BOEING AND AIR TANZANIA: SOMETHING FOUL AFOOT?

C O N F I D E N T I A L DAR ES SALAAM 001074

SIPDIS

SIPDIS

DEPT FOR AF/E BYODER, AF/EPS FOR THASTINGS, AF/EB
ALSO PASS TO MCC FOR MKAVANAGH, GBREVNOV
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E.O. 12958: DECL: 07/31/2017
TAGS: ETRD ECON PGOV BEXP TZ
SUBJECT: BOEING AND AIR TANZANIA: SOMETHING FOUL AFOOT?


Classified By: Deputy Chief of Mission D. Purnell Delly for
reasons 1.4b and d.


1. (SBU) SUMMARY: Air Tanzania is currently planning to
replace its aging fleet with newer, more efficient aircraft,
and has solicited proposals from Boeing and Airbus. Post is
prepared to advocate on Boeing's behalf, and is concerned
that the two companies be allowed to compete on a level
playing field without outside influence or corruption.
Boeing's recent dealings with top officials of the airline
suggest that the company's fear of outside influence might be
legitimate. END SUMMARY.


2. (SBU) In conversations on July 13 and 20, Rob Faye,
Regional Director of Sales for Boeing Commercial Airplanes,
told Ambassador Retzer, DCM, and PolCouns that Air Tanzania
had recently requested a proposal for the sale of new
airplanes from Boeing, and Boeing had provided a proposal for
five aircraft worth $537 million at catalog prices. In the
wake of the return of full ownership of Air Tanzania to the
GOT in early 2006, the airline is in the process of
reclaiming the operation of numerous services previously
provided by South African Airways. Air Tanzania is also
looking toward expanded routes and toward acquiring a newer,
more efficient fleet.


3. (SBU) Faye stated that because Air Tanzania's current
fleet of 29-year-old 737s (2 operable planes) is extremely
expensive to operate and maintain, the airline needs to
devise a plan to secure newer aircraft if it is to remain
viable. He further explained that in addition to the sale of
new aircraft, which could not be delivered until 2013, Boeing
can offer Air Tanzania a phased-in plan to lease aircraft and
a variety of capacity-building services (e.g., designing and
operating online reservations and ticketing),and can also
work with the airline to implement a multi-stage plan for
growth in the next 10-20 years.


4. (SBU) Boeing has submitted a request for advocacy through
the International Trade Administration, and Post is ready to
bring to bear all tools at our disposal to advocate on
Boeing's behalf. Airbus is also active in the Tanzanian
market, and Post's concern is that the two companies be
allowed to compete on a level playing field without outside
influence or possible corruption.


5. (C) Faye told the DCM that he had received the unusual
"suggestion" from David Mattaka, Managing Director and CEO of
Air Tanzania, that he should consult with a specific
Tanzanian businessman (Jitesh Ladwa, Managing Director,
Indian Ocean Hotels Ltd., and owner of the Golden Tulip
Hotel, Dar es Salaam) regarding Boeing's proposal to Air
Tanzania, an indication that Air Tanzania officials may
intend to profit from whatever deal they conclude.


6. (C) COMMENT: Post notes that the Golden Tulip Hotel, which
Mr. Ladwa owns, was built on a section of oceanfront property
where development has otherwise been prohibited. This raises
questions concerning how permission to build this hotel was
secured. END COMMENT.


7. (SBU) On July 14, Faye met with Mustafa Salim Nyang'anyi,
Chairman of the Board of Air Tanzania (and former Tanzanian
Ambassador to the U.S.). Faye reports that Nyang'anyi is
adamant about buying new airplanes (for reasons of both
economics and personal safety),and has already made payments
on several turbo prop planes to use for domestic flights to
Tanzania's smaller airports. Nyang'anyi has also told Faye
more than once that the GOT is prepared to guarantee
financing for Air Tanzania. The latest we have heard from
Faye is that Dr. Richard Kamungu, member of the board of Air
Tanzania, is currently visiting Boeing's operations in
Seattle, and that CEO David Mattaka has told Boeing that he
intends to accept Boeing's non-binding proposal. Boeing has
told us that they consider the acceptance of their proposal a
sign that Air Tanzania is serious about the offer, despite
its non-binding nature.
RETZER