US embassy cable - 04AMMAN6587

C O N F I D E N T I A L AMMAN 006587 
 
SIPDIS 
 
USDOC 4520/ITA/MAC/ONE/PTHANOS 
DEPARTMENT FOR EB FOR WAYNE/MERMOUD 
 
E.O. 12958: DECL: 08/04/2014 
TAGS: EAIR, BEXP, JO 
SUBJECT: WARNING SIGNS ON BOEING SALE TO RJ 
 
REF: AMMAN 5100 
 
Classified By: CHARGE D'AFFAIRES DAVID HALE FOR REASONS 1.5 (B) AND (D) 
 
1. (C) SUMMARY: In a series of conversations with Jordanian 
stakeholders in Royal Jordanian Airlines' proposed purchase 
of five Boeing 737s, Charge and Emboffs have received mixed 
signals on how salvageable negotiations between Boeing and RJ 
may be. This may reflect a decision by Jordanian stakeholders 
either to indefinitely delay a Boeing purchase while 
continuing to "make nice" with American interlocutors or to 
radically change the makeup of Royal Jordanian Airlines (RJ). 
 These issues may surface at a planned meeting between King 
Abdullah and Boeing Senior Vice President Thomas Pickering to 
be held in London on Friday. END SUMMARY. 
 
2. (C) In separate conversations, Charge has been told by 
both Royal Court Chief Samir Al-Rifai and General 
Intelligence Directorate head General Sa'd Khair that while 
the King remained firmly committed to a purchase of five 
Boeing 737 aircraft, they will be purchased by Royal Wings 
rather than by RJ. Meanwhile, RJ would proceed with a lease - 
without an option to buy - of five Airbus A320s and A321s. 
(NOTE: Royal Wings is a wholly-owned subsidiary of RJ, flying 
short range regional and charter flights; it currently has 
only six commercial routes, the longest of which is to 
Ankara.  RJ CEO Samer Majali's influence on Royal Wings, 
which has its own CEO, is in theory limited to his seat on 
the board of the Royal Jordanian parent company, chaired by 
Ministry of Transport Secretary-General Alaa Batayneh; in 
practice, the two lines cooperate closely.) 
 
3. (C) Prince Faisal, Air Force Commander, the king's 
brother, and current patron of Jordanian aviation, told 
Charge on August 5 that he had convinced the king of the 
merits of this new twist in the proposed deal.  He had been 
frustrated that Boeing had not come up with a viable 
financing/funding package, and did not want to further delay 
an RJ fleet upgrade.  Meanwhile, a Royal Wings purchase of 
Boeing, if financing arrangements are satisfactory, would 
enable expansion of Royal Wings' regional charter services. 
He was convinced it was a commercially viable proposal.  He 
said that RJ had been set to proceed with the Airbus lease at 
last week's board meeting, but had agreed to a delay pending 
the meeting between Abdullah and Pickering. 
 
4. (C) When engaged obliquely by the SCO last week on the 
plan to switch the purchase to Royal Wings, however, RJ CEO 
Majali convincingly professed complete ignorance.  (NOTE: In 
a conversation yesterday with Boeing representative Peter 
Ledger, Majali seemed better briefed on this proposal.) 
Majali acknowledged that negotiations with Boeing were going 
very badly, but held out hope that the gap between the two 
sides' positions might be overcome.  Majali told SCO that he 
is looking to Boeing or someone else to "fill the gap" not 
covered by Ex-Im Bank financing, and that he would prefer 
that the gap be filled by a cash infusion rather than further 
financing.  He would be disappointed if Boeing could offer no 
more than financing.  Majali has not yet pressed the issue to 
a point of decision, repeatedly delaying the board meeting 
that was finally held last week and to which Faisal referred. 
 He did, however, hold an unrelated RJ board meeting July 28 
to decide on a $40 million bond issuance that could fund 
either a Boeing purchase or an Airbus lease. 
 
5. (C) COMMENT: The purchase of five 737s for Royal Wings 
would increase its capacity more than tenfold, which might be 
possible if a fairly dramatic rearrangement of RJ - giving 
Royal Wings mid-range capability competitive with RJ - is in 
the works or if Faisal's vision of new charter markets is 
grounded in reality.  Majali's apparent ignorance of the plan 
suggests that it may in part be designed to sideline him 
(Reftel).  On the other hand, it is difficult to understand 
how Jordan, which has had a very difficult time in finding 
financing for a Boeing purchase, would decide that the best 
course would be to simultaneously lease five more A320s and 
buy five Boeings.  Airbus may have succeeded in making RJ an 
offer it can't refuse - but that nobody wants to hand an 
engaged American government an outright disappointment.  Post 
will continue to work closely with Boeing and the department 
on a strategy to a Boeing deal. 
HALE