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DE RUEHBI #1707/01 2611340
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P R 181340Z SEP 06
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INFO RUEHBI/AMCONSUL MUMBAI 9333
RUEHNE/AMEMBASSY NEW DELHI 5750
RUEHCG/AMCONSUL CHENNAI 1217
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UNCLAS SECTION 01 OF 02 MUMBAI 001707 
 
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TAGS: ECON EAIR PREL ETRD EFIN IN
SUBJECT: BOEING IDENTIFIES SITE FOR PLANNED MAINTENANCE FACILITY IN 
NAGPUR 
 
 
Summary 
------- 
 
¶1. (SBU) A senior Boeing official told the Consul General on 
September 15 that his company has now identified a site for its 
planned maintenance, repair and overhaul (MRO) facility in 
Nagpur.  Seattle-based Dinesh Keskar, who briefed us on the 
margins of the CG's visit to Nagpur, had met with officials of 
the Maharashtra Airport Development Company (MADC) earlier that 
day to agree on the site for the MRO unit, which will initially 
service commercial Boeing aircraft from Indian carriers but 
ultimately should become a service center for commercial 
aircraft from throughout south and southeast Asia.  Boeing will 
invest up to $100 million in the facility and create roughly 
1,000 jobs, with only a handful of managers expected to come 
from the U.S. to run the operation.  Keskar said that political 
and administrative support, from Civil Aviation Minister Praful 
Patel downwards, was strong and accommodating to Boeing's needs. 
 Boeing specifically sought a site outside the special economic 
zone (SEZ) and enormous logistical hub that MADC hopes to built 
adjacent to Nagpur's small regional airport, Keskar told the CG, 
since it did not want to be drawn into the planning 
uncertainties and complex construction that will affect the area 
in the coming years.  The jurisdiction of the SEZ will be 
extended to Boeing's desired site, however, so that the company 
can benefit from the SEZ's favorable tax and labor laws.  Boeing 
is gearing up for the deliveries of new 777 commercial aircraft 
to Indian carriers as part of its orders to sell over 100 
commercial planes in the country by 2012, he told us. End 
summary. 
 
Boeing Identifies Site for MRO at Nagpur Airport 
--------------------------------------------- --- 
 
¶2. (SBU) Dinesh Keskar, the Seattle-based senior VP for 
commercial aircraft sales at Boeing, told the Consul General on 
September 15 that his company has now identified a site for its 
planned maintenance, repair and overhaul (MRO) facility in 
Nagpur.  Keskar briefed the Consul General in Nagpur after his 
discussions with the Maharashtra Airport Development Company 
(MADC), the state-owned company responsible for implementing 
Maharashtra's ambitious vision to create an international 
transport and cargo hub in the city.  The Boeing site is located 
just north of the existing terminal building of the small 
regional airport, and was agreed upon during Keskar's visit 
earlier that day in Nagpur.   Keskar led a delegation of Boeing 
reps from Seattle and New Delhi to Nagpur to discuss potential 
sites for the facility with the MADC. 
 
Boeing Specifically Avoids Planned Logistics Hub and SEZ 
--------------------------------------------- ----------- 
 
¶3. (SBU) Keskar said that the MADC had hoped to settle the 
Boeing facility within the planned 8,000 acre special economic 
zone (SEZ) located to the south of the airport.  Boeing 
declined, Keskar said, because it did not want its facility to 
be located in what looks to be a gigantic, multi-year 
construction site.  During the construction phase of the SEZ, 
planning uncertainties, widespread building activity and 
unreliability of water and power supplies could disturb and 
hamper Boeing's activities, Keskar said.  Hence Boeing insisted 
on a site a good distance away from the SEZ and separated from 
it by the existing runway and a planned second runway.  The MADC 
has also agreed to extend the jurisdiction of the SEZ to include 
the MRO site so Boeing can benefit from the SEZ's privileged tax 
status and its flexible labor laws.  Keskar added that Boeing 
was confident that the city's power grid and water utility would 
be sufficiently reliable to supply the MRO.  In any case, he 
said, "we have enough political connections to ensure 
uninterrupted supply."  (Note: In separate discussions on 
September 14 and 15 in Nagpur, numerous interlocutors told the 
CG that Nagpur had a reasonably reliable power supply and did 
not face the brownouts experienced elsewhere in power-starved 
Maharashtra.  End note.) 
 
Civ Air Minister "Tells" Boeing to Come to Nagpur 
--------------------------------------------- ---- 
 
¶4. (SBU) Keskar confided that Boeing "was told to come" to 
Nagpur by Civil Aviation Minister Praful Patel, who hails from 
 
MUMBAI 00001707  002 OF 002 
 
 
the city.  (Boeing had agreed to build and operate an MRO in 
India as part of the 2005 deal to sell 68 aircraft to Air 
India.)  However, Boeing would not have agreed if the site had 
not been commercially viable, he stressed.  In general, the 
entire GOI political and administrative apparatus, from Minister 
Patel downwards, was highly supportive and accommodating towards 
Boeing's wishes and expectations, Keskar said. 
 
¶5. (SBU) Groundbreaking for the MRO is planned for early 2007, 
and the company was on track to fulfill its commitment to finish 
the project within 36 months, Keskar added.  He could not say 
what the facility would cost, but hinted that the $100 million 
figure routinely cited in the Indian media might be the upper 
limit of what Boeing will initially invest in the unit.  Roughly 
1,000 jobs will be created, although "maybe only five" managers 
from the U.S. will come to run the operation, he said.  Keskar, 
who is originally from Nagpur as well, said he had already begun 
discussions with universities in Nagpur and Mumbai to train the 
aviation engineers that Boeing will need at the facility. 
Initially, only planes from Indian carriers will be serviced, 
but ultimately Boeing plans to make the MRO a service center for 
planes from throughout south and southeast Asia, he said. 
 
Boeing to Deliver 108 Planes by 2012 
------------------------------------ 
 
¶6. (SBU) Keskar also updated us on Boeing's planned deliveries 
to India's rapidly growing civil aviation sector.  In addition 
to the landmark deal with Air India, Boeing will sell over 20 
planes to Jet Airways and 10 each to Spice Jet and Air Sahara in 
the coming years.  While delivery to Air India on account of its 
sovereign guarantee was not an issue, Keskar hinted that Boeing 
still had "problems" in its negotiations with Jet Airways, but 
was continuing to work with U.S. ExIm Bank on the financing.  As 
a whole, Boeing will deliver over 100 planes to the civil Indian 
market by 2012, he said.  Jet and Air India will both take 
delivery of their first new 777 aircraft in early 2007, he said. 
 Both carriers had opulent designs, he said, with Jet planning a 
"palace in the sky."   First class in Jet's new 777 will be a 
cavernous affair with individual suites complete with flat 
screen televisions and a choice of 500 films, while the business 
and economy classes will be far more opulent than the average in 
the sector.  Air India will also offer cabins in first class, 
and plans to remake its somewhat worn image with a completely 
new external design. 
 
Keskar's Views on Ambitious Vision for Nagpur 
--------------------------------------------- 
 
¶7. (SBU) Keskar was skeptical whether the market really needed 
an air transport hub on the scale that MADC envisages for 
Nagpur.  The MADC master plan foresees the construction of a 
second runway and a terminal capable of handling 14 million 
passengers a year.  MADC authorities tell us that they hope to 
create an international commercial aviation hub that will 
capture much of the transcontinental passenger traffic between 
Europe and Asia that now crosses over the Indian subcontinent. 
Keskar was more confident that the planned road, rail and air 
cargo hub would be successful.  He was also optimistic that the 
SEZ would be a success, since numerous Indian and multinational 
companies have already made a commitment to locate factories or 
IT centers on the site.  In any event Boeing had its own 
specific objectives with the MRO and did not want to get 
involved in the project planning for the larger logistics hub, 
he emphasized.  Post will report on the plans for the logistics 
hub and SEZ septel. 
OWEN