AMBASSADOR MET WITH GENERAL AUTHORITY OF CIVIL

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000636

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/18/2016
TAGS: PGOV PREL BTIO EAIR ECON KISL KPRV SA
SUBJECT: AMBASSADOR MET WITH GENERAL AUTHORITY OF CIVIL
AVIATION TO DISCUSS DEREGULATION, CONCERNS, EXPANSION

Classified By: Ambassador James C. Oberwetter
for reasons 1.4 (b) and (d).


1. (C) SUMMARY: Ambassador Oberwetter met with the President
Eng. Abdullah M. Nour Rehaimi and several Vice Presidents of
the General Authority of Civil Aviation (GACA) in Jeddah on
August 18 to discuss GACA's plans for deregulation and
expansion in Saudi Arabia. Both sides expressed an interest
in easing consular obstacles in order to facilitate movement
of personnel between Saudi Arabia and the U.S. GACA will
become an autonomous public authority, with its three major
divisions further delineated. The total cost of the proposed
developments exceeds USD 50 billion, which was the original
estimate. GACA requested USG assistance to rekindle the
relationship between the Federal Aviation Authority (FAA) and
GACA. END SUMMARY.

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GACA Moves Market Share to Europeans and Australians
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2. (C) Ambassador Oberwetter relayed to GACA president
Rehaimi, during their August 18 meeting, that the USG would
work to facilitate the issuance of visas for particular
entities of interest, such as Saudi Airlines and GACA.
Rehaimi mentioned that, due to "restrictive U.S. consular
policies" post-September 11 that increased limitations on
travel for Saudi businessmen, the commercial airline sector
has expanded cooperation with European and Australian firms.
He cited some conferences in the U.S. that Saudis were not
allowed to attend. GACA was concerned because it has 6,500
employees, many of whom plan to attend training in the U.S.
GACA also relies on U.S.-based employees to train its
employees inside Saudi Arabia.

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New consular policies for GACA?
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3. (C) Ambassador Oberwetter said that he hopes U.S. consular
policies used for the Saudi energy sector can be applied to
GACA and Saudi Airlines in order to allow closer cooperation
between U.S. and Saudi firms. The Ambassador then mentioned
concern about Europeans taking market share in Saudi Arabia.
One of Rehaimi,s assistants responded, "The phase with the
Europeans has matured, and Saudi Arabia is looking for the
next thing." Further, he told the Ambassador that GACA
receives its leading technology from the U.S. corporation
Boeing and that in the near future GACA navigation systems
would be completely computerized.

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GACA Will "Break Up" to Achieve Autonomy and Self-Sufficiency
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4. (C) Rehaimi told the Ambassador that a "large
transformation" is currently underway to convert GACA into an
autonomous, quasi-legal entity, managed by a board of
directors and independent from the SAG. GACA is currently
responsible for: a) regulatory authority; b) airport control;
and c) navigation services. Rehaimi advised that these
responsibilities would be "broken up" in the near future in
order to make GACA 100 percent financially self-sufficient in
ten years, although he did not specify how it would be
accomplished. There are six major areas of interest that
GACA has identified in its efforts to modernize civil
aviation in Saudi Arabia: 1) institutional; 2) sector
liberalization; 3) organization and human resources; 4)
airport operations; 5) air navigation services; and 6)
information technology.

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Jeddah and Medina to Be International Aviation Hubs
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5. (C) Rehaimi explained that Saudi Arabia currently has
three international airports, seven regional airports, and
seventeen domestic airports. GACA plans to convert Jeddah
into an international hub. The Ambassador commented that
Jeddah will become a "niche hub" since it will be mainly
servicing religious pilgrims on their way to conduct the Hajj
or Ummrah pilgrimages. GACA also plans to make Medina into
an international hub to support the Ummrah pilgrimages. The

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Ambassador stated that Post had estimated the cost of all of
the proposed upgrades and reforms to be approximately USD 50
billion. Rehaimi suggested that this is a "conservative
estimate." Another GACA executive added, "It will be at
least USD 50 billion."

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GACA Will Deregulate Commercial Aviation in Saudi Arabia
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6. (C) GACA explained plans to open the airline market and
end Saudia Airlines' monopoly in Saudi Arabia. The current
plans for opening up the sector include allowing other
airlines to compete with Saudia for international flights. A
two year window will allow Saudia to maintain its monopoly in
the domestic flights market temporarily. After the two year
window expires, the Saudia domestic flight market will open
up; however, there will be restrictions regarding
destinations and flight plans for firms entering the market.
GACA explained that many routes are not profitable and many
lose money, but the SAG insists that these routes remain
operational GACA expressed concern that competitors, driven
solely by profit-motive, would halt the unprofitable routes,
so it plans to bundle the profitable with the unprofitable
routes for airlines to bid on when entering the Saudi
aviation market.

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GACA Requests Assistance to Rekindle FAA Relationship
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7. (C) Rehaimi also asked the Ambassador for assistance in
"rekindling" the relationship between GACA and the Federal
Aviation Authority (FAA). GACA indicated that it wants to
work closely with the FAA on technical and training issues,
which includes airline safety, in order for Saudi Arabia to
become as advanced as the U.S. in the commercial aviation
sector. The Ambassador expressed his interest in assisting
GACA in its efforts to form closer ties with the FAA.

TONEY