GACA COMMENTS ON MODEL OPEN SKIES AGREEMENT TEXT

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000178 SIPDIS DEPT FOR NEA/ARP (HARRIS) AND EEB/TRA/AN (FINSTON) E.O. 12958: DECL: 05/24/2019 TAGS: EAIR ECON PREL KTIA SA SUBJECT: GACA COMMENTS ON MODEL OPEN SKIES AGREEMENT TEXT REF: A. SECSTATE 07670 ¶B. RIYADH 623 ¶C. JEDDAH 0146 ¶D. SECSTATE 41853 JEDDAH 00000178 001.4 OF 002 Classified By: CG Martin R. Quinn for reasons 1.4 (b) and (d) ¶1. (U) This is an action request. Please see paragraph 8. ¶2. (C) Summary: On May 20, following his meeting with representatives of Saudi Arabian Airlines, Captain Mohamed Jamjoom, Vice President Safety and Economic Regulation at the Saudi General Authority of Civil Aviation, provided PolEconOff with feedback on the Department's Model Open Skies Agreement text. Jamjoom prefaced his comments by saying that the model text generally fulfills all of Saudi Arabia's requirements but that three points require revision. If these points could be revised to meet the Saudi requirements, Jamjoom stated that an Open Skies agreement can be signed and take effect this year. End summary. ¶3. (C) The first critical point concerns the language in section II(1)(c)(i) which refers to "points behind." The Saudis wish to delete the right to operate from points behind from the agreement. ¶4. (C) The second critical point concerns Fifth Freedom rights. While the Saudis agree to Fifth Freedom in principle, they want to limit the scope of the right to "mutually agreed designated airports." The rationale is that U.S. carriers' large alliances would allow passengers from an extensive array of destinations outside the U.S. to travel to Saudi Arabia. ¶5. (C) The third critical point, characterized as a show-stopper, relates to Seventh Freedom transport of cargo. See sections II(1)(c)(i); II(2)(i); II(3). Captain Jamjoom enquired why the text relating to cargo is consistently bracketed and expressed the hope that the brackets imply that cargo can be dropped from the agreement. Saudi Arabia Airlines (Saudia) recently set up a new all-cargo service in partnership with a third party which gives a period of exclusivity for cargo service in and out of the Kingdom. He believes the exclusive period is either three or five years. Jamjoom stated that following this contractual period the language could be revisited and possibly restored to the text but given Saudia's contract with the third party, should this language be required in the Open Skies agreement from its inception, this point is a deal-breaker. ¶6. (C) Beyond the three major points, Jamjoom requested four less critical changes. -- He provided language to be incorporated into Article 3 as follows: "Each contracting party should have the right to designate in writing to the other contracting party one airline or more for the purpose of operating the service on the agreed route." When questioned about this language he was unable to explain the background issue involved but it appeared he was making the request on the behalf of Saudia in an attempt to shelter the airline from Saudi competition, and not to limit any U.S. carriers from entering the KSA. -- In Article 9 he noted that Saudi Arabia requires alcohol and tobacco to be sealed prior to landing thus rendering tax questions moot. The Saudis would like clarification of this point in the agreement. -- In Article 11 he asked for clarification of "first refusal" claiming that this term is unknown to them. -- In Article 17 he noted that because the King's approval is required for entry into force of the agreement, the agreement can only come into force "provisionally" upon signature. He asked that language be added clarifying that entry into force occurs following each country's procedure for ratification. ¶7. (C) Jamjoom concluded by noting that in the event that the proposed changes are not acceptable to the United States, the Saudis would like to amend the 1993 Air Transport Agreement between the U.S. and Saudi Arabia to include language concerning Co-operative Marketing Arrangements. Said proposed language has been received by ConGen Jeddah and will be scanned and forwarded via electronic mail. ¶8. (C) ACTION REQUEST: Post requests EEB/TRA/AN respond to the above comments indicating whether the proposed changes are acceptable, negotiable, or non-negotiable. In the event JEDDAH 00000178 002.4 OF 002 that negotiations are feasible, Post requests EEB to respond to the KSA's proposed dates for negotiation of the Agreement - July 8-9 -- by either accepting the proposal, countering with alternate dates, or proposing dates for a video conference to discuss the agreement further. Jamjoom stated that if these points can be resolved in a mutually satisfactory manner, an Open Skies Agreement can be signed without impediment in 2009. QUINN