TAJIKISTAN - BOEING MAKES A DEAL WITH SOMON AIR

UNCLAS SECTION 01 OF 02 DUSHANBE 001112 SENSITIVE SIPDIS DEPARTMENT FOR SCA/CEN E.O. 12958: N/A TAGS: ECON ETRD PGOV EAIR TI SUBJECT: TAJIKISTAN - BOEING MAKES A DEAL WITH SOMON AIR REF: DUSHANBE 932 DUSHANBE 00001112 001.2 OF 002 ¶1. (SBU) Summary: Boeing has reached an agreement with Somon Air (which is controlled by the President and his family),to provide Somon Air up to six 737 aircraft by 2012. With the aircraft, Boeing will provide a comprehensive package of training for Somon pilots and maintenance staff and analytical support to develop Somon's routes and company structure. Somon says it will expand its routes considerably with these aircraft. Somon Air seems to be in the process of replacing state-owned Tajik Air, which would presumably go out of business when Somon Air becomes large enough to take over its traffic. End Summary. ¶2. (SBU) Boeing Vice President for Middle East and Africa Marty Bentrott called on Ambassador September 30, accompanied by Jamshed Rahmonberdiev of Somon Capital, to discuss Boeing's new relationship with Somon Air. Boeing will sell two 737s to Somon, and will deliver them in two years. Somon will lease two, and possibly up to four more 737s by 2012. Somon already operates two 737-800s. Somon is entering into a comprehensive relationship with Boeing, which will include training of maintenance and flight crews, and assistance to develop routes and marketing relationships. AS ALWAYS IN TAJIKISTAN, BIG PLANS ¶3. (SBU) Rahmonberdiev, of Somon Capital, said Somon air would expand its routes to Istanbul and Riga in the next month, later start service to several cities in Russia, and is negotiating with Chinese authorities to start service to Urumqi. They are also considering flights to South Asia and Bangkok. Expanded service within central Asia was less interesting to them, because of low demand and Tajik Air's present regulatory monopoly. ¶4. (SBU) Rahmonberdiev and Bentrott noted that the airplanes bought directly from Boeing would be financed and would cost less that the two 737s Somon bought last year from other owners. Somon Capital paid cash for those two planes, did not do its homework, and found itself with planes that needed expensive and time consuming reconfigurations. They also lacked technical support, forcing Somon to engage Turkish Air in an expensive support contract. ¶5. (SBU) Bentrott said that a Boeing representative would likely come to live in Dushanbe closer to the delivery date to ease communications between Somon and Boeing. Next year Somon would send about 60 pilots and technicians to Seattle for training on the 737. In the near term, Somon Capital will visit Washington, D.C. and Seattle in late October and will want to meet with EximBank to discuss possible support from EximBank for this deal. ¶6. (SBU) No one from Somon Air itself came to the meeting. Somon Air is owned by OrionBank, controlled by the President and run by his brother-in-law. Somon Capital, half-owned by OrionBank, is contracted to handle all financial dealing for new aircraft for Somon Air, while the air company only operates the aircraft. Rahmonberdiev, the CEO of Somon Capital, was previously the embassy's commercial FSN and attended secondary school in the United States under the FLEX program. Somon Air's management comes with long experience at Tajik Air and is reportedly unfamiliar with western business practices. COMMENT: SLIGHTLY LESS STUPID, AS CORRUPT AS EVER ¶7. (SBU) Somon Air has been a comedy of errors, reflective of political interference and the slavish need, which permeates Tajik business and government, to instantly and unquestioningly gratify every presidential whim. Last year Somon Air hastily bought two aircraft, one new and the other barely used, to satisfy a political priority to establish a private airline. Thinking about aircraft internal configuration, engine software, training, and maintenance all came later. Predictably the DUSHANBE 00001112 002.2 OF 002 aircraft proved more expensive and difficult to operate than foreseen. Somon had to turn to Turkish Air to fly and maintain them. They seem now to be trying the old fashioned way, working with Boeing to develop a plan and the planes and people to carry out that plan. The scale of Somon's planned expansion indicates that as in Kazakhstan, the new "private" airline will supplant the existing state carrier, which will presumably then go bankrupt. Even in these economically difficult times, finding the money for all this seems not to be a problem. The President and his close associates control Somon Air but, as Rahmonberdiev has told us, the money to buy the airplanes comes from the financially opaque and ostensibly state-owned Tajik Aluminum Company. End Comment. GROSS