BOEING'S CONCERNS ABOUT ANA LARGE AIRCRAFT PURCHASE

UNCLAS SECTION 01 OF 02 TOKYO 002056 SENSITIVE SIPDIS STATE FOR EAP/J, EEB/CBA PASS TO USTR FOR BEEMAN PASS TO DOT FOR GRETCH USDOC FOR 3132/USFCS/ADESARRAN USDOC PLS PASS THE ADVOCACY CENTER/LARRY NAVIN E.O. 12958: N/A TAGS: BEXP EAIR PREL JA SUBJECT: BOEING'S CONCERNS ABOUT ANA LARGE AIRCRAFT PURCHASE REF: 06 NAGOYA 48 SENSITIVE BUT UNCLASSIFIED. CONTAINS PROPRIETARY INFORMATION. ¶1. (SBU) Summary: Boeing is concerned about possible EU governments' intervention on Airbus' behalf in connection with future purchases of large civil aircraft by All Nippon Airways (ANA). Representatives of ANA have told Emboffs, however, that any such purchase should be based solely on economic considerations. End Summary. -------------- Boeing's Perspective -------------- ¶2. (SBU) Boeing Japan President Nicole Piasecki and Director of Government Relations Gary Konop met with EMIN and Commercial Attache July 18 regarding Boeing's concerns that EU governments may be inappropriately intervening with Japanese entities in connection with ANA's recent request for proposals (RFP) for five aircraft, with an option for buying three more. The RFP follows both announcements that Boeing's delivery of 787s will be delayed to ANA as well as a Japanese/French joint economic communique issued during French PM Fillon's April visit to Japan. That communique contained language noting French hopes that "European companies in the aviation sector" would capture a share of the Japanese market comparable with that they hold in global markets (Boeing now holds about 90 percent of the passenger aircraft market in Japan, much higher than its share globally) and that France welcomed Japan's aspirations in developing a medium-sized regional passenger jet. (NOTE: When emboffs asked METI and MOFA officials about the communique in April, they said the language had been inserted by the French side, something they had initially resisted but finally agreed to as "harmless." End note.) ¶3. (SBU) Piasecki noted Boeing is working closely with ANA to manage any damage to the long-standing relationship between the two companies that might have resulted from the announcement earlier this year of significant delays in production/delivery of the new 787 to ANA and other carriers. She also noted the strong strategic relationship with Mitsubishi Heavy Industries, the Japanese company developing the new medium-sized regional jet, which is a key partner in producing Boeing's 787. Regarding the ANA RFP, Boeing is not entirely sure of ANA's intentions. She sees the Japanese air carrier as having three options: purchase the Airbus 380, purchase the Boeing 747-8, or purchase no large aircraft at this time. Given high fuel costs and the global economic picture, the business option ANA might well choose is to purchase no additional large aircraft. She noted Japanese media reports that ANA might seek to "punish" Boeing for delays in delivery of the 787 aircraft, but suspects ANA is "too savvy" to allow that issue to affect the current RFP. Still, she has heard reports that the Chairman of ANA's Board of Directors is taking an unusual role in ANA's internal discussions about the aircraft purchases, one that is more favorable to Airbus, and that this position may result from political pressure. ¶4. (SBU) Nevertheless and given EU governments' actions on behalf of Airbus elsewhere, including the April joint Japanese/French economic communique, Boeing believes it needs to be watchful and that it is necessary to be ready to counter further EU government engagement on Airbus' behalf. Boeing has applied to the Department of Commerce for USG advocacy in making the point that decisions on whether to purchase aircraft and what kinds need to be made on a commercial basis and without governments' interference. She also asked that Emboffs inquire, as appropriate, regarding ANA's -- or Japanese air carriers' -- plans as well as noting the need for making aircraft purchase decisions on a commercial basis. Piasecki insists ANA should approach the purchase of new aircraft strictly as a commercial decision TOKYO 00002056 002 OF 002 free from political pressure or inducements, and emphasized Boeing is not requesting advocacy letters from U.S. government officials nor that external pressure be applied to GOJ or to ANA through the GOJ. ¶5. (SBU) Given the high percentage of Japanese content in Boeing aircraft (reftel) and Boeing's history in Japan, Piasecki said, "Boeing and Japan are one." Nonetheless, Boeing has begun a campaign to emphasize the merits of the 747-8, including meetings with Diet members to inform them of Boeing's activities. -------------- ANA's Perspective -------------- ¶6. (SBU) The same day as the Boeing meeting, Econoff met ANA International and Regulatory Affairs Vice President Kazuyuki Iwakata, Director Hitoshi Kawahara, and Senior Manager Toshiyuki Urushibara. Iwakata said ANA is "in a bind" about the delays in delivery of the Boeing 787. The airline planned to use two of the fuel-efficient B-787s at the July G8 Summit and the Olympics to market ANA as an "eco-airline," but the delay ruined those plans. Now ANA has no easy solution and remains in a difficult position, Iwakata stated. ¶7. (SBU) Iwakata confirmed ANA launched a project team in July to consider three options regarding purchases of large aircraft (the Airbus 380, Boeing 747-8, and no purchases at all). When Econoff asked about the team's deadline, Iwata explained there would be no quick decision but emphasized media reports linking the RFP with the delayed 787s are untrue. ANA, he insisted, will make a decision based on economic factors. ZUMWALT