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Cablegate: Boeing Scores Success in Egypt Air Long-Haul

VZCZCXYZ0018
RR RUEHWEB

DE RUEHEG #2575/01 2311420
ZNR UUUUU ZZH
R 191420Z AUG 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 6582
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS CAIRO 002575

SIPDIS

SENSITIVE
SIPDIS

NEA FOR ELA
EB FOR CBA, TRA
COMMERCE FOR ADVOCACY CENTER

E.O. 12958: N/A
TAGS: EAIR ECON PREL EG
SUBJECT: BOEING SCORES SUCCESS IN EGYPT AIR LONG-HAUL
ACQUISITION

Sensitive but Unclassified. Please protect accordingly.

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Summary
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1. (SBU) Continuing the augmentation and upgrading of its
long-haul fleet, Egypt Air has agreed to lease six Boeing
777-300R aircraft, with the possibility of a direct purchase
or lease of two more. The decision follows shortly after the
airline concluded an agreement with Airbus to lease two A330s
and purchase five more. Egypt Air's agreement to lease the
six 777s is a success for Boeing in the face of a long list
of potential Airbus advantages in the Egyptian market. End
summary.

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Egypt Air Adds Six 777's
------------------------

2. (SBU) During the week of August 5, Egypt Air signed a
Letter of Intent (LOI) and placed a deposit with GE
Commercial Aviation Services to lease six Boeing 777-300R
long-haul aircraft. According to airline and Boeing Company
contacts, the possibility for the direct purchase or lease of
two additional 777s remains on the table. The parties
anticipate concluding the lease contract within the next
30-60 days. The decision by Egypt Air to lease the six
Boeings follows shortly after the airline concluded an
agreement with Airbus for the leasing of two A330s and the
direct purchase of five more. The acquisitions are part of
Egypt Air's efforts to augment and upgrade its long-haul
fleet to handle expanded passenger and cargo links with
far-flung partners, primarily in Asia.

--------------------
Ambassador Advocates
--------------------

3. (SBU) In a July 24 meeting, the Ambassador, joined by the
Commercial Counselor and Econoff, engaged Minister of Civil
Aviation Air Marshal Ahmed Shafik on behalf of the Boeing
bid. The Ambassador reiterated the advantages of the 777 vs.
the A330 with regard to range, efficiency, and cargo
capacity, and noted the synergy between the aircraft's
capabilities and Egypt's growing trade with long-haul
destinations in Asia. The Ambassador also noted Egypt Air's
stated desire to have a balanced fleet of Airbus and Boeings,
and that the airline's current weighting in favor of Airbus
was at odds with that goal and with international norms for
long-haul aircraft. Egypt Air currently operates five Boeing
777-200ERs, seven Airbus A330s, three A340s, and four A300
freighters; an anomaly considering that among all
international operators Boeing enjoys an approximate 75/25
advantage. The meeting followed-up on the Ambassador's
earlier message accompanying the delivery of Secretary of
Commerce Gutierrez's letter in support of the Boeing bid.

4. (SBU) Shafik said that Egypt Air was "in bad need of
Boeing's help," ostensibly referring to their desire to
expand long-haul and cargo services deeper into Asia. Shafik
told the Ambassador that Egypt Air was very happy with the
roll-out and performance of their 737-800's, and that Boeing
had been a "very cooperative" partner in the deal. Shafik
noted that he hoped that Boeing would be able to provide an
expedited delivery schedule, as Egypt Air was seeking to
incorporate the aircraft in the fleet as soon as possible.

5. (SBU) Aside from cooperation on commercial aircraft,
Shafik implored the Ambassador to encourage U.S. investment
and competition in the aviation sector more broadly, and said
he will issue instructions to all of his departments to
ensure that American firms are encouraged to bid on projects
in aviation services, management, retail, and infrastructure
development. He said that boosting tourism was at the core
of Egypt's aviation-related activities, and he wants American
companies to enter and compete in this market. In response,
FCS has arranged for a TDA-sponsored definitional mission to
visit Cairo in early September to explore project
opportunities in the sector.

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Comment
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6. (SBU) Egypt Air's agreement to lease the 777s is a success
for Boeing in the face of a long list of potential Airbus

advantages in the Egyptian market. The A330 retails for USD
80 - 95 million less that the 777, is available for delivery
a full year earlier, and Egypt Air already operates an A330
engine maintenance shop in Cairo. While the 777 outperforms
the A330 on capacity, range, and cargo, the A330 is "good
enough" to service some of Egypt Air's expanding services to
the Indian sub-continent and Southeast Asia. In addition,
Airbus is able to "take back" directly Egypt Air's aging
A340s, whereas Boeing would have to arrange for the disposal
of its older 777-200s though a third party. The GOE and
Egypt Air are happy with the performance of their current
fleet of Boeings, however, and recognize the role the 777 can
play in expanding trade ties with China. The Embassy will
continue to work with Boeing to encourage Egypt Air to focus
on the greater revenue generating potential of the 777 and
the need to increase the proportion of Boeing's in its
long-haul fleet.
RICCIARDONE

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