US embassy cable - 03ROME4931

C O N F I D E N T I A L ROME 004931 
 
SIPDIS 
 
 
E.O. 12958: DECL: 10/22/2008 
TAGS: EAIR, ECON, ETRD, BEXP, IT, FAA, AVIATION 
SUBJECT: BOEING AND ALITALIA: THE WRITING ON THE WALL? 
 
REF: 02 ROME 05339 
 
    CLASSIFIED BY: ECONOMIC MINISTER-COUNSELOR SCOTT F. KILNER FOR REASONS 
1.5 (B) AND (D) 
 
1. (C) SUMMARY: MANY ALITALIA EMPLOYEES BELIEVE THAT THE 
MERGER OF THEIR SKYTEAM ALLIANCE PARTNER AIR FRANCE WITH KLM 
WILL ONLY INCREASE THE INEVITABILITY THAT A POSSIBLE LARGE 
ORDER OF MEDIUM-RANGE AIRCRAFT BY ALITALIA WILL GO TO AIRBUS 
RATHER THAN BOEING. ALITALIA OFFICIALS ARE DOING THEIR BEST 
TO REMAIN PUBLICLY NEUTRAL; HOWEVER, AIRBUS HAS ALREADY WOVEN 
ITSELF DEEPLY INTO ALITALIA'S OPERATIONAL LIFE.  IN ADDITION, 
CONVERSATIONS WITH FLIGHT CREWS AND TICKETING AGENTS REVEAL 
PREPARATIONS FOR AN AIRBUS FUTURE.  THIS COMBINATION OF 
MERGER-RELATED PRESSURE AND AGGRESSIVE AIRBUS TACTICS CLEARLY 
HAS THE POTENTIAL TO SQUEEZE BOEING OUT OF THE ITALIAN 
MARKET.  END SUMMARY. 
 
2. (C) ON OCTOBER 8, ALITALIA'S VICE PRESIDENT FOR ALLIANCES 
AND BUSINESS DEVELOPMENT GIORGIO CALLEGARI TOLD ECONOFF THAT 
ALITALIA WAS CONSIDERING REPLACING A FLEET OF 89 MD-80 
PLANES. HE EXPLAINED, HOWEVER, THAT ANY FINAL DECISION ON 
SUCH A LARGE-SCALE PURCHASE WOULD REMAIN FROZEN UNTIL DETAILS 
OF THE KLM-AIR FRANCE DEAL TAKE SHAPE IN THE MONTHS AHEAD. 
HE SAID ALITALIA OFFICIALS ARE NEUTRAL ON THE CHOICE OF 
EITHER AIRBUS OR BOEING AIRCRAFT. 
 
3. (C) IN DISCUSSIONS WITH ECONOFF, SEVERAL ALITALIA CREW 
MEMBERS SCOFFED AT THIS OFFICIAL LINE AND SAID EMPHATICALLY 
IT WAS A "DONE DEAL" THAT ALITALIA WOULD BUY REPLACEMENT 
AIRCRAFTS FROM AIRBUS.  CREW MEMBERS BELIEVE THAT AIRBUS IS 
ALREADY POSITIONED PERFECTLY WITHIN THE ORGANIZATION.  AIRBUS 
PERSONNEL ARE AVAILABLE TO ALITALIA PILOTS AS CONSULTANTS AND 
    ADVISORS, AND PILOTS ARE TRAINED ON AIRBUS FLIGHT SIMULATORS. 
 THESE SIMULATORS PROVIDE TRAINING THAT IS INTERCHANGEABLE 
AMONG THE A319, A320 AND A321 AIRCRAFT, EXACTLY THE SHORT- 
AND MEDIUM-RANGE CRAFT THAT COULD FILL THE MD-80 NICHE. IN 
CONTRAST, ALITALIA PILOTS AND CREW MEMBERS SAY THAT BOEING 
HAS NO PRESENCE OR VISIBILITY WITHIN THE ORGANIZATION 
WHATSOEVER, AND THAT ANY PREVIOUS BOEING TRAINING IS 
AIRCRAFT-SPECIFIC, NOT INTERCHANGEABLE. 
 
5. (C) COMMENT: AS DESCRIBED IN REFTEL, BOEING HAS BEEN 
FEELING PRESSURE FOR SEVERAL YEARS FROM AIRBUS IN THE ITALIAN 
MARKET, NOT ONLY WITH ALITALIA ITSELF BUT WITH OTHER 
DEVELOPING REGIONAL AIRLINES.  ALITALIA HAS SIGNED ON TO 
"SLOW-TRACK" PARTICIPATION IN THE KLM-AIR FRANCE MERGER, 
WHICH REQUIRES IT TO ORGANIZE ITS AFFAIRS PRIOR TO ACTUAL 
INTEGRATION.  SHOULD ALITALIA REMAIN INTACT AS THE MERGER 
EVOLVES, THERE IS A VERY REAL POSSIBILITY THAT IT MAY 
PURCHASE AS MANY AS 89 MEDIUM-RANGE AIRCRAFT.  AIRBUS APPEARS 
TO HAVE ALREADY WOVEN ITSELF TIGHTLY INTO ALITALIA'S 
OPERATIONS AND THE STRONG ROLE AIR FRANCE IS LIKELY TO PLAY 
IN THE DEVELOPING NEW CORPORATE ENTITY CAN ONLY SERVE TO 
STRENGTHEN AIRBUS' POSITION.  EMBASSY WILL KEEP A CLOSE WATCH 
ON BOTH AIRBUS AND FRENCH GOVERNMENT ACTIONS TO PROMOTE 
AIRBUS IN ITALY, AS BOTH MIGHT SEE THE KLM-AIR FRANCE MERGER 
AS A GOLDEN OPPORTUNITY TO SQUEEZE BOEING OUT OF THE MARKET. 
END COMMENT. 
SEMBLER 
 
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 2003ROME04931 - Classification: CONFIDENTIAL