Cablegate: Prospective Sale of Boeings to Nepal Airlines May

VZCZCXRO8580
OO RUEHCI
DE RUEHKT #0202/01 0720825
ZNR UUUUU ZZH
O 130825Z MAR 09
FM AMEMBASSY KATHMANDU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9926
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6879
RUEHLM/AMEMBASSY COLOMBO PRIORITY 7195
RUEHKA/AMEMBASSY DHAKA PRIORITY 2514
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 5239
RUEHLO/AMEMBASSY LONDON PRIORITY 6390
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 2938
RUEHCI/AMCONSUL KOLKATA PRIORITY 4538
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 KATHMANDU 000202

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAIR ETRD EINV PREL PTER EAID NP
SUBJECT: PROSPECTIVE SALE OF BOEINGS TO NEPAL AIRLINES MAY
FACE CHALLENGE

Summary
-------

1. (SBU) According to a Washington, D.C.-based representative
for Boeing Corporation, Maoist-led Government of Nepal
representatives have indicated that the prospective purchase
by state-owned Nepal Airlines Corporation (NAC) of Boeing
aircraft is conditional on the lifting by the U.S. of the
terrorist designations against the United Communist Party of
Nepal (Maoist). Samir Sahgal, who is Boeing's Director for
International Operations in D.C., told Emboff March 10 that
an economic adviser to Prime Minister Dahal had conveyed that
message in meetings in the United States in late 2008.
According to Sahgal, NAC has already provided Boeing with a
request for information regarding the purchase of up to six
aircraft. Boeing anticipates a formal request for proposal
soon, and is eager to make sales, but is concerned that
Airbus may beat it to the punch.

Airplanes and Terrorist Tags
----------------------------

2. (SBU) During a phone call to post on March 10, the
Director for International Operations in Boeing Corporation's
Washington, D.C. office, alerted Emboff that the prospective
purchase by state-owned Nepal Airlines Corporation (NAC) of
Boeing aircraft was encountering some snags. According to
Samir Sahgal, the Maoist-led Government of Nepal (GON) has
informed Boeing that it is interested in acquiring Boeing
aircraft. But he noted that an adviser to the Prime
Minister, Pramod Kafle, had indicated that any purchase would
be conditional on the lifting by the United States of the
terrorist designations against the United Communist Party of
Nepal (Maoist). Sahgal said that Kafle had passed along that
message in a late 2008 visit to the U.S., including a trip to
Boeing headquarters in Seattle. The International Operations
Director stated that Suvendoo Ray, who is Boeing's Director
for Sales for Nepal, had heard the same refrain when he met
senior GON officials in Kathmandu in January 2009. Ray did
not share this information when he met the Ambassador.

NAC Looking for Planes; Boeing Eager To Sell
--------------------------------------------

3. (SBU) Sahgal informed Emboff that Boeing had received a
request for information in mid-February from the Managing
Director of NAC that spelled out NAC's interest in up to six
large aircraft. The International Operations Director said
he anticipated receiving a formal request for proposals from
NAC in the coming weeks. Boeing had aircraft available and
was offering good terms, including a very low down payment
and probable Export-Import Bank financing, but Sahgal was
concerned that the continuation of the terrorist listing
would preclude a sale. Even if the listing did not prevent
NAC from deciding to buy a Boeing aircraft, the question
arose if any sale of aircraft by Boeing would run afoul of
Office of Foreign Assets Control restrictions. He asked what
the likelihood was of the designations being lifted any time
soon. He expressed concern that Airbus would take advantage
of the situation to replace the airline's existing fleet of
Boeings with Airbus aircraft.

Comment
-------

4. (SBU) When Boeing's Director for Sales met with the
Ambassador in January, Ray highlighted his concern that
Airbus was trying to prevent Nepal Airlines from buying
Boeing aircraft. Ray failed to mention that the Maoists were
conditioning a sale on lifting of the terrorist designations.
Finance Minister Baburam Bhattarai indicated in his budget
speech in September 2008 that the GON was prepared to issue
sovereign guarantees for two large aircraft and his
government claims to be serious about boosting tourism. NAC
is desperately in need of new aircraft. In the short term,
as Boeing concedes, the airline requires leased aircraft in
order quickly to rebuild its market share and reputation
which persistent flight cancellations and mechanical failures
over several years have badly jeopardized. Boeing seems to
think the airline can be revived and is prepared to assist.
The GON would be wise to seize the opportunity without any
political conditions.

KATHMANDU 00000202 002 OF 002

POWELL

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