AIRBUS DETERMINED TO BREAK BOEING IN ALGERIA

UNCLAS ALGIERS 001108

SIPDIS
SENSITIVE

STATE FOR EB/TRA - JBYERLY, JREIFMAN
DEPT OF TRANSPORTATION FOR SEHATLEY

E.O. 12958: N/A
TAGS: EAIR BEXP AG
SUBJECT: AIRBUS DETERMINED TO BREAK BOEING IN ALGERIA

REF: ALGIERS 319

THIS CABLE CONTAINS COMPANY PROPRIETARY INFORMATION NOT TO BE
SHARED OUTSIDE USG.


1. (U) Airbus has dramatically increased pressure on Algeria
to dump Boeing, going so far as to offer to buy Air Algerie's
entire Boeing 737 fleet and replace it with Airbus aircraft,
simulators and training. As reported in reftel, Airbus has
been lobbying Air Algerie intensely for some time, but Air
Algerie president Abdelwahid Bouabdallah told the Ambassador
on October 7 that these efforts were becoming harder to
resist. Bouabdallah, in the presence of Minister of
Transportation Amar Tou, said he wished Boeing would be "more
present" in Algeria, and hoped that Air Algerie might move up
in Boeing's delivery queue given that other companies have
"dropped out due to the economic crisis." Ambassador
advocated on Boeing's behalf several times directly to Tou
and Bouabdallah during the meeting, saying that the U.S.
valued Boeing's history with Air Algerie and wanted to
continue the relationship. Bouabdallah said that French
President Nicolas Sarkozy personally lobbies regularly for
Airbus, and that he himself receives a call from the
president of Airbus "at least once a week." Air Algerie is
due to release a decisive tender for eleven mid-range
aircraft later this month, to modernize its fleet of 737s.


2. (SBU) According to Bouabdallah, Air Algerie is "the most
Boeing-oriented carrier" in the region, and that given its
history with Boeing 737 aircraft, Boeing remains "the natural
choice" for Air Algerie. However, he repeated several times
that Airbus was applying "extreme pressure" and at one point
cautioned the Ambassador not be surprised "should we change
our orientation." He said that Airbus' latest offer was to
buy all of Air Algerie's Boeing fleet and replace it with
their own, in order to lock down the Maghreb market.
Bouabdallah said that Tunisia has committed itself to Airbus,
while Morocco remains heavily focused on Boeing. This, he
explained, caused Airbus to see Algeria as "the tipping
point" for domination of the regional market. He regretted
that, in comparison to Airbus, Boeing had "not been present"
and asked the Ambassador to relay the message to Boeing.
Bouabdallah said that currently, Air Algerie was scheduled to
take delivery of new Boeing 737s in 2014, and asked if this
timetable could be accelerated. Bouabdallah also asked for
more Boeing training and maintenance support, as Airbus has
offered to engage and replace Boeing in these areas as well.


3. (SBU) COMMENT: This discussion took place within the
context of a larger discussion on Open Skies and Algerian
interest in a direct route for Air Algerie between Algiers
and New York. This indicates that the Algerian government
and Air Algerie are keen to maintain if not strengthen their
U.S. connection. However, this is the most alarmist
Bouabdallah has been about the possible demise of Boeing in
the Algerian market in several discussions we have had with
him and his staff since he took over Air Algerie earlier this
year. The offer to replace the entire Air Algerie Boeing
fleet is also the most aggressive Airbus tactic we have heard
to date. In order to present a strong U.S. response to
Airbus' lobbying efforts, we have also engaged the Advocacy
Center of the Foreign Commercial Service, which has already
been in touch with Boeing to discuss next steps. Our
impression was that Bouabdallah wanted to stay with Boeing,
all things being equal, but he was warning us that all things
may not be equal if Airbus continues to step up the political
pressure.

PEARCE