US embassy cable - 05SANAA3423

C O N F I D E N T I A L SANAA 003423 
 
SIPDIS 
 
USDOC - PASS TO ADVOCACY CENTER/CHRISTOPHER JAMES. HELSINKI 
- PASS TO FCS/ROBERT PEASLEE. RIYADH - PASS TO FCS/NANCY 
CHARLES-PARKER. DUBAI - PASS TO FCS. USDOC - PASS TO 
ITA/TYLER HOFFMAN. STATE - PASS TO USTR/JASON BUNTIN 
 
E.O. 12958: DECL: 12/04/2015 
TAGS: EAIR, ECON, KTDB, YM, ECON/COM 
SUBJECT: ROUND 3: BOEING VS. AIRBUS: AMBASSADOR RECEIVES A 
STATUS UPDATE FROM YEMENIA CHAIRMAN 
 
REF: A. SANAA 3032 
     B. JEDDAH 4638 
     C. SANAA 3198 
 
Classified By: AMBASSADOR THOMAS C. KRAJESKI FOR REASONS 1.4 (B) AND (D 
) 
 
 1. (C) Summary: On December 4, the Ambassador met with 
Captain Abdulhamid AlQadi, Chairman and CEO of Yemenia 
Airlines to discuss the 10-plane purchase that the company is 
in the midst of completing.  AlQadi said that the company 
will make a decision in the near future, possibly by the end 
of January, and the prospects for Boeing are favorable. 
Airbus is, however, placing pressure on Yemenia and is using 
a previous deal as leverage. End Summary. 
 
2. (C) Ambassador reiterated to AlQadi the importance of the 
Boeing deal to the USG, noting that business deals like this 
one not only promote trade and investment, but also bring 
Yemen and the United States closer together.  He mentioned 
that the deal was discussed during the recent visit of Yemeni 
President Ali Abdullah Saleh to the U.S., and that the 
discussions were positive. 
 
3. (C) Captain AlQadi said that he briefed President Saleh 
before the visit, and was glad to hear that it went well.  He 
further commented that Yemenia likes the Boeing offer because 
of the technology, the EX-IM financing and the dependability 
that comes from doing business with an American company.  He 
noted, however, that Yemenia needs to take into consideration 
the financial problems regarding a previous lease of two 
Airbus aircraft.(reftel A) 
 
4. (C) According to AlQadi, the current market value of the 
two Airbus planes is USD 10-12 million each.  According to 
the terms of its lease, however, Airbus is charging Yemenia 
USD 38 million plus interest payments for a total of USD 50 
million dollars .  As part of the negotiations for the 
current deal, Airbus has agreed to slash 90 percent of the 
price of the current lease if Yemenia purchases 10 more 
aircraft from Airbus, not Boeing.  If Yemenia rejects the 
deal, the company will have to pay USD 73 million to purchase 
the planes and close the lease, or Airbus will pursue legal 
action. 
 
5. (C) AlQadi and the Ambassador agreed that the Airbus 
leasing deal had been unfair from the beginning, and that 
Airbus was using the threat of legal action against Yemenia 
to win the 10-plane contract.  AlQadi commented that Yemenia 
is trying to find an alternative way of handling the problem 
with the old Airbus deal, but Airbus is refusing to 
participate in arbitration, and the company fears that Airbus 
could resort to seizing the planes. 
 
6. (C) Captain AlQadi hopes that Yemenia will have reached a 
decision on the purchase of the 10 new aircraft by the end of 
January. He mentioned plans to hold a meeting on December 19 
between the company owners, Boeing, and Airbus to further 
discuss the purchase. 
Krajeski