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. -------------- -------------- GACA Moves Market Share to Europeans and Australians -------------- -------------- ¶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. -------------- New consular policies for GACA? -------------- Q -------------- ¶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. -------------- GACA Will "Break Up" to Achieve Autonomy and Self-Sufficiency -------------- ¶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. -------------- -------------- Jeddah and Medina to Be International Aviation Hubs -------------- -------------- ¶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 JEDDAH 00000636 002 OF 002 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." -------------- -------------- GACA Will Deregulate Commercial Aviation in Saudi Arabia -------------- -------------- ¶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. -------------- -------------- GACA Requests Assistance to Rekindle FAA Relationship -------------- -------------- ¶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