Wikileaks lifts curtain on Boeing/Airbus horsetrading

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The New York Times reports another set of WikiLeaks has shown the lengths the US diplomatic corps, among others, go to market defence and aerospace products. The newspaper says the cables, posted on its website shows “to a greater degree than previously known” that “diplomats are a big part of the sales force.”

The paper Sunday published diplomatic cables showing the king of Saudi Arabia wanted the United States to outfit his personal jet with the same high-tech devices as the American president’s “Air Force One”. The president of Turkey wanted a slot for an astronaut on a NASA space flight and the Bangladeshi prime minister pressed the State Department to re-establish landing rights at Kennedy International Airport in New York.
“Each of these government leaders had one thing in common: they were trying to decide whether to buy billions of dollars’ worth of commercial jets from Boeing or its European competitor, Airbus,” the newspaper reported. “And United States diplomats were acting like marketing agents, offering deals to heads of state and airline executives whose decisions could be influenced by price, performance and, as with all finicky customers with plenty to spend, perks.
“This is the high-stakes, international bazaar for large commercial jets, where tens of billions of dollars are on the line, along with hundreds of thousands of high-paying jobs. At its heart, it is a wrestling match fought daily by executives at two giant companies, Boeing and Airbus, in which each controls about half of the global market for such planes.”

The paper added it was “not surprising that the United States helps American companies doing business abroad, given that each sale is worth thousands of jobs and that their foreign competitors do the same. But like the other WikiLeaks cables, these offer a remarkably detailed look at what had previously been only glimpsed — in this case, the sales war between American diplomats and their European counterparts. The cables describe letters from presidents, state visits as bargaining chips and a number of leaders making big purchases based, at least in part, on how much the companies will dress up private planes.
“The documents also suggest that demands for bribes, or at least payment to suspicious intermediaries who offer to serve as ‘agents,’ still take place. Boeing says it is committed to avoiding any such corrupt practices.” The NY Time savers the cables make clear that both Boeing and the US government set limits on their efforts, turning away requests in Turkey and Tanzania to hire “agents” who charge steep commissions — or as some called them, bribes — to gain access to top officials. “Agents” and steep “commissions” have been at the heart of several corruption scandals here,” says a 2007 State Department cable recounting a demand that Boeing hire a mysterious hotel executive in Tanzania to serve as a “go-between” with government officials. Payments like that, the cable said, typically were bribes that “ended up in Swiss bank accounts.”

The paper says State Department and Boeing officials, in interviews last month, acknowledged the important role the United States government plays in helping them sell commercial airplanes, despite a trade agreement signed by the United States and European leaders three decades ago intended to remove international politics from the process.

The United States economy, said Robert D. Hormats, under secretary for economic affairs at the State Department, increasingly relies upon exports to the fast-growing developing world — nations like China and India, as well as those in Latin America and the Middle East. “So pushing sales of big-ticket items like commercial jets, earth-moving equipment or power plants (or stepping in to object if an American company is not being given a fair chance to bid) is central to the Obama administration’s strategy to help the nation recover from the recession.”

Boeing earns about 70 percent of its commercial plane sales from foreign buyers, and is the single biggest exporter of manufactured goods in the United States. Every $1 billion in sales — and some of these deals carry a price tag of as high as $10 billion — translates into an estimated 11,000 American jobs, according to the State Department. “That is the reality of the 21st century; governments are playing a greater role in supporting their companies, and we need to do the same thing,” Hormats, a former top executive at Goldman Sachs, said in an interview. Boeing spokesman

Tim Neale, added “The way I look at it, it levels the playing field.” But Charles A. Hamilton, a former Defence Department official who is a consultant to Airbus, said the US government’s advocacy undermined arguments by Boeing and the United States that Airbus had an unfair advantage because of its subsidies from European governments. “The bottom line is anything goes to get the business,” said Hamilton, adding that he was speaking for himself, and not for Airbus. “If they feel like they are losing, they will do just about anything to save a deal.”

Airbus executives would not discuss details of their own sales campaigns — and the WikiLeaks documents are mostly focused on American efforts, the NY Times said. But one Airbus official, who was not authorised to speak on the record, conceded that, international agreements aside, “commercial jet sales are not totally decoupled from political relationship building.”

The cables show that the United States was willing to pull out all the political stops if Boeing is in danger of losing a big deal to Airbus. In late 2007, the board of Gulf Air, the national airline of the oil-rich kingdom of Bahrain, picked Airbus for a huge sale. Boeing told the American government, which responded that there was still a way to turn the deal around, even though Airbus had offered the planes for about US$400 million less than Boeing. The crown prince and king of Bahrain, preparing for the first visit by a sitting United States president, agreed to reverse the decision aftrr some lobbying, ordering Gulf Air to reopen negotiations with Boeing, which ended up winning the deal, which was signed while then-President Bush visited shortly afterwards.

The NY Times adds French president Nicolas Sarkozy made a last-minute bid to save the deal. He offered to visit Bahrain after Bush had left, but that stop-over was cancelled when the Boeing agreement was signed in January 2008. None of the last-minute diplomacy was disclosed.

A January 2010 cable shows ongoing US interest in the Brazilian Air Force’s FX2 programme for 36 to as many as 100 fighter aircraft to replace the dated Northrop F5B Freedom Fighter. The cable notes former president Luiz Inácio Lula da Silva made no secret of his preference for the Rafale, although, reportedly, Dassault’s best offer was 40% pricier. “Despite another Sarkozy visit to Brazil in November and [defence minister] Jobim’s later stop in Paris, the French were not able to meet Brazilian requests for a lower price, but their lack of responsiveness did not seem to affect the Brazilian preference,” the cable said. “Initial statements in September from Lula and [foreign minister] Amorim attempted to portray the French as somehow offering a superior level of technology transfer as justification for the higher price, but as details emerged from the technical evaluation process, it became clear that all three competitors were generally meeting [Brazilian Air Force] tech transfer requirements.”



The cable adds Boeing has strengthened its case by promoting its new “Global Super Hornet” initiative, which would transfer important elements of production of all F/A 18 aircraft (including those for the US military) to Brazil. “By globalising Super Hornet production and including Brazil in the process, Boeing not only is in position to create and maintain more jobs in Brazil, but can assuage Brazilian paranoia about theoretical USG cutoffs of fighter supply bypointing out that any such cutoff would affect the US Navy as well.” The cable concludes with a four-step “campaign plan” to market the Super Hornet, augmenting a June 2009 lobbying plan.