
remedial measures while the inspection team was still
conducting its assessment. The lead investigator stated that
several of the deficiencies were successfully corrected by
the time the team left the facility. He also noted that in
the other cases, including the very daunting task of cleaning
their massive parts storage facility, management had already
committed significant staff and resources to carrying out or
planning corrective action. In observing the out-brief
between FAA and Saudia Quality Control management, Pol/Econ
also noted that the senior managers present accepted the
inspectors assessment with a determination to correct

JEDDAH 00000244 002 OF 003


problems and acknowledged the immediate need for reformation.

INSPECTION OF TECHNICAL TRAINING ACADEMY


6. (C) At the request of Saudia management, one of the
inspectors, with a background in technical training,
accompanied by Pol/Econ Chief, toured the airline's Prince
Sultan Aviation Academy for technical training. After
touring the facility located in central Jeddah, only a few
blocks from the Consulate, the inspector described himself as
quite impressed with the facility. The facility, tools, and
instructors were deemed capable of providing very good
training to students beginning with the most basic
maintenance tasks for untrained students to training of
experienced technicians in new, sophisticated repair
techniques.

ACADEMY HAS ROOM TO EXPAND


7. (C) Notable at the time of the visit was that there were
comparatively few students for a facility of its size and
range of potential training courses. There seemed to be
substantial numbers of students in the basic training courses
for new employees, but many of the classrooms had only a few
students, and a number seemed to be unoccupied. In that
respect, after privatization, the academy would be in a good
position to take in students from outside sources for paid
training courses. General Authority of Civil Aviation VP
Berenji has told the Consulate that that this is his plan
(reftel).

WILL ACADEMY BE ABLE TO MAINTAIN ITSELF UNTIL IT BECOMES
PROFITABLE?


8. (C) COMMENT: As Saudia progresses toward privatization
one must consider if the academy will be able to maintain its
budget and facilities. Many analysts have commented that
Saudia staffing and budgets will have to be cut dramatically
if the airline is to become competitive. Over the course of
two to four years, until privatization becomes a reality,
will the relatively lightly used Academy be able to maintain
its capabilities or will budget considerations degrade it?
END COMMENT.

SAUDIA'S MARCH TOWARD PRIVATIZATION COULD BE BUMPY


9. (C) At the request of Pol/Econ Chief, the FAA team leader
shared the team's observations of Saudia's potential for
transformation into a private company, based on their
experience of seeing many airlines throughout the world
struggle to privatize. He foresaw no "issues that would stop
them from privatization, but some areas might make them less
attractive to investors."

MANPOWER


10. (C) The inspector observed that "they will probably have
to down-size the work force to make it attractive for
privatization. Saudi Arabian Airlines Repair Station seems
to have plenty of workers to keep up with the needs of the
repair Station (and the airline). In fact, I believe they
are over-staffed compared to the way private companies work.
I have watched other companies go through privatization and
it can be quite painful on the workers, which will probably
be the case for Saudi Arabian Airlines Repair Station."
Confirming this observation, during the tour of the Repair
Station, personnel could be seen standing around. As one
inspector confided to Pol/Econ Chief, "for every guy they
have working, there is one standing over him watching him
work."

FACILITIES


11. (C) "The actual size of the facility is just barely
adequate. For one thing, most of their hangars are not large
enough to house their largest aircraft. In addition, the
hangars are not air conditioned. Human factors are becoming
an issue now, and I would say that the quality of work might
be affected by the discomfort of the workers during hot
times. (Furthermore)...without air-conditioned hangars, the
doors will likely remain open much of the time which makes
them susceptible to dirt and dust being blown in. I did

JEDDAH 00000244 003 OF 003


notice that a lot of areas are dirty around the facility,
i.e. covered with dust."

TECHNOLOGY


12. (C) In this category the inspector referred to how
modern the facility is in terms of equipment and methods.
"Generally speaking, I would say that some updating is
needed. For instance, a lot of the manuals they are
currently using are provided to them on disk (CD or DVD).
But they do not have a central server to make them available
to everyone, so they simply copy the disks and distribute
them to those that need them. Also the aviation test
equipment they are using, while adequate, is not the latest
available." He speculated that the lack of some modern
equipment is compensated for with extra manpower.


13. (C) COMMENT: These criticisms suggest that Saudia will
be faced with the unattractive option of being required to
make substantial expenditures on facilities and procedural
reforms just as they are trying to cut their costs, in order
to become a competitive carrier. It will bear careful
watching in the future to see if the repair managers are able
to wrest sufficient funds from an increasingly cost-conscious
executive as they move towards full competition. END COMMENT.
Gfoeller