ROUND 3: BOEING VS. AIRBUS: AMBASSADOR RECEIVES A

C O N F I D E N T I A L SANAA 003423

SIPDIS

USDOC - PASS TO ADVOCACY CENTER/CHRISTOPHER JAMES. HELSINKI
- PASS TO FCS/ROBERT PEASLEE. RIYADH - PASS TO FCS/NANCY
CHARLES-PARKER. DUBAI - PASS TO FCS. USDOC - PASS TO
ITA/TYLER HOFFMAN. STATE - PASS TO USTR/JASON BUNTIN

E.O. 12958: DECL: 12/04/2015
TAGS: EAIR ECON KTDB YM ECON COM
SUBJECT: ROUND 3: BOEING VS. AIRBUS: AMBASSADOR RECEIVES A
STATUS UPDATE FROM YEMENIA CHAIRMAN

REF: A. SANAA 3032

B. JEDDAH 4638

C. SANAA 3198

Classified By: AMBASSADOR THOMAS C. KRAJESKI FOR REASONS 1.4 (B) AND (D
)


1. (C) Summary: On December 4, the Ambassador met with
Captain Abdulhamid AlQadi, Chairman and CEO of Yemenia
Airlines to discuss the 10-plane purchase that the company is
in the midst of completing. AlQadi said that the company
will make a decision in the near future, possibly by the end
of January, and the prospects for Boeing are favorable.
Airbus is, however, placing pressure on Yemenia and is using
a previous deal as leverage. End Summary.


2. (C) Ambassador reiterated to AlQadi the importance of the
Boeing deal to the USG, noting that business deals like this
one not only promote trade and investment, but also bring
Yemen and the United States closer together. He mentioned
that the deal was discussed during the recent visit of Yemeni
President Ali Abdullah Saleh to the U.S., and that the
discussions were positive.


3. (C) Captain AlQadi said that he briefed President Saleh
before the visit, and was glad to hear that it went well. He
further commented that Yemenia likes the Boeing offer because
of the technology, the EX-IM financing and the dependability
that comes from doing business with an American company. He
noted, however, that Yemenia needs to take into consideration
the financial problems regarding a previous lease of two
Airbus aircraft.(reftel A)


4. (C) According to AlQadi, the current market value of the
two Airbus planes is USD 10-12 million each. According to
the terms of its lease, however, Airbus is charging Yemenia
USD 38 million plus interest payments for a total of USD 50
million dollars . As part of the negotiations for the
current deal, Airbus has agreed to slash 90 percent of the
price of the current lease if Yemenia purchases 10 more
aircraft from Airbus, not Boeing. If Yemenia rejects the
deal, the company will have to pay USD 73 million to purchase
the planes and close the lease, or Airbus will pursue legal
action.


5. (C) AlQadi and the Ambassador agreed that the Airbus
leasing deal had been unfair from the beginning, and that
Airbus was using the threat of legal action against Yemenia
to win the 10-plane contract. AlQadi commented that Yemenia
is trying to find an alternative way of handling the problem
with the old Airbus deal, but Airbus is refusing to
participate in arbitration, and the company fears that Airbus
could resort to seizing the planes.


6. (C) Captain AlQadi hopes that Yemenia will have reached a
decision on the purchase of the 10 new aircraft by the end of
January. He mentioned plans to hold a meeting on December 19
between the company owners, Boeing, and Airbus to further
discuss the purchase.
Krajeski