BOEING'S CONCERNS ABOUT ANA LARGE AIRCRAFT PURCHASE

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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.

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Boeing's Perspective
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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

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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.

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ANA's Perspective
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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