Identifier
Created
Classification
Origin
07AMMAN3286
2007-08-02 13:54:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Amman
Cable title:  

CHANGE IS IN THE AIR: JORDAN'S AVIATION PRIVATIZATION

Tags:  EAIR ECON EINV KPRV JO 
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VZCZCXRO9354
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHAM #3286/01 2141354
ZNR UUUUU ZZH
R 021354Z AUG 07
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 9768
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHUP/AMEMBASSY BUDAPEST 0039
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHMT/AMCONSUL MONTREAL 0019
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 02 AMMAN 003286 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA AND EEB/TRA
MONTREAL FOR U.S. MISSION TO ICAO

E.O. 12958: N/A
TAGS: EAIR ECON EINV KPRV JO
SUBJECT: CHANGE IS IN THE AIR: JORDAN'S AVIATION PRIVATIZATION
EFFORTS

Sensitive but unclassified; please protect accordingly. Contains
proprietary information - not for distribution outside the USG.

REF: A. AMMAN 483

B. AMMAN 1299

UNCLAS SECTION 01 OF 02 AMMAN 003286

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA AND EEB/TRA
MONTREAL FOR U.S. MISSION TO ICAO

E.O. 12958: N/A
TAGS: EAIR ECON EINV KPRV JO
SUBJECT: CHANGE IS IN THE AIR: JORDAN'S AVIATION PRIVATIZATION
EFFORTS

Sensitive but unclassified; please protect accordingly. Contains
proprietary information - not for distribution outside the USG.

REF: A. AMMAN 483

B. AMMAN 1299


1. (U) Summary: Several privatization and restructuring efforts
continue in Jordan's aviation sector with the support of the King
and Parliament (ref A). The Cabinet approved privatization of 74%
of Royal Jordanian's stock shares. A contract has been signed for
the expansion and private management of Queen Alia International
Airport (QAIA). Queen Noor Aviation College (QNAC) which trains
regional air traffic controllers, is also up for bid. To complement
these privatization efforts, the Jordan Civil Aviation Authority
became the Jordan Civil Aviation Commission, a regulatory body,
effective August 1. End Summary.

74% of Royal Jordanian Airlines to Be Privatized
-------------- ---


2. (SBU) In a July 18 meeting with the Ambassador, Minister of
Transport Saud Nseirat said that the Cabinet had agreed to the Royal
Jordanian (RJ) deal to privatize 74% of Royal Jordanian stock
shares, with the government keeping 26%. The shares to be sold to
non-Jordanians will be capped at 49%. An initial public offering
(IPO) is expected this year. The Minister said that RJ was doing
well overall. This week, RJ began non-stop service to Budapest and
now serves 54 cities - including Chicago, Detroit, and New York --
on four continents. Previously this year, RJ announced plans to
acquire up to twelve Boeing 787s through direct purchase and lease
contracts (reftel B).

Ongoing Negotiations on Open Skies
--------------


3. (SBU) Minister Nseirat added that Jordan has Open Skies
agreements with Kuwait, Oman, and Saudi Arabia. He said he has been
working aggressively to sign an agreement with Egypt, but that the
discussions have been difficult. The Minister said the Government
of Jordan (GoJ) is also in Open Skies discussions with Tunisia and
Algeria. NOTE: Jordan and the United States implemented an Open
Skies agreement in 1996, the United States' first outside of Europe.
END NOTE. Currently, U.S. carriers fly to Jordan using code-share

partners.

Expansion of Queen Alia International Airport
--------------


4. (SBU) This spring, the international ADP consortium won the bid
for the extension, establishment, and management of Queen Alia
International Airport (QAIA). The ADP consortium is comprised of
international investment houses, construction companies and
management firms, including Aeroport de Paris Management which
operates 23 airports worldwide. Abu Dhabi Investment Corporation
will have the largest stake. The Minister predicted that the new
QAIA will be ready by 2010 and that construction work will begin in
three months. ADP will spend an estimated $10-$15 million to
improve the current facilities, and $550 million on new facilities
to triple the airport's capacity. The Minister said that he
believed Jordan got a great deal on this investment, which includes
ADP paying 50% of the airport's annual revenue to the Jordanian
government. ADP won the bid by submitting the highest concession
fees offer to the GoJ.


5. (U) Five consortia were short-listed during the bidding process,
and the International Finance Corporation (IFC) - the private sector
arm of the World Bank Group was brought in as an independent advisor
to the Government. During a July 25 meeting with EconOffs, the CEO
of a Jordanian-Kuwaiti investment firm that did not win the final
bid complimented the airport bidding process for its transparency,
project management, and speed. Although disappointed that her firm
was not selected, she felt that the process served Jordan well and
was fair. She also said that the use of an external financial
advisor should be replicated on other large government projects.


6. (SBU) During a July 23 meeting with EconOff, QAIA's air traffic
control tower manager and his colleagues expressed concerns about
job security after the ADP consortium take-over, but were excited
about the projected growth in capacity. The tower manager and
several supervisors also shared with EconOff additional concerns
about low wages and insufficient manning for air traffic
controllers.

Queen Noor Aviation College Up for Bid

AMMAN 00003286 002 OF 002


--------------


7. (SBU) Queen Noor Aviation College was founded in 1973 and serves
as one of the region's training centers for air traffic controllers.
60% of its students are from Jordan, and 40% come from other
countries in the Middle East. Jordan's Executive Privatization
Commission designated the school as a "potential investment
opportunity," and Minister Nseirat reported that the Government had
received three bids for the college. According to the school's
dean, the bidders include a New Zealand company and Royal Jordanian
Air Academy, a flight school which was itself previously privatized.



8. (SBU) During a July 22 meeting, the dean and his team expressed
some concerns about the scope of change that may result from
privatization, but emphasized their commitment to training. A
visiting delegation of FAA, United States Air Force, and British
Royal Air Force officials described the school's facilities as good,
but not state-of-the-art.

Jordan Civil Aviation from Authority to Commission
-------------- --------------


9. (U) As part of the privatization process in the aviation sector,
Jordan has also been developing a clearer regulatory role for the
Jordan Civil Aviation Authority (JCAA). As of August 1, the JCAA
became the Jordan Civil Aviation Commission (JCAC); the names of the
new commissioners are expected to be released soon. During an
August 1 meeting with JCAC, its Director of Civil Aviation Security
said he expected that the staff at JCAC would be streamlined to a
core team focused on policy. He also expected the new commission
would be more independent from the Ministry of Transport.


10. (U) Jordan's new Civil Aviation Law stipulates that the
Commission will be responsible for organizing civil aviation issues
including aviation safety, economic, and environmental organization.
It will also assume responsibility for contracting with investors,
executing Ministry policy, and studying and negotiating discussions
in preparation for international treaties and agreements in civil
aviation. Article 8 of the Law emphasizes that the Commission will
temporarily continue to operate and manage civil aviation utilities,
such as the airports and the college that have been operated and
managed by the Civil Aviation Authority, until the investor
contracts are finalized.

Comment
--------------


11. (SBU) In addition to increased government revenue, the major aim
of these privatization moves is increased competition in the
country's aviation sector. The lack of excess capacity at QAIA has
until now limited Jordan's ability to embrace a comprehensive Open
Skies policy. Theoretically, under bi-lateral or multi-lateral Open
Skies agreements any airline operator should have a fair and equal
ability to compete. Until now, however, limited capacity has
maintained the status quo in terms of flight and passenger loads,
and Royal Jordanian Airlines has continued to dominate the local
market. Tourism industry officials have also said that the limited
capacity at the airport, and the relative high cost of RJ tickets,
has thus far limited Jordan's ability to expand its tourism sector.
These privatization steps and associated changes in government
structure should serve to support Jordan's growing aviation and
tourism sectors. Correspondingly however, the challenges inherent
in transition to privatization, such as low manning and low salaries
could potentially become a serious safety and security concern for
Jordan's airspace and airports if not proactively addressed.


Visit Amman's Classified Website at
http://www.state.sgov.gov/p/nea/amman

HALE