My personal opinion is that this is lateral line erosion/Hole in the head. (Also oscars are very prone to this!) Nobody really knows what causes it but one theory is poor nutrition. I am inclined to agree with this. I work at a fish store and someone brought in a donation fish I believe was starting LLE. We feed very high quality foods and live tubifex, keep him in pristine water with no other fish and it has drastically improved. The biggest concern is secondary bacterial infections. What are you feeding him?
Here is a site with some good pics-
http://www.flippersandfins.net/HITHarticle2.htm Look @ the second photo, I would say this is very close!
What are your water params?