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Cablegate: Romania: Boeing Sets Up for a 1 Billion Dollar Deal

VZCZCXRO0346
OO RUEHFL RUEHKW RUEHLA RUEHROV
DE RUEHBM #0608 2131203
ZNY SSSSS ZZH
O 311203Z JUL 08
FM AMEMBASSY BUCHAREST
TO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 8548
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE

S E C R E T BUCHAREST 000608

SIPDIS

STATE PLEASE PASS TO EUR/CE ASCHEIBE
COMMERCE PLEASE PASS TO ITA KNAJDI

E.O. 12958: DECL: 07/30/2018
TAGS: EAIR ECON PGOV RO
SUBJECT: ROMANIA: BOEING SETS UP FOR A 1 BILLION DOLLAR DEAL

REF: BUCHAREST 362

Classified By: DCM Jeri Guthrie-Corn for reasons 1.4 (b) and (d).

1. (C/NF) Summary. The Regional Boeing sales representative
advised the Ambassador of plans for a multi-plane deal to
sell new Boeing 737s to TAROM, the Romanian state owned
airline. From Boeing's perspective the 737s fit naturally
into TAROM's existing fleet structure and will support
TAROM's future expansion plans. Operationally and
strategically, Boeing believes that 737s are a better fit for
TAROM than the competition. The deal could result in selling
up to ten aircraft plus additional options to TAROM and
Boeing is valuing the potential deal at close to USD 1
Billion. However, Boeing is worried about reports that EADS
does not plan to compete fairly and that they may attempt to
improperly influence key government officials to favor Airbus.

2. (S/NF) In a meeting on July 25th with the Ambassador, the
regional Boeing representative, Monte Frazier, shared an
allegation that EADS may have offered 3 percent of the sales
price of any eventual Airbus purchase as bribes to officials
in the Romanian Government. Frazier has been a frequent
visitor to Bucharest over the last several months, and
recently helped Romanian low-cost carrier Blue Air complete
the purchase of several next generation 737 aircraft. He has
built good contacts with the senior management of TAROM and
believes that these managers are favorably inclined toward
purchasing 737s from Boeing. However, these same TAROM
managers preferred to wait until they were able to meet
privately with senior Boeing executives outside of Romania at
the Farnborough Air Show to report allegations that officials
in the Ministry of Transportation and the Prime Minister's
office have been offered bribes to force TAROM to buy new
aircraft from EADS.

3. (SBU) The business rationale for TAROM to choose Boeing
is considerable. reftel reported on TAROM's hodgepodge fleet
mix, which includes B-737s, A-310s, A-318s, plus smaller
regional turboprops. TAROM has subsequently signed a lease
deal for four new 737 aircraft to fill immediate fleet needs.
This will make 737s the predominant aircraft type in the
fleet when the new leased planes enter service. According to
Boeing, the range, size, and fuel efficiency of 737s make
them the best possible aircraft for a regional carrier like
TAROM. As an added benefit, the parts and flight crew
certifications are standardized across the 737 line, making
an exclusively 737 fleet cheaper and more flexible from an
operations standpoint. TAROM is already able to offer a full
suite of 737 repair services at their certified maintenance
facility, which provides additional cost justifications for
sticking with the 737 airframe.

4. (C/NF) Comment. Post has offered our support to Boeing
and agreed to advocate for Boeing with the GOR, when it
becomes appropriate, to ensure that Boeing's eventual bid is
given all due consideration. Setting aside allegations of
bribery, the political pressure on Romania to pick a European
airframe is considerable. The fact that 4 leased Boeing
planes have been added into the fleet, may actually lend
weight to the argument that it is now Airbus's turn to garner
a sale, despite the fact that a mixed fleet raises costs and
creates operational difficulties for TAROM. Boeing seems
prepared to make the argument that 737s make the most
business sense for TAROM, and they are planning on an all-out
effort to ensure their eventual success in concluding a sale.
Post plans to assist Boeing to ensure that the eventual
competition is fair and transparent. The fact that TAROM is
wholly state-owned unfortunately injects politics into what
should be a straightforward business decision. End Comment.
TAUBMAN

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