US embassy cable - 02AMMAN7229

UNCLAS SECTION 01 OF 02 AMMAN 007229 
 
SIPDIS 
 
SENSITIVE 
 
USDOC FOR ADVOCACY CENTER - C JAMES 
USDOC FOR 4520/ITA/MAC/ONE/COBERG 
EXIMBANK FOR ROBERT MORIN 
TDA FOR STEINGASS/SIGLER 
 
E.O. 12958: N/A 
TAGS: BEXP, EFIN, EAIR, JO 
SUBJECT: JORDAN:  YET ANOTHER DELAY FOR BOEING 
 
REF: AMMAN 6022 
 
SENSITIVE BUT UNCLASSIFIED.  PROTECT SENSITIVE BUSINESS 
INFORMATION. 
 
1.  (SBU)  Summary.  Minister of Transportation Nader Dahabi 
informed the Charge that an independent airline consultant 
has been brought in to analyze Boeing/Airbus offers to sell 
short-haul jets to Royal Jordanian Airlines (RJ) (REFTEL). 
The analysis, which will delay yet again a decision by RJ by 
approximately six months, will be done as the government and 
RJ deliberate a proposal that the Social Security Corporation 
(SSC) purchase the jets and lease them back to RJ.  This 
delay is likely to disappoint Boeing as it further extends an 
already long and arduous process.  End Summary. 
 
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YET ANOTHER DELAY 
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2.  (SBU) During a meeting that covered a range of 
transportation issues (SEPTEL), Minister  Dahabi informed the 
Charge that, as a possible option to upgrade Royal 
Jordanian's fleet (REFTEL), the Ministry of Transport (MOT) 
may ask the Social Security Corporation (SSC) to purchase the 
jets and lease them back to RJ.  Dahabi said he is going to 
sit down with the minister of Labor and the CEO of the SSC to 
"look at RJ's case".  If it looks like the right idea, the 
SSC will negotiate directly with RJ.  He emphasized that the 
SSC would need to see a viable business plan from RJ to be 
sure the investment makes sense. 
 
3.  (SBU) Concurrently, Dahabi said, RJ has asked an 
independent airline consultant, SH & E, to examine competing 
offers from Boeing and Airbus to determine which would be 
best for RJ, or whether leasing rather than direct purchase 
might be a more viable option.  He said SH & E, which is 
based in London but has offices in New York and Chicago, 
would come to Jordan after the holidays to begin the 
analysis.  He said using an external consultant would ensure 
that the process was transparent.   Acknowledging that this 
would stretch out the process, Dahabi said that "if we take 
another five to six months, it won't hurt us".  He added that 
he had recently informed the French Ambassador about the SSC 
option, but had yet to inform him about the consultants. 
 
4.  (SBU) Dahabi said, in a meeting RJ CEO Samir Majali had 
with PM Abul Ragheb two months ago, the PM advised Majali and 
the RJ Board that "now was not the right time to buy, because 
we don't know what will happen with Iraq".  Dahabi said the 
PM suggested that, given cash flow concerns at RJ, leasing 
might be a better option.  He reiterated the government's 
strong position that it would not guarantee any RJ loans, 
consistent with its strategy since 1994, and RJ's status as a 
self-sustaining company, even if state-owned. 
 
5.  (SBU) Dahabi said that the Jordanian Government and RJ's 
caution goes back to the Gulf War.  He said RJ made a deal in 
1987 to purchase 14 Airbus A-310s.  The first one was 
delivered on schedule in 1990.  However, with the impact on 
air travel due to the Gulf War, RJ was unable to make its 
monthly payments and defaulted.  When Dahabi became CEO of RJ 
in 1994, he said he noticed that RJ was paying JD1 million 
($1.4 million) per month for the deal, "twice what anyone 
else in the world was paying for A-310s".  He said RJ 
defaulted again, and, following a restructuring of the deal, 
is still paying $500,000 per month.  (Note: Despite the 
government's and RJ's wariness over the 1987 deal, RJ 
concluded a deal in January with Airbus to lease widebody 
aircraft.  End note.) 
 
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COMMENT 
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6.  (SBU) Thus opens yet another chapter in an unnecessarily 
long saga.  While the possibility of the SSC getting involved 
in the RJ deal is intriguing, Boeing is likely to be 
disappointed by the selection of an independent consultant to 
analyze the Boeing/Airbus offers.  We are inclined to be 
skeptical of the additional credibility it could bring to the 
process, which has already been painstaking.  In the past, 
Boeing has been reluctant to share proprietary information, 
so a lot will depend on the consultant to be selected.  We 
will continue to keep a close watch on the process, with 
particular emphasis on the prospective benefits to the 
bilateral relationship of contracts being awarded to Boeing 
as soon as possible. 
BERRY