NEPAL: ADVOCACY CONTINUES AS BOEING'S HOPES FADE

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 000840 SENSITIVE SIPDIS E.O. 12958: DECL: 09/09/2019 TAGS: EAIR ETRD PREL PTER NP SUBJECT: NEPAL: ADVOCACY CONTINUES AS BOEING'S HOPES FADE REF: A. KATHMANDU 529 ¶B. KATHMANDU 431 ¶C. KATHMANDU 202 Classified By: Charge d'Affaires a.i. Jeffrey A. Moon. Reason 1.4 Summary -------------- ¶1. (SBU) The Charge d'Affaires continues to advocate at the highest levels of government for the state-run Nepal Airlines Corporation (NAC) to conduct its decision-making process on the purchase of new aircraft in a fair and transparent manner, even as Boeing officials REPORT that the NAC Board of Directors has all but finalized a decision to award the contact to Airbus. Boeing says its only hope for having the decision reconsidered rests with the Supreme Court reinstating the powers of the NAC's managing director, who favors Boeing. The top court, however, recently ruled against the managing director in his long-standing power struggle with the NAC's executive chairman, a decision that has not been appealed. Charge Advocates for Fairness and Transparency -------------- - ¶2. (SBU) During a September 4 meeting, the Charge urged Prime Minister Madhav Kumar Nepal to ensure that the Government of Nepal's (GON's) decision-making on the purchase of two new aircraft by the NAC -- one narrow-body and one wide-body -- be conducted in a fair and transparent manner. The Charge made a similar appeal to NAC Executive Chairman Sugat Ratna Kansakar at a reception a week earlier. Boeing: Deal with Airbus 'Just about Done' -------------- ¶3. (C) The NAC Board of Directors has yet to announce a decision on the aircraft purchase, which it has been mulling since bidding closed on May 22. Suvendoo Ray, Boeing's Director of International Sales, told the Charge during a September 1 meeting that while no public announcement has been made, the NAC has privately decided to accept the Airbus proposal. Citing sources "at the very top of the government, he said, "The deal is just about done." According to Ray, the decision to go with Airbus is being pushed by NAC Executive Chairman Kansakar, who was "hired for one thing: make the Airbus deal." ¶4. (C) One of Boeing's few allies within the NAC is Managing Director Kul Bahadur Limbu, a veteran pilot, according to Ray. He said Limbu supports Boeing's argument that it would be financially imprudent for the NAC to purchase a wide-body aircraft for long-haul routes to Europe. (Note. An independent analysis ordered by the NAC, also questioned the purchase, noting the company's plans are "not sufficiently clear in outlining the need to launch these routes and there viability." End note.) Boeing's best hope, Ray said, is for the Supreme Court to rule in favor of Limbu, allowing him to regain the upper hand in his long-standing power struggle with Kansakar and the NAC board. NAC Power Struggle Not Likely to Favor Boeing -------------- ¶5. (U) Limbu's efforts to exert supreme authority at the NAC have resulted in a mixed record in Supreme Court. Limbu was appointed managing director of the NAC in January 2008, but was sacked 11 months later by the new Maoist-led government, which named Kansakar to oversee the state-run airline. Limbu appealed his sacking to the Supreme Court, which in early June reinstated him as managing director. On July 23, the Cabinet of the newly formed, UML-led government appointed Kansakar as executive chairman of the NAC, transferring all of Limbu's responsibilities to him. Limbu asked the Supreme Court to stay the Cabinet's decision until it heard his appeal, which it did, allowing him to regain top executive authority, at least temporarily. On Aug. 12, a Supreme Court panel rejected Limbu's appeal and upheld the Cabinet's authority to appoint Kansakar as executive chairman. ¶6. (U) The Supreme Court's decision made it clear that he had to answer to Kansakar, but Limbu refuses to do so, asserting that he still holds ultimate authority at the NAC. The government directed Limbu to REPORT to a new office at the Ministry of Tourism and Civil Aviation, which oversees the NAC, although he kept the title as NAC managing director. KATHMANDU 00000840 002 OF 002 Limbu continues to claim top executive powers, but he has not asked the Supreme Court to reconsider its decision that undermines this claim. Comment -------------- ¶7. (U) Since it is doubtful that the Supreme Court will be asked again to weigh in on the NAC's internal power struggle, much less rule in Limbu's favor, the NAC board will most likely formalize its decision to purchase aircraft from Airbus and forward it to the Cabinet. Final approval by the Cabinet is not guaranteed, however. Before the Cabinet can act, the purchase plan must be reviewed by the Constituent Assembly's Public Accounts Committee (PAC),which has recently demonstrated a strong commitment to bringing greater transparency to government transactions. When the contracts for operating resorts in Chitwan National Park expired in July, the PAC demanded that the new contracts be awarded through open bidding, even though the Forest Minister supported the automatic renewal of existing licenses. The Committee has also recently demanded the GON renegotiate the agreement it signed with an Australian-based consortium for the construction of the 750-megawatt West Seti Hydroelectricity Project. PAC members argued that the government will receive few returns for the many concessions it made in the original agreement MOON