Identifier
Created
Classification
Origin
05WARSAW1369
2005-03-10 14:06:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Warsaw
Cable title:  

LOT AIRLINES CEO DISCUSSES BOEING'S OFFER

Tags:  EAIR ECON PREL PL 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS WARSAW 001369 

SIPDIS


SENSITIVE

STATE FOR EUR/NCE: TARA ERATH AND MICHAEL SESSUMS
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON
USDOC FOR 3133/USFCS/OIO/EUR/TMOORE
USDOC FOR 3150/USFCS/OIO/CEE/MCOSTA
TREASURY FOR OASIA MATTHEW GAERTNER AND ERIC MYER
FRANKFURT FOR TREASURY JIM WALLAR
STATE PASS TO EXIM BANK FOR DAVID FIORE

E.O. 12958: N/A
TAGS: EAIR ECON PREL PL
SUBJECT: LOT AIRLINES CEO DISCUSSES BOEING'S OFFER

REF: (A) WARSAW 985, (B) WARSAW 971

This message is sensitive, but unclassified: Not for
Internet distribution.

-------
Summary
-------

UNCLAS WARSAW 001369

SIPDIS


SENSITIVE

STATE FOR EUR/NCE: TARA ERATH AND MICHAEL SESSUMS
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON
USDOC FOR 3133/USFCS/OIO/EUR/TMOORE
USDOC FOR 3150/USFCS/OIO/CEE/MCOSTA
TREASURY FOR OASIA MATTHEW GAERTNER AND ERIC MYER
FRANKFURT FOR TREASURY JIM WALLAR
STATE PASS TO EXIM BANK FOR DAVID FIORE

E.O. 12958: N/A
TAGS: EAIR ECON PREL PL
SUBJECT: LOT AIRLINES CEO DISCUSSES BOEING'S OFFER

REF: (A) WARSAW 985, (B) WARSAW 971

This message is sensitive, but unclassified: Not for
Internet distribution.

--------------
Summary
--------------


1. (SBU) The CEO of LOT Airlines met with the Ambassador to
discuss the LOT tender for wide-body aircraft. LOT still
does not know when the final decision on which aircraft it
will purchase will be made. The CEO expects, however, that
if the decision is postponed past the middle of April the
entire proposal will likely be tabled for two years due to
the coming change in Poland's government. The CEO said that
Boeing's recent efforts in Poland, especially the visit of
the former Boeing CEO, Harry Stonecipher, have helped the
company's bid.

--------------
Timing?
--------------


2. (SBU) The CEO and President of LOT Airlines, Marek
Grabarek, met with the Ambassador on March 9, to discuss the
LOT tender for wide-body aircraft. Grabarek acknowledged
that the fleet replacement process was not progressing as
quickly as he wanted and claimed that he did not know why it
has taken so long. While stressing his desire for LOT to
make the decision as much as possible on commercial grounds,
he acknowledged that LOT will need to consult with the GOP


3. (SBU) Due to the expected elections in June, Grabarek
believes that mid-April is the deadline by which a decision
must be made. If, by that time, the GOP has not decided
which aircraft to purchase, Grabarek thinks that the
political climate will be such that the GOP will not make a
decision before elections. In that case, LOT will most
likely revisit the fleet-replacement issue in about two
years. With winter vacation now over, he believes it might
be easier for "the ministers to make a decision." Grabarek
said that it would useful for the USG to push the government
to make a decision - or support LOT's choice - soon.

--------------
Political Pressures
--------------


4. (SBU) Grabarek was heartened by the message that came out

of the Ministry of Treasury during the Stonecipher visit
that the decision will be made on the commercial merits. He
acknowledged that there is tremendous political pressure
being applied at all levels of the GOP, but believes the
current state of the government is weakening traditional
political muscle. He said the Stonecipher visit was an
effective counterweight to some of the political pressure
from Airbus because it stressed the company's commercial
advantages and effectively highlighted Boeing's cooperation
in Poland. Grabarek appreciated the Boeing CEO's comments
that Boeing would hold the 787 delivery slots for LOT for
the time being. Grabarek hoped that Boeing's new management
would reconfirm that same flexibility as soon as possible.

--------------
Future of LOT
--------------


5. (SBU) Next week LOT will send letters to Airbus and
Boeing asking them to extend their offers, as both expire
soon. In addition, the letter to Boeing may request that
the aircraft manufacturer include flexible options for the
larger 787-9 aircraft. Grabarek said that since LOT began
addressing the fleet replacement issue in summer 2004, the
company's market outlook has become more upbeat and it may
need to purchase bigger aircraft.


6. (SBU) Grabarek reported that the Ministry of Treasury's
talks with the trustees of the Swiss Air Group regarding
disposition of their shares were going well and there should
"soon" be an agreement to move ahead with the privatization

of LOT. Grabarek said that while LOT needs to move ahead
and have a final decision on the wide-body aircraft purchase
for the sake of the company, it is still deciding what kind
of airline it wants to be. The airline is positioning
itself as a provider of premium services among a field of
low-cost carriers. Grabarek said that his "dream" is for
Boeing to win the deal. He added that, ideally, Boeing
would also assist in the refurbishment of the business class
seats in LOT's current 767 fleet, which LOT would continue
to operate before the delivery of the 787s.

--------------
Message to Boeing
--------------


7. (SBU) Grabarek said CEO Stonecipher's trip had been very
effective in promoting the company's bid and stressing the
importance of keeping the fleet replacement tender
commercial. He did not think Boeing needed to follow-up
with another visit in the wake of Stonecipher's dismissal,
but a high-level visit by Boeing at the same time that the
supervisory board is deciding which aircraft to purchase
might be counterproductive. The Ambassador asked Grabarek
if there was any message that he should share with Boeing.
Grabarek responded, "They need to have a little more
patience."

--------------
Comment
--------------


8. (SBU) Officials at all levels tell us Airbus is applying
enormous political pressure to swing the deal their way.
The good news is that LOT and its parent ministry (Treasury)
seem intent on keeping the deal as commercial as possible.
We have previously heard from the Minister of Treasury,
Jacek Socha, that the decision rests solely in the hands of
the supervisory board (reftel A). We should not
underestimate the challenges LOT and Socha will face in
keeping it commercial, although, perversely, the GOP's
impending dissolution as elections approach will tend to
blunt some of the instruments in Airbus' toolkit. We will
keep up our engagement on this end, pushing for a decision
this spring and recommend that Boeing stay sharp. It would
be useful for the new Boeing CEO to send LOT a letter
reiterating Stonecipher's commitment on the flexible
delivery slots. End comment.

Ashe


NNNN

2005WARSAW01369 - Classification: UNCLASSIFIED