PRIVATE SYRIAN AIRLINE DEAL STILL TRYING TO GET

C O N F I D E N T I A L DAMASCUS 000480 SIPDIS SIPDIS NEA/ELA, NSC FOR MARCHESE/SINGH, COMMERCE FOR CHRISTINO E.O. 12958: DECL: 05/21/2017 TAGS: EAIR ECON ETTC KCRM SY SUBJECT: PRIVATE SYRIAN AIRLINE DEAL STILL TRYING TO GET OFF THE GROUND REF: A. DAMASCUS 0295 ¶B. 06 DAMASCUS 3186 Classified By: A/DCM William Roebuck, for reasons 1.4 b/d ¶1. (C) In a May 9 meeting, Syrian Arab Airlines (SAA) officials confirmed recent press reports that the newly-formed Cham Holding Company plans to partner with SAA and the Kuwaiti al-Aqeela company to establish a private airline in Syria, and acknowledged that some steps had already been taken. They expressed doubts, however, that the new airline would actually materialize. SAA IT Advisor Mousab Arslan said financing for the new airline remained unclear. He and SAA Technical Director Moheiddin Issa told EconOff that the triad of investors was under the impression that U.S. sanctions applied only to public companies such as SAA, and that a private company would not have any trouble leasing or buying planes. ¶2. (C) The Cham Holding Company plans were reported by local media May 2, saying that "important steps" have been taken to establish licensing and allocate shares of ownership for a new airline. Cham Holding's leading stockholder is President Asad's first cousin Rami Makhlouf. We had heard previously from contacts in the industry that Makhlouf was establishing a charter airline in the Virgin Islands to take over the most profitable SAA routes, leaving the beleaguered national carrier with the more costly and less profitable long-haul routes (ref A). ¶3. (C) Comment: The much-touted 2006 negotiations to purchase Russian airframes to replace much of the aging SAA fleet appear to be at a standstill (ref B),and no SAA manager we have talked to has shown any interest in reviving them. Despite all of the roadblocks, the latest move by Makhlouf and company signals the SARG's continued determination to acquire Boeing or Airbus airplanes in one fashion or another. The feasibility of the SARG's deal with Makhlouf is difficult to assess as the details are unclear. Our Syrian contacts in the industry, however, tell us that the SARG remains confident that a deal put together by Rami Makhlouf will work, as Libya did a similar project with its national carrier at the height of U.S. sanctions, they assert. CORBIN