ID:164307
    Date:2008-07-31 12:03:00
    Origin:08BUCHAREST608
    Source:Embassy Bucharest
    Classification:SECRET//NOFORN
    Dunno:08BUCHAREST362
    Destination:VZCZCXRO0346
OO RUEHFL RUEHKW RUEHLA RUEHROV
DE RUEHBM #0608 2131203
ZNY SSSSS ZZH
O 311203Z JUL 08
FM AMEMBASSY BUCHAREST
TO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 8548
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
    
S E C R E T BUCHAREST 000608 
 
NOFORN 
SIPDIS 
 
STATE PLEASE PASS TO EUR/CE ASCHEIBE 
COMMERCE PLEASE PASS TO ITA KNAJDI 
 
E.O. 12958: DECL: 07/30/2018 
TAGS: EAIR, ECON, PGOV, RO 
SUBJECT: ROMANIA: BOEING SETS UP FOR A 1 BILLION DOLLAR DEAL 
 
REF: BUCHAREST 362 
 
Classified By: DCM Jeri Guthrie-Corn for reasons 1.4 (b) and (d). 
 
 1. (C/NF) Summary.  The Regional Boeing sales representative 
advised the Ambassador of plans for a multi-plane deal to 
sell new Boeing 737s to TAROM, the Romanian state owned 
airline.  From Boeing's perspective the 737s fit naturally 
into TAROM's existing fleet structure and will support 
TAROM's future expansion plans.  Operationally and 
strategically, Boeing believes that 737s are a better fit for 
TAROM than the competition.  The deal could result in selling 
up to ten aircraft plus additional options to TAROM and 
Boeing is valuing the potential deal at close to USD 1 
Billion.  However, Boeing is worried about reports that EADS 
does not plan to compete fairly and that they may attempt to 
improperly influence key government officials to favor Airbus. 
 
2.  (S/NF) In a meeting on July 25th with the Ambassador, the 
regional Boeing representative, Monte Frazier, shared an 
allegation that EADS may have offered 3 percent of the sales 
price of any eventual Airbus purchase as bribes to officials 
in the Romanian Government.  Frazier has been a frequent 
visitor to Bucharest over the last several months, and 
recently helped Romanian low-cost carrier Blue Air complete 
the purchase of several next generation 737 aircraft.  He has 
built good contacts with the senior management of TAROM and 
believes that these managers are favorably inclined toward 
purchasing 737s from Boeing.  However, these same TAROM 
managers preferred to wait until they were able to meet 
privately with senior Boeing executives outside of Romania at 
the Farnborough Air Show to report allegations that officials 
in the Ministry of Transportation and the Prime Minister's 
office have been offered bribes to force TAROM to buy new 
aircraft from EADS. 
 
3.  (SBU) The business rationale for TAROM to choose Boeing 
is considerable.  reftel reported on TAROM's hodgepodge fleet 
mix, which includes B-737s, A-310s, A-318s, plus smaller 
regional turboprops.  TAROM has subsequently signed a lease 
deal for four new 737 aircraft to fill immediate fleet needs. 
 This will make 737s the predominant aircraft type in the 
fleet when the new leased planes enter service.  According to 
Boeing, the range, size, and fuel efficiency of 737s make 
them the best possible aircraft for a regional carrier like 
TAROM.  As an added benefit, the parts and flight crew 
certifications are standardized across the 737 line, making 
an exclusively 737 fleet cheaper and more flexible from an 
operations standpoint.  TAROM is already able to offer a full 
suite of 737 repair services at their certified maintenance 
facility, which provides additional cost justifications for 
sticking with the 737 airframe. 
 
4.  (C/NF) Comment.  Post has offered our support to Boeing 
and agreed to advocate for Boeing with the GOR, when it 
becomes appropriate, to ensure that Boeing's eventual bid is 
given all due consideration.  Setting aside allegations of 
bribery, the political pressure on Romania to pick a European 
airframe is considerable.  The fact that 4 leased Boeing 
planes have been added into the fleet, may actually lend 
weight to the argument that it is now Airbus's turn to garner 
a sale, despite the fact that a mixed fleet raises costs and 
creates operational difficulties for TAROM.  Boeing seems 
prepared to make the argument that 737s make the most 
business sense for TAROM, and they are planning on an all-out 
effort to ensure their eventual success in concluding a sale. 
 Post plans to assist Boeing to ensure that the eventual 
competition is fair and transparent.  The fact that TAROM is 
wholly state-owned unfortunately injects politics into what 
should be a straightforward business decision.  End Comment. 
TAUBMAN