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