Diplomats Help Push Sales of Jetliners on the Global Market
*Bangladesh's prime minister, Sheik Hasina Wazed, was equally direct
in making a connection for the landing rights at Kennedy Airport, as a
condition of the airplane deal, which was then at risk of collapsing.
"If there is no New York route, what is the point of buying Boeing?" a
November 2009 cable quotes Ms. Hasina as saying as she pressed
American officials. The deal with Boeing went through. So far, flights
by the country's national carrier, Biman Bangladesh Airlines, to New
York have not been restored.*
WASHINGTON —The king of Saudi Arabia wanted the United States to
outfit his personal jet with the same high-tech devices as Air Force
One. The president of Turkey wanted the Obama administration to let a
Turkish astronaut sit in on a NASA space flight. And in Bangladesh,
the 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. 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.
To a greater degree than previously known, diplomats are a big part of
the sales force, according to hundreds of cables released by
WikiLeaks, which describe politicking and cajoling at the highest
levels.
It is 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.
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.
The Equalizers
"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," Mr. Hormats, a former top executive at Goldman Sachs, said in
an interview.
Said Tim Neale, a Boeing spokesman, "The way I look at it, it levels
the playing field."
But Charles A. Hamilton, a former Defense Department official who is a
consultant to Airbus, said the 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 Mr.
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. But one Airbus official, who was not authorized to speak on
the record, conceded that, international agreements aside, "commercial
jet sales are not totally decoupled from political relationship
building."
One example of the horse-trading involved Saudi Arabia, which in
November announced a deal with Boeing to buy 12 777-300ER airliners,
with options for 10 more, a transaction worth more than $3.3 billion
at list prices.
That announcement was preceded by years of intense lobbying by
American officials.
One pitch came from the highest levels, the cables show. In late 2006,
Israel Hernandez, a senior Commerce Department official,
hand-delivered a personal letter from President George W. Bush to the
Jeddah office of King Abdullah, urging the king to buy as many as 43
Boeing jets to modernize Saudi Arabian Airlines and 13 jets for the
Saudi royal fleet, which serves the extended royal family.
The king read the letter from Mr. Bush, the State Department cable
says, and announced that Boeing jets were his favorites. He said he
had just turned down two new Airbus jets, opting instead for a
slightly used Boeing 747.
But before he would commit to a mostly Boeing fleet, the king had a request.
"I am instructing you," he told Mr. Hernandez politely, according to
the State Department cable, "to speak to the president and all
concerned authorities," as the king "wanted to have all the technology
that his friend, President Bush, had on Air Force One." Once he had
his own high-tech plane, with the world's most advanced
telecommunications and defense equipment — the king told Mr. Hernandez
that " 'God willing,' he will make a decision that will 'please you
very much.' "
A State Department spokesman confirmed last week that the United
States had authorized an "upgrade" to King Abdullah's plane, adding
"for security reasons, we won't discuss specifics."
Bangladesh's prime minister, Sheik Hasina Wazed, was equally direct in
making a connection for the landing rights at Kennedy Airport, as a
condition of the airplane deal, which was then at risk of collapsing.
"If there is no New York route, what is the point of buying Boeing?" a
November 2009 cable quotes Ms. Hasina as saying as she pressed
American officials. The deal with Boeing went through. So far, flights
by the country's national carrier, Biman Bangladesh Airlines, to New
York have not been restored.
The request from Turkey for a slot on a future NASA flight came early
last year, as Turkish Airlines was considering buying as many as 20
Boeing jets.
The government there owns slightly less than half of the airline, but
Turkey's minister of transportation, Binali Yildirim, in a January
2010 meeting with the United States ambassador to Turkey, made clear
that the country's president wanted help with its fledgling space
program and perhaps assistance from the Federal Aviation
Administration to improve its aviation safety.
Requests for Favors
"Cooperation in this area will create the right environment for
commercial deals," Mr. Yildirim told the United States ambassador, the
cable says.
In a cable back to Washington, James F. Jeffrey, then the United
States ambassador to Turkey, called the effort by Turkish authorities
to link the Boeing deal to political requests an "unwelcome, but
unsurprising degree of political influence in this transaction." But
he went on to say that authorizing the F.A.A. to help Turkey improve
its aviation safety and space exploration programs could benefit both
nations.
"We probably cannot put a Turkish astronaut in orbit, but there are
programs we could undertake to strengthen Turkey's capacity in this
area that would meet our own goals for improved aviation safety," he
wrote. "In any case, we must show some response to the minister's
vague request if we want to maximize chances for the sale."
The deal was announced a month later, as Turkish Airlines ordered 20
Boeing planes.
Some sales come to Boeing in part because foreign political leaders
want to show friendship to the United States.
King Abdullah II of Jordan, a longtime ally and recipient of billions
of dollars in United States aid, told the ambassador in 2004 that
"even though the latest Airbus offer was better than Boeing's he
intended to make a 'political' decision to have Royal Jordanian buy
Boeing aircraft," a State Department cable said, although the United
States still had to help Boeing secure the deal.
The cables show that the United States is 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 $400 million less than Boeing.
'Far From Over'
"The contest remained far from over," said the cable. "Gulf Air's
selection still needed to be endorsed by the government."
The American ambassador at the time, Adam Ereli, and his chief
economic officer, went into action, "lobbying Gulf Air management,
board members, government officials and representatives of
parliament," and appealing directly to the crown prince of Bahrain, in
an effort to line up a deal for Boeing that could be final in time for
a coming visit by President Bush, the first visit by a sitting United
States president.
Within two weeks, the embassy alerted Boeing officials that the crown
prince and king of Bahrain had rejected Airbus's offer and directed
Gulf Air's chairman to make a deal with Boeing that could be signed
while Mr. Bush was in the country.
Seeing that Airbus had been outmaneuvered, France's president, Nicolas
Sarkozy, made a last-minute bid to save the deal, the State Department
cable says. He offered to visit Bahrain after Mr. Bush had left, but
that stop-over was canceled when the Boeing agreement was signed in
January 2008. None of the last-minute diplomacy was disclosed.
The cables make clear that both Boeing and the 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.
Mr. Neale, the company spokesman, says that for Boeing, "it is not
just a matter of abiding by U.S. law and laws internationally but a
general sense of business ethics." When such requests surfaced, Boeing
often reported them to the State Department.
" '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."
Eric Lipton reported from Washington, Nicola Clark from Paris and
Andrew W. Lehren from New York.
http://www.nytimes.com/2011/01/03/business/03wikileaks-boeing.html
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