SAUDIS READY TO NEGOTIATE OPEN SKIES AGREEMENT

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000146

SIPDIS

DEPT FOR EEB/TRA/AN (FINSTON); NEA/ARP (HARRIS)

E.O. 12958: DECL: 04/20/2019
TAGS: EAIR ECON PREL KTIA SA
SUBJECT: SAUDIS READY TO NEGOTIATE OPEN SKIES AGREEMENT

REF: A. STATE 07670

B. FINSTON/KANAREK JANUARY 27 EMAIL

C. 2005 STATE 97534

Classified By: CG Martin R. Quinn for reasons 1.4 (b) and (d)


1. (C) Summary: On April 15, in response to SAG request for
aviation agreements between U.S. and Saudi airlines, CG and
Pol/EconOff delivered Ref A to the president and vice
president of the Saudi General Authority of Civil Aviation
(GACA),Abdullah Rehaimi and Captain Mohammad Ali Jamjoom,
proposing that the U.S. and the KSA enter into an Open Skies
Agreement. Rehaimi accepted the proposal without hesitation
and requested that negotiations begin in Washington on July
8-9. During the hour-long meeting Rehaimi described recent
moves by GACA to reform and modernize the civil aviation
sector in the KSA, including a move toward Open Skies
arrangements with some neighboring countries. He said that
the Council of Ministers has given advance approval for entry
into similar agreements with countries outside the region
beginning in late 2010. End summary.


2. (C) In response to a December 24 note sent by the Saudi
Embassy to the Department of State requesting permission from
the Federal Aviation Administration to negotiate strategic
market alliances -- including code sharing agreements --
between U.S. and Saudi carriers, ConGen delivered a demarche
expressing the USG position favoring Open Skies Agreements.
Bypassing any discussion of code-sharing, GACA President
Rehaimi immediately voiced GACA's desire to negotiate an Open
Skies Agreement and proposed that negotiations commence in
Washington July 8-9.


3. (C) During his nearly five-year tenure, Rehaimi, whose
background is project finance, not aviation, has pushed
through a number of measures aimed at modernizing civil
aviation throughout Saudi Arabia. These include the
licensing of two new carriers to compete with Saudia with
more licenses expected to issue in the near future; the
improvement and construction of new airport facilities; and
the gradual opening of the market to outside competition.
Rehaimi and Jamjoom told the CG that the Council of Ministers
has given GACA authority to enter into Open Skies agreements
in order to further bring the market into the international
mainstream and to help satisfy the enormous unmet demand for
air travel in this rapidly developing and growing country.
Both men claimed that Saudi Arabia had already entered into
an Open Skies Agreement with Egypt and that there were other
such arrangements with countries in the neighborhood with
more to follow. They added that the Council of Ministers has
already granted them the authority to ink agreements with
countries outside the region starting from the end of 2010.
Rehaimi emphasized that he might be able to get an exception
and move more quickly in a case where the economics of the
deal benefited Saudi Arabia.


4. (U) Copies of the model Open Skies agreement text in
English and Arabic were provided to GACA. GACA officials
requested initial discussions in May with Pol/EconOff in
order to convey back to the Department any preliminary
questions raised by the model agreement terms and conditions.



We need to take YES for an answer, and quickly
-------------- -


5. (C) Comment: We think the Saudi offer is worth pursuing
despite skepticism from several of our contacts. As an
example, local business leader Musallam Musallam, Chairman of
SKAB, an industrial conglomerate, recently told Pol/EconOff
that during a dinner with a government Minister in the last
week he was told the SAG would never enter into Open Skies
agreements because they would drive Saudi Arabian Airlines
out of business. The Minister denied that there were any
completed Open Skies agreements between Saudi Arabia and
other countries. GACA Captain Jamjoom subsequently confirmed
that the SAG agreement with Egypt is not completely open,
noting, for example, that it includes restrictions on
low-cost carriers and an prohibits Egyptian carrier flights
to Medinah. He also confirmed what Musallam and others have
said: that Saudia is expected to try to prevent SAG entry
into Open Skies arrangements but that eventually these deals
will happen because they are needed for the country in order
to satisfy the demand for flights.


6. (C) Nevertheless, we remain optimistic about the chance

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of reaching an agreement on Open Skies, and we think this
remains a goal the Department should pursue on a priority
basis. The remarks of our pessimistic contacts in the
preceding paragraph represent an accurate portrayal of the
domestic opposition to an Open Skies Agreement that GACA will
need to overcome. Neverthless, senior GACA leaders are
optimistic about reaching a mutually beneficial agreement.


7. (C) Beyond the symbolic value of U.S. carriers flying
regularly into Saudi airports and loading and offloading
passengers and the economic benefits to the United States an
Open Skies agreement would return, we should not overlook
the public diplomacy, political and economic reform benefits
that would follow from such an accord. For his part, GACA
Captain Jamjoom reiterated what Musallam and others have told
us: Saudi Arabian Airlines is expected to try to prevent SAG
entry into Open Skies arrangements, but eventually these
deals will happen because they are needed for the country in
order to satisfy the great and increasing demand for flights
to, from, and within Saudi Arabia. End Comment.
QUINN