LEBANON: MEA CHAIRMAN FEARS AIRORT COULD FALL INTO

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 000499

SIPDIS

SIPDIS

STATE FOR NEA/ELA
STATE PASS TO USTR AND TO EU MEMBER STATES COLLECTIVE
ABU DHABI FOR FAA
TREASURY FOR MNUGENT AND SBLEIWEISS
USDOC FOR 4520/ITA/MAC/ONE
NSC FOR ABRAMS/SINGH/YERGER/DEMOPULOS

E.O. 12958: DECL: 04/11/2018
TAGS: ECON EAID EFIN PREL PGOV PARM MNUC LE
SUBJECT: LEBANON: MEA CHAIRMAN FEARS AIRORT COULD FALL INTO
WRONG HANDS

Classified By: CDA Michele J. Sison for reasons 1.4 (b) and (e).

SUMMARY
--------------


1. (C) The GOL is bidding out the operations and maintenance
contract at Beirut International Airport (BIA). The chairman
of national carrier Middle East Airlines (MEA),which also
owns the company that currently has the operations and
maintenance contract, says that the Kuwaiti Khurafi group
could win the bid by making an offer below their costs. As a
result, he argues, the GOL would lose effective control over
BIA operations. He argues that MEA,s subsidiary, MEAS,
should retain this contract to assure that BIA is operational
at all times. Hout criticized PM Siniora for missing the
national security considerations while grasping at economic
benefits, accusing him of acting as an accountant and not as
a statesman. End summary.

AIRPORT SHOULD BE IMMUNE
FROM POLITICAL INFLUENCE
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2. (C) On April 2, the chairman of Lebanon,s national
airline Middle East Airlines (MEA),Mohammad Hout, shared
with Econ officers his concerns about a GOL decision to call
for bids for the operations and maintenance (O&M) of Beirut
International Airport (BIA). MEA,s subsidiary, MEAS (Middle
East Airport Services) has had this contract for nearly ten
years and has continuously provided BIA services at all
times, even when opposition-led demonstrations blocked access
to BIA, Hout remarked. For that reason, it is vital that
MEAS retains this contract to ensure that BIA will stay
immune from political influences, he argued.

KUWAITI GROUP
ONLY OTHER BIDDER
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3. (C) Hout said that GOL,s Council for Development and
Reconstruction (CDR) called about six weeks ago for a
five-year bid for the O&M at BIA, and the bid deadline is
April 22. Besides MEAS, there is only one other bidder for
this project, Kuwaiti Khurafi group, and Hout fears that this
wealthy group would bid at below cost to win the contract.
Hout said he is willing to give up &ten percent8 on this
contract to keep it, but fears that the PM would be tempted
by much lower costs. Siniora is thinking of economic
benefits at the expense of political considerations, Hout
complained. Hout is suspicious of the Khurafi group, which
has bid on all aspects of the job, from baggage handling to
luggage carts to cleaning. If these people decide to go on
strike for any reason, they will be able to paralyze BIA
activities, he argued. Hout also mentioned that the Khurafi
group worked on plans for the reconstruction of the Hizballah
stronghold in Dahiya, in Beirut,s southern suburbs, and is
allegedly a supporter of Hizballah SYG Nasrallah.

CABINET DECIDED TO BID
THIS PROJECT LAST YEAR
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4. (C) Hout does not understand the timing for bidding this
project, and why Siniora cabinet approved in the first place
the idea of opening for bids such a vital operation. The
Cabinet approved bidding this project about a year ago based
on a request for Acting Transport Minister Mohammad Safadi.
The Khurafi group was also awarded a three-year O&M contract
for the government-owned Lebanese University without any bid.

PM THINKING
LIKE AN ACCOUNTANT
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5. (C) Hout said the PM Siniora is thinking as an accountant
and not as a statesman. It is important for this government
to show that BIA is not affected by political developments,
but is open for all, Hout argued. This is why the late PM
Rafiq Hariri gave the O&M contract to MEA about ten years
ago, Hout said. That contract has been annually renewed in
the last few years; it expired at the end of December 2007,
and MEA has continued to serve BIA despite GOL arrears of

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about $10-12 million, Hout said. Hout told us he raised this
issue with the leader of the largest parliamentary bloc, MP
Saad Hariri, who was surprised by Siniora,s attitude.

COMMENT
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6. (C) Two ministers we spoke to recently, Tarik Mitri and
Charles Rizk, did not recall the cabinet taking action to
approve the airport services be put out to bid. However,
that may be understandable since the cabinet has been asked
to act on hundreds of matters in recent months, with the
number increasing as the cabinet took on the powers of the
presidency while that position remains vacant. End comment.

SISON