US embassy cable - 05WARSAW1369

UNCLAS  WARSAW 001369 
 
SIPDIS 
 
 
SENSITIVE 
 
STATE FOR EUR/NCE: TARA ERATH AND MICHAEL SESSUMS 
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON 
USDOC FOR 3133/USFCS/OIO/EUR/TMOORE 
USDOC FOR 3150/USFCS/OIO/CEE/MCOSTA 
TREASURY FOR OASIA MATTHEW GAERTNER AND ERIC MYER 
FRANKFURT FOR TREASURY JIM WALLAR 
STATE PASS TO EXIM BANK FOR DAVID FIORE 
 
E.O. 12958: N/A 
TAGS: EAIR, ECON, PREL, PL, Economy 
SUBJECT: LOT AIRLINES CEO DISCUSSES BOEING'S OFFER 
 
REF: (A) WARSAW 985, (B) WARSAW 971 
 
This message is sensitive, but unclassified: Not for 
Internet distribution. 
 
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Summary 
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1. (SBU) The CEO of LOT Airlines met with the Ambassador to 
discuss the LOT tender for wide-body aircraft.  LOT still 
does not know when the final decision on which aircraft it 
will purchase will be made.  The CEO expects, however, that 
if the decision is postponed past the middle of April the 
entire proposal will likely be tabled for two years due to 
the coming change in Poland's government.  The CEO said that 
Boeing's recent efforts in Poland, especially the visit of 
the former Boeing CEO, Harry Stonecipher, have helped the 
company's bid. 
 
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Timing? 
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2. (SBU) The CEO and President of LOT Airlines, Marek 
Grabarek, met with the Ambassador on March 9, to discuss the 
LOT tender for wide-body aircraft.  Grabarek acknowledged 
that the fleet replacement process was not progressing as 
quickly as he wanted and claimed that he did not know why it 
has taken so long.  While stressing his desire for LOT to 
make the decision as much as possible on commercial grounds, 
he acknowledged that LOT will need to consult with the GOP 
 
3. (SBU) Due to the expected elections in June, Grabarek 
believes that mid-April is the deadline by which a decision 
must be made.  If, by that time, the GOP has not decided 
which aircraft to purchase, Grabarek thinks that the 
political climate will be such that the GOP will not make a 
decision before elections.  In that case, LOT will most 
likely revisit the fleet-replacement issue in about two 
years.  With winter vacation now over, he believes it might 
be easier for "the ministers to make a decision."  Grabarek 
said that it would useful for the USG to push the government 
to make a decision - or support LOT's choice - soon. 
 
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Political Pressures 
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4. (SBU) Grabarek was heartened by the message that came out 
of the Ministry of Treasury during the Stonecipher visit 
that the decision will be made on the commercial merits.  He 
acknowledged that there is tremendous political pressure 
being applied at all levels of the GOP, but believes the 
current state of the government is weakening traditional 
political muscle.  He said the Stonecipher visit was an 
effective counterweight to some of the political pressure 
from Airbus because it stressed the company's commercial 
advantages and effectively highlighted Boeing's cooperation 
in Poland. Grabarek appreciated the Boeing CEO's comments 
that Boeing would hold the 787 delivery slots for LOT for 
the time being.  Grabarek hoped that Boeing's new management 
would reconfirm that same flexibility as soon as possible. 
 
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Future of LOT 
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5. (SBU) Next week LOT will send letters to Airbus and 
Boeing asking them to extend their offers, as both expire 
soon.  In addition, the letter to Boeing may request that 
the aircraft manufacturer include flexible options for the 
larger 787-9 aircraft.  Grabarek said that since LOT began 
addressing the fleet replacement issue in summer 2004, the 
company's market outlook has become more upbeat and it may 
need to purchase bigger aircraft. 
 
6. (SBU) Grabarek reported that the Ministry of Treasury's 
talks with the trustees of the Swiss Air Group regarding 
disposition of their shares were going well and there should 
"soon" be an agreement to move ahead with the privatization 
 
of LOT.  Grabarek said that while LOT needs to move ahead 
and have a final decision on the wide-body aircraft purchase 
for the sake of the company, it is still deciding what kind 
of airline it wants to be.  The airline is positioning 
itself as a provider of premium services among a field of 
low-cost carriers.  Grabarek said that his "dream" is for 
Boeing to win the deal.  He added that, ideally, Boeing 
would also assist in the refurbishment of the business class 
seats in LOT's current 767 fleet, which LOT would continue 
to operate before the delivery of the 787s. 
 
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Message to Boeing 
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7. (SBU) Grabarek said CEO Stonecipher's trip had been very 
effective in promoting the company's bid and stressing the 
importance of keeping the fleet replacement tender 
commercial.  He did not think Boeing needed to follow-up 
with another visit in the wake of Stonecipher's dismissal, 
but a high-level visit by Boeing at the same time that the 
supervisory board is deciding which aircraft to purchase 
might be counterproductive.   The Ambassador asked Grabarek 
if there was any message that he should share with Boeing. 
Grabarek responded, "They need to have a little more 
patience." 
 
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Comment 
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8. (SBU) Officials at all levels tell us Airbus is applying 
enormous political pressure to swing the deal their way. 
The good news is that LOT and its parent ministry (Treasury) 
seem intent on keeping the deal as commercial as possible. 
We have previously heard from the Minister of Treasury, 
Jacek Socha, that the decision rests solely in the hands of 
the supervisory board (reftel A). We should not 
underestimate the challenges LOT and Socha will face in 
keeping it commercial, although, perversely, the GOP's 
impending dissolution as elections approach will tend to 
blunt some of the instruments in Airbus' toolkit.  We will 
keep up our engagement on this end, pushing for a decision 
this spring and recommend that Boeing stay sharp.  It would 
be useful for the new Boeing CEO to send LOT a letter 
reiterating Stonecipher's commitment on the flexible 
delivery slots.  End comment. 
 
Ashe 
 
 
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 2005WARSAW01369 - Classification: UNCLASSIFIED