CAL DISAPPOINTS BOEING AGAIN ON 747-ADVANCED

C O N F I D E N T I A L TAIPEI 004922 SIPDIS DEPT FOR EAP/TC DEPT PASS AIT/W, USTR E.O. 12958: DECL: 12/20/2015 TAGS: EAIR ETRD BEXP TW SUBJECT: CAL DISAPPOINTS BOEING AGAIN ON 747-ADVANCED LAUNCH CUSTOMER DEAL REF: A. TAIPEI 4249 ¶B. TAIPEI 4573 Classified By: AIT Director Douglas H. Paal, Reason 1.4 d ¶1. (C) Summary: China Airlines (CAL) surprised Boeing by failing to move forward on a proposal to purchase at least ten planes as a launch customer for the 747-Advanced aircraft during a visit by a senior Boeing executive, which Boeing expected to culminate with the signing of a contract. Boeing representatives in Taipei told AIT that CAL executives said that political pressure and pressure from Airbus limited CAL's ability to commit to the launch customer deal. Boeing has so far refused to extend its December 21 expiration for the advantageous launch customer terms, but hopes that CAL will express that it is serious about moving forward on a deal and give Boeing a reason to push back the deadline. Boeing has not yet asked for assistance from AIT/T, but indicated that such a request may be forthcoming. End summary. ¶2. (C) China Airlines (CAL) surprised Boeing by failing to move forward on a proposal to purchase at least ten planes as a launch customer for the 747-Advanced aircraft. According to Boeing's Taiwan Commercial Airplane Group Chief Representative Paul Fang and Asia Pacific Sales Director Scott Grimsby, Boeing believed it was on the verge of signing an agreement whereby CAL would buy four 747 Advanced cargo and six 747 Advanced passenger aircraft. Boeing's Vice President and General Manager for Airplane Programs Mike Cave, whom Grimsby described as the Commercial Airplane Group's number two, arrived in Taipei for meetings on December 12 that they believed would work out the final details of the agreement and conclude with a signing. However, CAL proceeded with the meeting as if it were nothing more than a courtesy call. CAL Chairman Philip Wei later cited "pressure from Airbus" as one reason it was not prepared to proceed with the launch customer deal at this time. Fang said that another senior CAL executive later cited "political pressure" when Wei was out of earshot. ¶3. (C) Boeing had previously given CAL a deadline of December 21 to reach a launch customer agreement. During the meetings with Cave, CAL asked for an extension until after the Lunar New Year holiday on January 28. After departing Taiwan, Cave sent a letter to Wei reviewing the results of their meeting and noting disappointment that an agreement had not been reached. He also reiterated the December 21 deadline. Fang told AIT that Boeing hopes that the letter will cause CAL to come back to Boeing with a more reasonable extension request and an expression of commitment to moving forward toward a deal that would give Boeing justification to extend. ¶4. (C) Fang and Grimsby requested a meeting with AIT to brief us on the current status of their discussions with CAL. They did not request any assistance at this time. However, they noted that the references to "political pressure" and "pressure from Airbus," suggested that they might wish to seek assistance soon in countering European lobbying of the Taiwan government. Comment: The Boeing representatives do not yet have a specific idea of what type of pressure, if any, CAL is under at this point. This lack of clarity probably results at least in part from Wei's recent promotion to Chairman and subsequent replacement as President by CAL outsider Ringo K.S. Chao (ref B). Until the circumstances are substantially clarified, AIT recommends that we not intervene. End comment. PAAL