Diplomats Help Push Sales of Jetliners on the Global Market
Source: New York Times 2 January 2011
Summary Boeing executives, at times, are pressed by foreign government officials and airline executives to hire "agents" or other intermediaries to help deliver a sale. Typically, these agents ask for some kind of a commission to make introductions to officials running the competition. Boeing faced such a request in Tanzania in 2007, as it was bidding on a relatively small contract to modernize the Air Tanzania fleet. It was already concerned, as the bidding began, that AirBus had an inside track. Boeing officials refused to hire the agent and reported the request to the State Department. Air Tanzania was shut down by aviation safety authorities about a year after this exchange.
Date 2007-09-13 11:25:00
Source Embassy Dar Es Salaam
Classification CONFIDENTIAL
C O N F I D E N T I A L SECTION 01 OF 02 DAR ES SALAAM 001249
SIPDIS
SIPDIS
DEPT FOR AF/E RMEYERS, SHAMILTON
AF/EPS FOR THASTINGS, AF/EB
PASS TO DEPARTMENT OF COMMERCE FOR ITA ALSO PASS TO MCC FOR MKAVANAGH, GBREVNOV NAIROBI FOR FCS
E.O. 12958: DECL: 09/13/2017
TAGS: ETRD, ECON, PGOV, BEXP, TZ
SUBJECT: BOEING AND AIR TANZANIA: THE STRUGGLE TO ENSURE TRANSPARENCY AND A LEVEL PLAYING FIELD
REF: DAR ES SALAAM 1074
Classified By: Deputy Chief of Mission D. Purnell Delly for reasons 1.4 b and d.
SUMMARY
--------
1. (C) As Air Tanzania shops for new airplanes for its aging fleet, we remain troubled by separate press reports, quoting Air Tanzania leadership and most recently the Minister of Infrastructure, that a decision has been made in favor of Airbus. This decision would have been made without any serious negotiations with Boeing. We have actively engaged at the highest reaches of this government, and for the moment halted the rush to Airbus and opened a window that Boeing intends to exploit. Air Tanzania now seems to be seriously evaluating the leasing and sale options offered by Boeing.
But we do not believe we are out of the woods, in view of early efforts to pressure Boeing to hire an "agent," and subsequent rumors that China is tying aid to purchase of
Airbuses in order to give business to the joint manufacturing facility being built in China. Ambassador Green raised MCC, the importance of transparency to the investment climate, and a level playing field for Boeing in his presentation of credentials to President Kikwete on September 12. Earlier the DCM had called on the Infrastructure Minister and spoken with a close advisor to the President underscoring the same points. We will continue to press hard not only on behalf of Boeing, but the importance of transparency and a level playing field to the positive investment climate Kikwete is working to create.
END SUMMARY.
2. (SBU) Air Tanzania plans to replace its aging fleet with newer, more efficient aircraft, and has solicited proposals from Boeing and Airbus. In June 2007, Boeing submitted a request for advocacy through the Department of Commerce's International Trade Administration, and Ambassador Retzer, the DCM, and EconCouns met with Rob Faye, Regional Director of Sales for Boeing Commercial Airplanes, on several occasions.
Boeing's early dealings with top officials of the airline beginning in June suggested to Post that the company's fear of outside influence or corruption might be legitimate (reftel).
3. (C) Subsequent to meetings with Faye, the DCM raised the issue of Air Tanzania's dealings with Boeing and Airbus in conversations with a close advisor to President Jakaya Kikwete. The DCM specifically noted Air Tanzania Managing Director and CEO, David Mattaka's unusual "suggestion" that Faye should contact a wealthy South Asian hotelier, who subsequently suggested to Faye that he would need his services to open the right doors in government. Faye flatly refused, responding that Boeing does not use "agents" in Tanzania or elsewhere. (Comment: "Agents" and steep "commissions" have been at the heart of several corruption scandals here, including a BAE radar deal in which the GOT paid a 31 percent commission to a Tanzanian agent, much of which ended up in Swiss bank accounts, according to a UK Parliamentary investigation. Despite the fact that the UK shared this evidence with Tanzania's corruption board, no evident action has been taken. End Comment.) The presidential advisor later got back to the DCM, telling him that President Kikwete was "incensed" upon learning that senior Air Tanzania officials might be intending to profit personally from the deal.
4. (SBU) On August 9, Boeing's Faye met with Maua Daftari, Deputy Minister of Infrastructure, and Dr. Bartholomew Rufunjo, Director of Transport and Communications in the Ministry of Infrastructure (the Ministry that makes all financial decisions regarding Air Tanzania). Faye reported his meetings with both Daftari and Rufunjo were promising.
Both officials mentioned more than once the importance of a fair and level acquisition process for Air Tanzania's development. David Mattaka, CEO of Air Tanzania, went out of his way to tell Faye on August 10 that Air Tanzania did not use agents. Mattaka repeated this statement during a meeting between Faye and the Air Tanzania board of directors. Faye reported that it was apparent that there had been some communication with the Ministry, presumably from State House, to ensure there would be no "go-betweens" in Air Tanzania's dealings with Boeing. On the sidelines, Mattaka mentioned to Faye that he thought the pressure was originating with the U.S. Embassy.
DAR ES SAL 00001249 002 OF 002
5. (U) Ambassador Retzer forcefully raised the issue of combating corruption in his last public speech beforebdeparting Post on August 31. On September 2, forty-eight hours after Retzer departed country, the Tanzanian press reported for the second time that Air Tanzania was in the process of procuring eight Airbus planes, and extensively quoted Tanzanian Minister of Infrastructure, Andrew Chenge.
We did not view the timing of the second announcement -- on the heels of Retzer's departure and before Ambassador Green had arrived and been credentialed -- as a coincidence.
6. (C) On September 7, the DCM and EconOff met with Minister Chenge. The DCM began by raising President Kikwete's upcoming trip to the United States and his plan to take a large business delegation. Kikwete would be marketing Tanzania as a prime location to trade and invest. It was important, therefore, that a major U.S. corporation like Boeing compete on a level playing field with Airbus, so its message to the U.S. business community would echo Kikwete's message. The DCM said Boeing and the Embassy had been confused by recent press reports regarding Air Tanzania's acquisition of new aircraft, and asked Chenge to clarify the status of negotiations.
7. (C) Chenge said contrary to his purported statements to the Tanzanian press, no final decision had been made on whether Air Tanzania would acquire Airbus or Boeing airplanes. The first decision was what type of airplanes to buy, and Boeing was the obvious choice since Air Tanzania already owned and maintained several Boeing airplanes.
However, the issue of financing was also a primary concern due to a lack of government funding for the new aircraft. He stated that he could say "with certainty" that no decision has been made, but his Ministry was "very cautious on how to proceed because (they) don,t have the money." He said he understood Boeing could help open doors to financing possibilities, but "certain deadlines" needed to be met. The
DCM stressed that regardless of the outcome, the Embassy wants to see that Air Tanzania is engaged in fair and transparent negotiations. He pointed out that Tanzania would benefit from giving Boeing the chance to underbid Airbus.
8. (C) The DCM ended the meeting by mentioning the upcoming vote on the Millennium Challenge Corporation (MCC) Compact for Tanzania, and the importance of transparency to sustaining any Compact that eventually would be signed. On the way out, Chenge,s staffer told the DCM that he was aware that Chenge had "misspoken" and been "misquoted" in the press, and that his office had already received several calls for clarification. (Comment: We think one of the calls to Chenge's office may have come from State House. End Comment)
-------
9. (C) Although Air Tanzania is a small airline, looking to expand its fleet of two Boeing 737's to a fleet of about 10 planes, this deal has the potential to result in USD 537 million in sales for Boeing. Boeing is ready to offer Air Tanzania a number of capacity-building services to enable the airline to better serve the Tanzanian public. More broadly, if done right, the deal can reinforce the impression that Tanzania is a promising place to invest. Done wrongly, it can reinforce impressions that have been building here for
the past 18 months that this is a government without the political will to tackle senior-level corruption. To us, reinforcing the view that Tanzania is a positive place to invest is almost as important as ensuring one of America's premier private sector "champions" is accorded the transparency and level playing field it is due. We remain concerned, however, in part due to rumors that the Chinese have tied aid to buying Airbus. We will continue to monitor this case closely, intervening decisively with the government when necessary.
Destination
VZCZCXRO6390
PP RUEHDBU RUEHDT RUEHKN RUEHLMC RUEHMJ RUEHMR RUEHPB
DE RUEHDR #1249/01 2561125
ZNY CCCCC ZZH
P 131125Z SEP 07
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 6752
INFO RUCNCLM/MCC CANDIDATE COUNTRY COLLECTIVE PRIORITY
RUEHNR/AMEMBASSY NAIROBI PRIORITY 0780
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
Source: New York Times 2 January 2011
Summary Boeing executives, at times, are pressed by foreign government officials and airline executives to hire "agents" or other intermediaries to help deliver a sale. Typically, these agents ask for some kind of a commission to make introductions to officials running the competition. Boeing faced such a request in Tanzania in 2007, as it was bidding on a relatively small contract to modernize the Air Tanzania fleet. It was already concerned, as the bidding began, that AirBus had an inside track. Boeing officials refused to hire the agent and reported the request to the State Department. Air Tanzania was shut down by aviation safety authorities about a year after this exchange.
Date 2007-09-13 11:25:00
Source Embassy Dar Es Salaam
Classification CONFIDENTIAL
C O N F I D E N T I A L SECTION 01 OF 02 DAR ES SALAAM 001249
SIPDIS
SIPDIS
DEPT FOR AF/E RMEYERS, SHAMILTON
AF/EPS FOR THASTINGS, AF/EB
PASS TO DEPARTMENT OF COMMERCE FOR ITA ALSO PASS TO MCC FOR MKAVANAGH, GBREVNOV NAIROBI FOR FCS
E.O. 12958: DECL: 09/13/2017
TAGS: ETRD, ECON, PGOV, BEXP, TZ
SUBJECT: BOEING AND AIR TANZANIA: THE STRUGGLE TO ENSURE TRANSPARENCY AND A LEVEL PLAYING FIELD
REF: DAR ES SALAAM 1074
Classified By: Deputy Chief of Mission D. Purnell Delly for reasons 1.4 b and d.
SUMMARY
--------
1. (C) As Air Tanzania shops for new airplanes for its aging fleet, we remain troubled by separate press reports, quoting Air Tanzania leadership and most recently the Minister of Infrastructure, that a decision has been made in favor of Airbus. This decision would have been made without any serious negotiations with Boeing. We have actively engaged at the highest reaches of this government, and for the moment halted the rush to Airbus and opened a window that Boeing intends to exploit. Air Tanzania now seems to be seriously evaluating the leasing and sale options offered by Boeing.
But we do not believe we are out of the woods, in view of early efforts to pressure Boeing to hire an "agent," and subsequent rumors that China is tying aid to purchase of
Airbuses in order to give business to the joint manufacturing facility being built in China. Ambassador Green raised MCC, the importance of transparency to the investment climate, and a level playing field for Boeing in his presentation of credentials to President Kikwete on September 12. Earlier the DCM had called on the Infrastructure Minister and spoken with a close advisor to the President underscoring the same points. We will continue to press hard not only on behalf of Boeing, but the importance of transparency and a level playing field to the positive investment climate Kikwete is working to create.
END SUMMARY.
2. (SBU) Air Tanzania plans to replace its aging fleet with newer, more efficient aircraft, and has solicited proposals from Boeing and Airbus. In June 2007, Boeing submitted a request for advocacy through the Department of Commerce's International Trade Administration, and Ambassador Retzer, the DCM, and EconCouns met with Rob Faye, Regional Director of Sales for Boeing Commercial Airplanes, on several occasions.
Boeing's early dealings with top officials of the airline beginning in June suggested to Post that the company's fear of outside influence or corruption might be legitimate (reftel).
3. (C) Subsequent to meetings with Faye, the DCM raised the issue of Air Tanzania's dealings with Boeing and Airbus in conversations with a close advisor to President Jakaya Kikwete. The DCM specifically noted Air Tanzania Managing Director and CEO, David Mattaka's unusual "suggestion" that Faye should contact a wealthy South Asian hotelier, who subsequently suggested to Faye that he would need his services to open the right doors in government. Faye flatly refused, responding that Boeing does not use "agents" in Tanzania or elsewhere. (Comment: "Agents" and steep "commissions" have been at the heart of several corruption scandals here, including a BAE radar deal in which the GOT paid a 31 percent commission to a Tanzanian agent, much of which ended up in Swiss bank accounts, according to a UK Parliamentary investigation. Despite the fact that the UK shared this evidence with Tanzania's corruption board, no evident action has been taken. End Comment.) The presidential advisor later got back to the DCM, telling him that President Kikwete was "incensed" upon learning that senior Air Tanzania officials might be intending to profit personally from the deal.
4. (SBU) On August 9, Boeing's Faye met with Maua Daftari, Deputy Minister of Infrastructure, and Dr. Bartholomew Rufunjo, Director of Transport and Communications in the Ministry of Infrastructure (the Ministry that makes all financial decisions regarding Air Tanzania). Faye reported his meetings with both Daftari and Rufunjo were promising.
Both officials mentioned more than once the importance of a fair and level acquisition process for Air Tanzania's development. David Mattaka, CEO of Air Tanzania, went out of his way to tell Faye on August 10 that Air Tanzania did not use agents. Mattaka repeated this statement during a meeting between Faye and the Air Tanzania board of directors. Faye reported that it was apparent that there had been some communication with the Ministry, presumably from State House, to ensure there would be no "go-betweens" in Air Tanzania's dealings with Boeing. On the sidelines, Mattaka mentioned to Faye that he thought the pressure was originating with the U.S. Embassy.
DAR ES SAL 00001249 002 OF 002
5. (U) Ambassador Retzer forcefully raised the issue of combating corruption in his last public speech beforebdeparting Post on August 31. On September 2, forty-eight hours after Retzer departed country, the Tanzanian press reported for the second time that Air Tanzania was in the process of procuring eight Airbus planes, and extensively quoted Tanzanian Minister of Infrastructure, Andrew Chenge.
We did not view the timing of the second announcement -- on the heels of Retzer's departure and before Ambassador Green had arrived and been credentialed -- as a coincidence.
6. (C) On September 7, the DCM and EconOff met with Minister Chenge. The DCM began by raising President Kikwete's upcoming trip to the United States and his plan to take a large business delegation. Kikwete would be marketing Tanzania as a prime location to trade and invest. It was important, therefore, that a major U.S. corporation like Boeing compete on a level playing field with Airbus, so its message to the U.S. business community would echo Kikwete's message. The DCM said Boeing and the Embassy had been confused by recent press reports regarding Air Tanzania's acquisition of new aircraft, and asked Chenge to clarify the status of negotiations.
7. (C) Chenge said contrary to his purported statements to the Tanzanian press, no final decision had been made on whether Air Tanzania would acquire Airbus or Boeing airplanes. The first decision was what type of airplanes to buy, and Boeing was the obvious choice since Air Tanzania already owned and maintained several Boeing airplanes.
However, the issue of financing was also a primary concern due to a lack of government funding for the new aircraft. He stated that he could say "with certainty" that no decision has been made, but his Ministry was "very cautious on how to proceed because (they) don,t have the money." He said he understood Boeing could help open doors to financing possibilities, but "certain deadlines" needed to be met. The
DCM stressed that regardless of the outcome, the Embassy wants to see that Air Tanzania is engaged in fair and transparent negotiations. He pointed out that Tanzania would benefit from giving Boeing the chance to underbid Airbus.
8. (C) The DCM ended the meeting by mentioning the upcoming vote on the Millennium Challenge Corporation (MCC) Compact for Tanzania, and the importance of transparency to sustaining any Compact that eventually would be signed. On the way out, Chenge,s staffer told the DCM that he was aware that Chenge had "misspoken" and been "misquoted" in the press, and that his office had already received several calls for clarification. (Comment: We think one of the calls to Chenge's office may have come from State House. End Comment)
-------
9. (C) Although Air Tanzania is a small airline, looking to expand its fleet of two Boeing 737's to a fleet of about 10 planes, this deal has the potential to result in USD 537 million in sales for Boeing. Boeing is ready to offer Air Tanzania a number of capacity-building services to enable the airline to better serve the Tanzanian public. More broadly, if done right, the deal can reinforce the impression that Tanzania is a promising place to invest. Done wrongly, it can reinforce impressions that have been building here for
the past 18 months that this is a government without the political will to tackle senior-level corruption. To us, reinforcing the view that Tanzania is a positive place to invest is almost as important as ensuring one of America's premier private sector "champions" is accorded the transparency and level playing field it is due. We remain concerned, however, in part due to rumors that the Chinese have tied aid to buying Airbus. We will continue to monitor this case closely, intervening decisively with the government when necessary.
Destination
VZCZCXRO6390
PP RUEHDBU RUEHDT RUEHKN RUEHLMC RUEHMJ RUEHMR RUEHPB
DE RUEHDR #1249/01 2561125
ZNY CCCCC ZZH
P 131125Z SEP 07
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 6752
INFO RUCNCLM/MCC CANDIDATE COUNTRY COLLECTIVE PRIORITY
RUEHNR/AMEMBASSY NAIROBI PRIORITY 0780
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
