TIGHT RACE FOR BOEING IN CARIBBEAN AIRLINES DEAL

UNCLAS SECTION 01 OF 02 PORT OF SPAIN 000506 SENSITIVE SIPDIS SANTO DOMINGO ALSO FOR REGIONAL COMMERCIAL OFFICE E.O. 12958: N/A TAGS: EAIR ECON EINV PREL KPRV TD SUBJECT: TIGHT RACE FOR BOEING IN CARIBBEAN AIRLINES DEAL REF: KINGSTON 743; KINGSTON 471 BUSINESS SENSITIVE INFORMATION: PLEASE PROTECT ACCORDINGLY ¶1. (SBU) SUMMARY: Boeing's bid to sell ten 737-800 aircraft to Trinidad and Tobago's national carrier Caribbean Airlines (CAL) is reaching a watershed as an intra-governmental board is expected to decide on a vendor by early January. Boeing is competing against Airbus for a potential $790 million deal for new aircraft and related services as CAL's current aircraft lease with Boeing expires in 2010. Boeing representatives told us the company will step up its marketing plan at the outset of 2010, but a long-shot deal to acquire Air Jamaica may delay the CAL aircraft acquisition decision, or reduce the spend. END SUMMARY. -------------- NEW AIRPLANES FOR THE NEW YEAR -------------- ¶2. (SBU) Caribbean Airlines (CAL) CEO Ian Brunton told us December 2 that the final decision to purchase ten new passenger aircraft rests in the hands of an intra-governmental board comprised of various GOTT stakeholders. Brunton noted that CAL has a "close relationship with Boeing," but he would not reveal which bidder he supports, saying only that CAL forwarded its recommendation to the interagency board in November with a plea that the company is in "dire need of the aircraft" since a final decision to upgrade CAL's strained fleet was long past-due. Minister of Works and Transport Colm Imbert likewise told the Charge September 22 of the imperative for the GOTT to reach a timely decision in light of the looming expiration of CAL's current aircraft lease with Boeing. -------------- BOEING VS AIRBUS -------------- ¶3. (SBU) Imbert also told the Charge that Boeing aircraft possessed a definite design edge over Airbus because of roomier cabin luggage space, which he described as a particularly appealing feature for the Caribbean traveler. Imbert highlighted Boeing's existing relationship with CAL as another advantage for the company, including flight crew familiarity with the aircraft. But he also noted what he called Airbus' competitive price, and its offer to re-train CAL flight and maintenance crews at no charge. The Minister lamented the fact that, unlike Airbus' specific financial and technical package, Boeing had submitted only general information with no financial offer, which he described as a failure to "step up to the plate." When we raised this point with Boeing, company representatives explained that they wished to avoid a bidding war and chose a marketing strategy that emphasized a comprehensive equipment and services package. Company representatives told us in mid-December that its team had met with GOTT diplomats at the Trinidad and Tobago Embassy in Washington, and hoped to meet with Imbert in the near future to further discuss the package as the decision moves to the interagency board. -------------- AIR JAMAICA IN THE MIX -------------- ¶4. (SBU) Jamaican PM Golding visited Trinidad and Tobago December PORT OF SP 00000506 002 OF 002 16 to dust off a CAL bid to purchase GOJ-owned Air Jamaica (refs). Trinidad-based Guardian newspaper reported that the GOJ needed to divest Air Jamaica (AJ) in order to secure a much-needed IMF loan, and described the talks as positive movement toward a single air carrier for the Caribbean. Golding met with several GOTT ministers, but Prime Minister Manning was in Copenhagen at the time. The Guardian reported on December 18 that Golding described CAL as the "preferred bidder" during a parliamentary exchange the previous evening. CAL Chairman Arthur Lok Jack also tried to keep afloat the prospects for some sort of CAL-AJ merger, insisting to reporters that his company's offer "was never formally rejected, and, therefore, it remained open." Editorials later in the week were conflicted about whether acquiring the troubled Jamaican airline was in the best interest of Trinidad and Tobago since CAL itself received Finance Ministry bailouts in both 2008 and 2009. ¶5. (SBU) A high-level parliamentarian told the Charge on December 24 that he had been told a merger of the airlines was in the offing, with CAL taking over AJ operations but not its debt. Citing a non-disclosure agreement, CAL executives told us they could not discuss the possible Air Jamaica deal and whether such a deal might negate the need for new aircraft or result in Airbus becoming the front-runner for any new CAL purchases. CAL CEO Brunton did tell us December 21 that if the AJ deal were to go through, his company might be forced to reconsider how many new aircraft it would purchase. -------------- COMMENT: MORE DELAYS, OR JUST LESS TO SPEND? -------------- ¶6. (SBU) PM Manning's government has previously made capital-intensive decisions based more on a bidder's perceived stature than on straight pricing issues, so Boeing might overcome Airbus' reportedly competitive bid as long as the company's stepped-up marketing effort does not arrive too late. But CAL's need for new planes, and its financial capacity to buy them, may be in question if it is truly still pondering an Air Jamaica bid. KUSNITZ