VZCZCXRO1994
PP RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHHI #1974/01 3250920
ZNR UUUUU ZZH
P 210920Z NOV 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 6754
INFO RUCPDOC/USDOC WASHINGTON DC
RUEHHM/AMCONSUL HO CHI MINH 3975
RUEHZS/ASEAN REGIONAL FORUM COLLECTIVE
UNCLAS SECTION 01 OF 02 HANOI 001974
SIPDIS
SIPDIS
SENSITIVE
STATE FOR EAP/MLS
STATE PASS TO USTR DBISBEE
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
USDOC PASS TO ADVOCACY CENTER
EEB/TPP/BTA/ANA
E.O. 12958: N/A
TAGS: EAIR ECON EIND EINV ETRD BEXP KTEX OTRA OVIP KIPR
VM
SUBJECT: BOEING INKS DEFINITIVE AGREEMENT WITH VIETNAM AIRLINES AND
NEWLY FORMED VIETNAM AIRLINES LEASING COMPANY FOR THE PURCHASE OF 12
787 DREAMLINERS
HANOI 00001974 001.2 OF 002
1. (SBU) Summary: In a ceremony and press event on November 16 in
Hanoi, the Boeing Company signed a definitive agreement for the
purchase of 12 787 Dreamliners with Vietnam Airlines (VNA) and the
newly formed Vietnam Airlines Leasing Company (VALC). Prior to the
evening signing ceremony, Boeing CEO and President of Commercial
Airlines, Scott Carson, paid a courtesy call on Prime Minister
Nguyen Tan Dzung to congratulate the country on the $1.88 billion
purchase and encourage the continued development of the aviation
sector. Minister of Planning and Investment Vo Hong Phuc, speaking
during the ceremony at the behest of Prime Minister Dung, called the
sale of the 12 Dreamliners - four of which were purchased by VNA and
eight by VALC- symbolic of the improving commercial and bilateral
relationship between the United States and Vietnam. Vietnam
Airlines previously purchased four Dreamliners in 2005. First
delivery on that purchase is set for 2009. End Summary.
VALC - A Catalyst for Fleet Expansion at VNA
--------------------------------------------
2. (SBU) Vietnam staged an impressive show on November 16 to
commemorate the purchase of 12 Boeing 787 aircraft. After a
commercial and cultural warm up, which featured a multi-media expose
of Vietnam Airline's development as a regional carrier and three
divo tenors bellowing the Vietnamese version of Con Solo Mio, the
first order of business for the signing ceremony was the issuance by
Hanoi People's Committee Chairman Nguyen The Thao of a business
license to VALC, a new-joint stock company formed by state-owned
enterprise (SOE) giants Vietnam Airlines, Vinashin Business Group,
the Vietnam Oil and Gas Group, the Bank of Investment and
Development of Vietnam and the Phong Phu Corporation. According to
VNA, which maintains a 23 percent majority stake in the venture,
VALC was created in recognition of the fact that the airline must
more than double its fleet by 2020 if it is to assume its place as a
recognized regional carrier and assist the Vietnamese economy
maintain average annual growth above seven percent. The airline
currently owns 46 aircraft, but plans to operate 86 by 2015 and 110
by 2020, several of which it intends to lease from VALC. In
addition to buying and leasing aircraft, VALC plans to offer
on-demand air transport, terminal operation, and aircraft
maintenance and insurance services.
3. (SBU) Following remarks from VNA Chairman Nguyen Sy Hung and
Boeing CEO and President for Commercial Airplanes, Scott E. Carson,
Boeing Company signed a definitive agreement with Vietnam Airlines
for the delivery of four 787 Dreamliner aircraft starting in 2015,
the list value of which is $627 million. Moments later, the
Chicago-based company inked a larger deal, worth $1.25 billion with
the newly established VALC for eight aircraft with delivery
positions starting in 2016, after which VNA and VALC immediately
signed their own Memorandum Of Understanding (MOU) for the leasing
of the eight aircraft to VNA. In speaking of the significance of
the deals, Chairman Hung expressed VNA's expectation that the fleet
expansion will clear the way to begin direct flights to the U.S. in
2008 and expand service to Europe, and hinted at an internal VNA
target of operating 28 787 Dreamliners by 2020. The airline
currently has four 787 Dreamliners on order with Boeing for delivery
starting in 2009.
The Politics of Aviation in Vietnam
-----------------------------------
4.(SBU) The deal signing was the result of a one-and-a-half year
sales negotiation, which had heavy personal involvement by Prime
Minister Nguyen Tan Dung. Prior to the actual ceremony, Dung met
with Carson and his management team in a closed-door session, during
which, according to Boeing, the Prime Minister expressed his
expectation that VNA, which is one of 12 large SOE's managed
directly by the Prime Minister's office, would acquire direct flight
routes to the United States by the end of 2008. He underscored to
Carson that he and the GVN view continued development of the local
aviation industry as central to Vietnam's continued economic growth
and that he looked forward to Boeing's participation in that
development on several fronts.
5. (SBU) Speaking at the behest of the Prime Minister to the signing
ceremony's 150 invited guests, Minister of Planning and Investment
Phuc acknowledged aviation's key role in the Vietnamese economy and
underscored its importance in the political relationship with key
trading partners like the U.S. He echoed a familiar Government of
Vietnam (GVN) restrain that there is "room enough" for all major
trading partners to take part in the development of Vietnam's major
HANOI 00001974 002.2 OF 002
infrastructure sectors, alluding to the signing of an MOU between
VNA and Boeing rival Airbus in September 2007 for the purchase of 10
A-350s and 20 narrow-body A-321s. In the end, he pointed to the
Boeing deal as symbolic of the ever-improving bilateral relationship
between the United States and Vietnam and as a significant step
toward easing the $8.5 billion trade imbalance between our
countries.
6. (SBU) From the outset of its engagement with VNA and the GVN,
Boeing encountered intense competition from European rival Airbus
(whose representative attended the signing ceremony). Throughout,
Boeing sought and received robust advocacy support from the highest
levels of the U.S. Mission to Vietnam, the Department of Commerce,
the Department of State and other senior-level inter-agency Trade
Promotion Coordinating Council officers. In discussions with Dung
during his Business Development Trade Mission to Vietnam from
November 4 - 8, 2007, Secretary of Commerce Carlos Gutierrez
strongly advocated for quick completion of the deal. True to Dung's
word that a definitive agreement would be soon be finalized, VNA and
VALC completed the deals by Dung's November 16 deadline. At an
informal gathering after the signing, CEO Carson; Stanley Deal,
Boeing Vice President of Sales for Asia Pacific; and other Boeing
executives thanked Mission Vietnam for the Embassy's and USG's
assertive and on-going engagement, noting that USG advocacy was a
key factor in bringing the agreement to fruition.
7. (SBU) Speaking on behalf of the Embassy and the United States
Government at the signing ceremony, the DCM highlighted the 500
percent growth in two-way trade between the U.S. and Vietnam since
the signing of the Bilateral Trade Agreement in 2001. He
congratulated Vietnam on its impressive economic development,
underscored U.S. Government support to Vietnam as it continues to
transform its economy, and expressed trust that completion of the
Boeing/VNA contract would be a harbinger for completion of other
pending U.S.- Vietnamese infrastructure agreements to be finalized
in the near future.
MICHALAK