NEW AIR ALGERIE LEADERSHIP READY FOR BOEING

UNCLAS ALGIERS 000319

SIPDIS

SIPDIS

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

E.O. 12958: N/A
TAGS: EAIR BEXP AG
SUBJECT: NEW AIR ALGERIE LEADERSHIP READY FOR BOEING
COURTSHIP

REF: A. 07 ALGIERS 1772

B. 07 ALGIERS 946


1. (U) In a March 15 meeting with the Ambassador, new Air
Algerie President Abdelwahid Bouabdallah and his assistant
Amar Mahiout told us they intended to move quickly to replace
part of Air Algerie's mid-range Boeing 737 fleet (ref A).
Bouabdallah said that they would be looking for delivery of
ten new 100-150 seat jets in 2009, of which two would be
cargo planes. The officials told us that they have heard
nothing from Boeing since Bouabdallah's arrival on the job
last month. Meanwhile, Airbus has been aggressively courting
their business, including phone calls from the Airbus
president and offers to slash aircraft prices. Because Air
Algerie already has Boeing simulators and maintenance
experience, Bouabdallah said the company was inclined to
purchase from Boeing, but needed guidance on which specific
type of aircraft and specifications would best suit Air
Algerie's needs. Bouabdallah said they wanted a broad
contract with Boeing, to include consulting and maintenance
support.


2. (U) Given the decline of the dollar, Bouabdallah said that
buying from Boeing remained a more attractive option for Air
Algerie, despite some dissatisfaction with the last contract
Air Algerie signed with Boeing. According to Bouabdallah,
Air Algerie signed that contract for the purchase of 737-600
aircraft which turned out not to be the most economical
choice of the various 737 options available to them at the
time, given its smaller baggage hold. He said he hoped
Boeing would discuss and guide them through the options and
help us choose the one that makes the most sense.
Bouabdallah also mentioned a finance rate of 5.25 percent on
Air Algerie's last Boeing deal, saying that he now knows they
could have done better, as he said he has seen other current
aircraft financing arrangements on the market of between 2
and 3 percent. Finally, he said that the French-U.S. joint
venture CFM engine for the 737-600 and 800s had given them
some problems on routes in southern Algeria, since the
engines had not received the appropriate internal coating to
protect it against sand. (He also noted that Air Algerie had
experienced greater problems with its two Airbus 310
aircraft, which he said would likely be taken out of
passenger service soon.)


3. (U) Bouabdallah said he had no aviation background and
simply wanted to make the right choice: "I have no religion"
regarding the Boeing-Airbus rivalry, he said. But he pointed
out that despite Boeing's history with Air Algerie, Airbus
was "playing on their geographical advantage" and pushing
hard to break Boeing's market share in Algeria. Since the
last Air Algerie visit to Boeing was approximately three
years ago, according to Mahiout, the Ambassador stressed that
it was high time for a visit, adding that we would transmit
Bouabdallah's message to Boeing immediately.
FORD