Identifier
Created
Classification
Origin
09DAMASCUS279
2009-04-14 14:49:00
CONFIDENTIAL
Embassy Damascus
Cable title:  

BOEING READOUT ON SYRIAN AIR'S DILEMMA

Tags:  EAIR ECON ETRD ETTC PGOV PREL SY 
pdf how-to read a cable
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PP RUEHDE
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ZNY CCCCC ZZH
P 141449Z APR 09
FM AMEMBASSY DAMASCUS
TO RUEHC/SECSTATE WASHDC PRIORITY 6253
INFO RUEHAM/AMEMBASSY AMMAN PRIORITY 7578
RUEHLB/AMEMBASSY BEIRUT PRIORITY 5124
RUEHLO/AMEMBASSY LONDON PRIORITY 0520
RUEHOT/AMEMBASSY OTTAWA PRIORITY 0197
RUEHFR/AMEMBASSY PARIS PRIORITY 0489
RUEHRH/AMEMBASSY RIYADH PRIORITY 8058
RUEHDE/AMCONSUL DUBAI PRIORITY 0231
RHEHNSC/NSC WASHDC PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 000279 

SIPDIS

DEPT FOR NEA/ELA, EEB/ESC/TFS; NSC FOR SHAPIRO/MCDERMOTT;
COMMERCE FOR BIS/CHRISTINO; PARIS FOR WALLER; LONDON FOR
TSOU

E.O. 12958: DECL: 04/13/2019
TAGS: EAIR ECON ETRD ETTC PGOV PREL SY
SUBJECT: BOEING READOUT ON SYRIAN AIR'S DILEMMA

REF: A. 08 DAMASCUS 438

B. 08 DAMASCUS 599

C. 08 DAMASCUS 661

D. 08 DAMASCUS 850

E. DAMASCUS 188

F. DAMASCUS 192

Classified By: Charge d'Affaires Maura Connelly for reasons 1.4(b,d)

-------
Summary
-------

C O N F I D E N T I A L SECTION 01 OF 03 DAMASCUS 000279

SIPDIS

DEPT FOR NEA/ELA, EEB/ESC/TFS; NSC FOR SHAPIRO/MCDERMOTT;
COMMERCE FOR BIS/CHRISTINO; PARIS FOR WALLER; LONDON FOR
TSOU

E.O. 12958: DECL: 04/13/2019
TAGS: EAIR ECON ETRD ETTC PGOV PREL SY
SUBJECT: BOEING READOUT ON SYRIAN AIR'S DILEMMA

REF: A. 08 DAMASCUS 438

B. 08 DAMASCUS 599

C. 08 DAMASCUS 661

D. 08 DAMASCUS 850

E. DAMASCUS 188

F. DAMASCUS 192

Classified By: Charge d'Affaires Maura Connelly for reasons 1.4(b,d)

--------------
Summary
--------------


1. (C) A Boeing sales representative described Syrian Air
execs as disappointed that his April 7-8 visit to Damascus
did not portend an imminent change in U.S. sanctions law that
would allow Syrian Air to purchase new aircraft from Boeing.
He said that Syrian Air was confused about the extent of
renovations that Boeing's recently-issued export licenses
would allow, and was reluctant to invest millions of dollars
to only partially overhaul the 33 year-old 747-SPs. If they
proceed with the renovations, Syrian Air plans to operate the
747-SPs for five more years, by which time they hope U.S.
sanctions will have been amended to allow them to purchase
new aircraft. He related airline executives' continuing
frustration with Lufthansa Technik of Germany for not
re-exporting a Syrian Air Airbus A320 engine, ostensibly due
to U.S. sanctions. When asked how Syrian Air intended to pay
for a new fleet, execs told Boeing they would seek "outside
financing" backed up by "sovereign guarantees." End summary.

--------------
Boeing in Syria to "Build Relationships"
--------------


2. (C) Boeing Commercial Director for the Middle East and
Africa Donald Galvanin provided the Charge and Emboffs with a
readout of his April 7-8 meetings with officials at Syrian
Arab Airlines (Syrian Air). Describing the mission of his
visit as "relationship building," Galvanin said that Boeing
was concerned about losing a potentially large contract to
Airbus -- should sanctions ever be relaxed -- for lack of
on-the-ground marketing. He was "all but certain" that

Airbus had conducted a fleet planning exercise with Syrian
Air that had culminated with the signing of an MOU. He
characterized Syrian Air executives as disappointed that his
visit did not portend an imminent change in U.S. sanctions
law that would allow the beleagured airline to purchase new
aircraft. Despite their disappointment, he said, they were
eager to discuss Syrian Air's intentions for its grounded
fleet of two Boeing 747-SPs and six 727s, as well as the
airline's longer term hopes for the future.

--------------
Differing Opinions on Export Licenses
--------------


3. (C) Galvanin identified a misunderstanding between Boeing
and Syrian Air over the extent of the renovations that the
recently-issued export licenses permit. Boeing officials, he
said, believe the "D-check" export licenses cover the
complete renovation of each of Syrian Air's two 747-SP
aircraft. Galvanin put the value of such renovations at USD
21 million per plane: USD 4 million per engine (USD 16
million per aircraft) plus USD 5 million to overhaul the
airframe. Syrian Air, however, interpreted the export
licenses as only covering the USD 5 million airframe
overhauls and not the engines. Syrian Air was reluctant to
invest money in overhauling the airframes if they could not
be guaranteed that additional export licenses would be
granted to overhaul the engines.


4. (C) Syrian Air officials were also concerned, he said,
that the D-check licenses did not include a provision for
spare parts. Based on Syrian Air's difficulties in obtaining
licenses for spare parts, airline officials did not want to

DAMASCUS 00000279 002 OF 003


make a substantial investment in the jumbo jets only to have
them grounded for want of relatively inexpensive spare parts.
Of further concern, Galvanin added, Syrian Air faced limited
options for procuring spare parts for the 33 year-old 747-SP
models, as Boeing had long ceased producing them and reliable
parts were increasingly hard to find on the secondary market.


5. (C) If Syrian Air's concerns about engines and spare parts
were addressed, Galvanin said, the airline intended to hire
Saudi-based Boeing subsidiary Al-Salaam Aviation to perform
the airframe overhauls. The engines, however, would be sent
to Lufthansa Technik in Germany. He related Syrian Air's
frustrations with Lufthansa Technik for refusing to re-export
an Airbus A320 engine due to U.S. sanctions. Syrian Air's
technical director confirmed to Galvanin that he had three
more Airbus engines in need of maintenance in Germany (as we
reported in ref C),but he was afraid to ship them outside of
Syria until the export license dilemma over the first engine
was resolved.


6. (C) Note: Syrian Air complained to Post in September 2008
that Lufthansa Technik "could not" obtain an export license
for the Airbus engine (ref C). FM Muallim raised the issue
again with A/S-designate Feltman and NSC Senior Director
Shapiro in March 2009 (ref F),after which Commerce/BIS
confirmed that Lufthansa Technik had never applied for an
export license. Vice FM Faisal Miqdad's Chef de Cabinet
Husam Ala'a told Charge on April 6, however, that some part
of the delay was related to a payment owed to Lufthansa
Technik which, he said, had just been "taken care of." End
note.

--------------
Syrian Air's Long Term-Plan
--------------


7. (C) Syrian Air execs told Galvanin that they intended to
operate the 747-SPs for five years -- if the D-checks were
completed -- after which time they hoped U.S. sanctions law
would have been amended to permit the purchase of new
aircraft. In addition to their existing fleet of six A320s
(only five of which are operational),the airline wanted to
buy a mix of new A320 and A330s, or their respective Boeing
equivalents -- the 737 and 777. Airline officials claimed
they faced increasing pressure from the SARG to purchase
Russian-made aircraft, which would not be subject to U.S.
sanctions, but they much preferred either Airbus or Boeing
due to their greater reliability and ease of maintenance.
Syrian Air further confirmed its intentions to sell its six
727s for salvage (as Post reported in ref C). Galvanin
assessed that the Syrians may have a difficult time finding a
buyer for the aging planes, as only a few African countries
still operated 727s.


8. (C) Galvanin told us that Boeing analysts estimated Syrian
Air's optimal fleet would require a mix of 737s and 777s
totaling 20 aircraft, rather than the 50-aircraft deal that
Airbus had reportedly offered the Syrians in September 2008.
Generally speaking, he said, the asking price for a new 737
is USD 80 million, and USD 200 million for a 777. When asked
how Syrian Air intended to pay for 20 new aircraft, Galvanin
told us that airline execs said they would use a combination
of "outside financing" backed up with "sovereign guarantees."
He added that any MOU that Airbus had signed with Syrian Air
following Sarkozy's September 2008 visit to Damascus was
likely to be non-binding until the airline had actually paid
a considerable deposit to reserve space on the manufacturer's
production line.

--------------
Comment
--------------


9. (C) With the exception of FM Muallim's request to
A/S-designate Feltman regarding the A320 engine in Germany
and the MFA's follow-up on this issue, SARG officials have

DAMASCUS 00000279 003 OF 003


been reluctant to discuss U.S. sanctions and their
deleterious effect on Syrian Air. Nor, with a few
exceptions, have they broached sanctions in great detail with
visiting members of Congress who presumably will have an
influential voice over whether sanctions will ever be lifted.
We know from business contacts that the subject is on Syrian
minds and is likely to be raised eventually. In the mid- to
long-term, Syria's increasing desperation for new commercial
aircraft might be leveraged to advance U.S. policy
objectives.


10. (C) As a short-term, relatively low-cost option that
might help sway the Syrian regime to move forward with a
decision on the NEC location site, we believe Washington
might consider modifying General Order No. 2, para (c)
Licensing Exceptions of the Export Administration Regulations
(EAR). When General Order No. 2 was issued in May 2004, it
contained no license exception for exporting replacement
parts for licensed end-items already in Syria. Consequently,
all replacement parts regardless of value must be exported
with a separate license -- even a rubber gasket worth USD
0.05 for an emergency room ventilator. Post believes
modifying para (c) to set a dollar value threshold for
replacement parts below which no license would be required
would give the Syrians confidence that their reconditioned
747s would not be soon grounded again pending lengthy export
license application procedures for most spare parts. Such a
modification would be consistent with A/S-designate Feltman's
point to FM Muallim (ref F) that we are not politicizing
aviation safety, nor, by extension, health care.
CONNELLY