US embassy cable - 04AMMAN7508

UNCLAS AMMAN 007508 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAIR, KTIA, JO 
SUBJECT: JORDANIAN REPLY REGARDING USG PROPOSAL TO AMEND 
CRS PROVISIONS OF AIR SERVICES AGREEMENT 
 
REF: STATE 155586 
 
1.  (U) Embassy received on September 7 the following letter 
from Jordan's Director General of Civil Aviation Authority: 
 
BEGIN TEXT: 
 
Dear Mr. Eason, 
 
With reference to your letter of August 31, 2004, concerning 
the U.S. Government proposal to amend the U.S./Jordan Air 
Services agreement by deleting Annex III of the Agreement. 
Kindly note that we are considering the above proposal with 
cautious due to the following reasons: 
 
1.  We strong believe that the Justification for keeping 
Annex III is still prevailing in the Jordanian market. 
2.  The Non-Discrimination clauses do serve the Jordanian 
economy and air transport in Jordan.  CRS's have substantial 
market power over most airlines in the world, let alone small 
carriers operating from/into Jordan. 
3.  The Internet e-commerce penetration is still low in 
Jordan and in the Middle East, Credit card holders and usage 
is not comparable to US penetration.  Thus Internet 
e-commerce is not yet an alternative channel for airlines to 
use in our region.  Carriers are still largely dependant on 
dominant CRS's in Jordan to sell its inventory. 
4.  Removing Annex III opens the doors for these huge 
dominant CRS's to bias against smaller carriers in the 
following areas: 
a.  Increasing the distribution cost to smaller carriers. 
b.  Reducing distribution cost for larger carriers and giving 
them an extra advantage. 
c.  Display bias with large carriers and against smaller 
carriers whereby, large carriers can give priority for their 
services to be shown in the first display, which is in this 
case gives them a better chance to attract more passengers. 
d.  Display bias used in a travel agency dominant channel 
will also affect customers and they will end up manipulated 
through the dominate large Airlines or GDS's. 
 
Based on the above mentioned you are kindly requested to 
advise us the reasons to delete the Annex in question. 
With my best personal regards 
Sincerely yours, 
Hanna Najjar 
Director General 
Civil Aviation Authority 
 
END TEXT. 
 
2. (SBU) COMMENT: The above draft was formulated primarily by 
the state-owned Royal Jordanian Airlines.  Their initial 
position on the deletion was very negative, but the CAA DG 
softened the response, partially in response to Post's advice 
that other Open Skies partners had responded positively and 
none had so far responded negatively.  Nonetheless,  RJ will 
likely require some strong reasons for the deletion before 
surrendering what they feel to be a protection for a 
disadvantaged airline already on the edge. 
HALE