VZCZCXYZ0010
RR RUEHWEB

DE RUEHDR #0003/01 0021404
ZNR UUUUU ZZH
R 021404Z JAN 08
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 7179
INFO RUEHJB/AMEMBASSY BUJUMBURA 2619
RUEHKM/AMEMBASSY KAMPALA 3107
RUEHLGB/AMEMBASSY KIGALI 1055
RUEHNR/AMEMBASSY NAIROBI 0873
RUEHBJ/AMEMBASSY BEIJING 0347
RUEHDS/AMEMBASSY ADDIS ABABA 3274
RUEHSA/AMEMBASSY PRETORIA 3604

UNCLAS DAR ES SALAAM 000003 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
DEPT AF/E FOR JLIDDLE, AF/EPS FOR ABREITER 
PASS USTR FOR FLISER, WJACKSON AND COMMERCE/ITA FOR BERKUL 
NAIROBI FCS FOR JSULLIVAN 
ADDIS FOR AU MISSION 
 
E.O. 12958:  N/A 
TAGS: ETRD EFIN EAID ECON PREL TZ
SUBJECT: AUSTR LISER DISCUSSES BOEING AND FLEET EXPANSION WITH AIR 
TANZANIA BOARD 
 
REF: 07 DAR ES SALAAM 1074 
 
Summary 
------- 
¶1. (U) AUSTR Florie Liser learned from David Mattaka, Chief 
Executive Officer of Air Tanzania Company (ATC,) and three ATC Board 
Directors in a November 13 meeting in Arusha that the Board had 
recommended to the Government of Tanzania (GOT) to acquire Airbus 
A-320s (narrow body planes) to expand its aging fleet on regional 
routes.  For longer routes to Europe and Asia, ATC may lease Boeing 
767-200's in the short-term and purchase new A-330s in 2012. 
Mattaka told AUSTR Liser that the ATC Board had preferred the Airbus 
company's delivery dates for new aircraft and its credit incentives. 
 Dr. Juma Ngasongwa, GOT Minister of Planning and Economy, who had 
arranged the meeting on instructions from President Kikwete, 
emphasized that the GOT felt an "urgency" to get its national 
airlines back on track, thus preferred earlier delivery dates. 
Mattaka said the leasing agreements ATC will pursue in the short 
term are separate from the purchase package.  End summary. 
 
Serious Concerns About Transparent Acquisition Process 
--------------------------------------------- ---- 
¶2. (SBU) AUSTR Liser said USTR's primary goal in sub-Saharan Africa 
is to expand trade with the U.S. and that efficient transport is an 
important part of this goal.  In terms of ATC's impending purchase 
of new aircraft, Ms. Liser noted that the USG is most interested in 
a transparent process in which Boeing has the same opportunities as 
its competitor (Airbus) to make a case for its products and 
services.  She noted, however, that while Boeing Company had been 
eager to offer a competitive equipment and incentive package to meet 
ATC's requirements, it appeared that Boeing's efforts to engage 
fully since providing its package to ATC had resulted in no response 
from Air Tanzania.  Liser said she learned that the GOT Minister of 
Infrastructure indicated to the press in early September that a 
decision had been made at a time when Boeing thought the playing 
field was still open.  In addition, an advertisement in a regional 
business journal showed Air Tanzania's new logo on an Airbus plane 
(reftel).  AUSTR Liser noted that Ambassador Green and Embassy staff 
had met with GOT officials at all levels to stress the importance of 
a fair and transparent acquisition process, but since ATC never put 
out an international tender or Request for Proposal (RFP), the 
accepted way to let vendors know an airlines' requirements, serious 
concerns about fairness and transparency had arisen. 
 
¶3. (SBU) AUSTR Liser stressed that a non-transparent process could 
have "severe effects" on Tanzania's investment climate, adding that 
she had been concerned enough to raise this issue in her November 12 
meeting with President Jakaya Kikwete.  Liser understood from 
President Kikwete that a decision might have already been made by 
ATC to select Airbus for regional transport routes.  For longer 
routes, e.g. to China and India, the President had indicated that 
Air Tanzania was tending toward Boeing aircraft, but "that decision 
was still in process." 
 
ATC Said Search Began in March 2007 
---------------------------------- 
¶4. (U) Mattaka outlined Air Tanzania's decision-making process since 
March 2007.  In lieu of putting out an international tender, ATC had 
invited three aircraft companies to make presentations and offers 
based on key requirements, including routes, load factors, etc.: 
Boeing, Airbus and Embraer of Brazil; only Boeing and Airbus 
responded.  According to Mattaka, "Our request was for three narrow 
body planes and two wide body planes, as one package."  On March 25, 
2007, Robert Faye of Boeing met with Mattaka and ATC staff to 
describe types of Boeing aircraft available and make an initial 
recommendation; Faye promised to bring a commercial proposal with 
incentives within two weeks.  On March 29, Airbus gave its 
presentation to ATC, including a complete commercial offer and 
credit incentives.   Mattaka said that two weeks elapsed and ATC 
received nothing from Boeing.  In May 2007, Faye came with a 
commercial offer, but no credit proposals.  Mattaka said that it was 
not until August 10 that ATC received Boeing's full package. 
 
¶5. (SBU) Minister of Planning Ngasongwa assured Liser that both 
companies were given equal opportunities to present and explain 
their offers.  AUSTR Liser said Boeing had indicated to USTR that 
they made a full presentation in June.  Mattaka confirmed Rob Faye 
had met him and his ATC staff in June to ask about progress and kept 
in close e-mail contact, but claimed Faye did not bring a full offer 
that included credit incentives until August.  Minister Ngasongwa 
 
 
added the ATC Board did not begin deliberations on a decision until 
complete proposals, including credit incentives, were in from both 
companies. 
 
¶6. (U) The ATC Board then analyzed and compared the Boeing and 
Airbus proposals.  While the cost difference of the two companies' 
aircraft was not significant (about USD 500,000), the delivery dates 
were:  Airbus promised 2012 delivery vs. Boeing in 2014.  Another 
significant difference the ATC Board noted was the credit memo 
incentives.  According to Mattaka, Boeing's incentives were fewer 
and linked to a full purchase agreement.  Thus no credits could be 
used during the period that ATC might need to lease planes.  To use 
the credit lines Boeing offered, an initial deposit had to be made 
first.  On the other hand, Airbus credit memos would immediately be 
available, even during any leasing period.  Mattaka added that 
Boeing had also asked ATC to present a balance sheet, and wanted a 
guarantee for all transactions from the Government of Tanzania. 
"Boeing thought we were not creditworthy and wanted a balance sheet; 
Airbus did not ask for balance sheets," he said. 
 
Decision Made in August 
----------------------- 
¶7. (SBU) AUSTR Liser inquired if indeed ATC was planning to lease 
planes in the short term to begin upgrading the fleet by 2008. 
Mattaka confirmed that leasing possibilities were discussed with 
both companies and ATC had contacted at least one Boeing and one 
Airbus lessor before July 2007.  However, both opportunities were 
lost because ATC was waiting for Boeing's proposal.  On August 17, 
the ATC Board made a recommendation to the GOT to select the Airbus 
package to purchase both narrow body and wide body planes.  To 
address its interim needs, in September ATC had located a company 
ready to lease Airbus A320s and arrived at an agreement.  In 
response to Liser's query whether ATC was open to handling a mixed 
fleet, Mattaka replied that for wide body planes on the longer 
routes, the possibility was still being considered, stating: "In the 
long run, we could well have a mixed fleet of A330s and the 
Dreamliner (Boeing 787)." 
 
Price Not the Only Consideration 
-------------------------------- 
¶8. (U) Liser asked since ATC had never previously flown Airbus 
craft, how much did the ATC Board factor in the additional costs and 
time to bring Airbus into its fleet including servicing, 
maintenance, training, and interoperability with regional airlines 
with large Boeing fleets.  She emphasized that interoperability 
within the region is preferable for each country's airlines: "Many 
regional airlines have ordered from Boeing," Liser noted.  "Once 
these companies receive their new aircraft, their fleets will have 
nearly all Boeing craft." 
 
¶9. (SBU) Mattaka explained among the attractive incentives from 
Airbus were training for pilots, engineers, and mechanics.  He also 
claimed interoperability and maintenance issues were not major 
concerns for ATC.  " Minor maintenance could be done in Dar es 
Salaam with our own Airbus-trained engineers, and major scheduled 
servicing could be in Dubai or South Africa," he suggested.  He also 
noted that South African Airways has a mixed fleet. 
 
¶10. (U) Mattaka added that Airbus had mentioned the possibility of 
Dar es Salaam becoming a maintenance hub for Airbus.  Liser 
countered that an airliner maintenance facility is a major capital 
investment and questioned whether Airbus would ultimately keep its 
word.  Mattaka said at the Kilimanjaro International Airport, the 
GOT constructed a large maintenance hangar during the era of the 
previous East African Community which is still government-owned. 
The hangar is still operational, though under-utilized; presently 
internal GOT discussions are ongoing whether to restart the twelve 
workshops in that facility.  Mattaka stated that ATC has yet to 
discuss use of this hangar with Airbus, but could explore the 
possibility "when the time comes." 
 
¶11. (U) Minister of Planning Ngasongwa stressed that Air Tanzania 
intends to continue discussions with Boeing: "We certainly do not 
want to appear we are not transparent."  AUSTR Liser reiterated if 
that was the GOT goal, then an RFP is an internationally accepted 
way to make a large acquisition such as the expansion of an airline 
fleet.  "If an RFP or similar process is not followed, it will not 
be clear if all bidders are being given the same access and the same 
chances," she stressed.  Mattaka countered while ATC did not 
advertise per se, the company had put out a commercial proposal for 
 
routes, expected time frames, etc.  The ATC Board's recommendation 
had been made based on the full package, including credit 
incentives. 
 
¶12. (SBU) ATC Board Members Dr. Richard Kasungu and Ms. Carol Lemki 
stressed to AUSTR Liser that throughout the decision process the ATC 
Board had carefully adhered to the guidelines in Tanzania's domestic 
Procurement Act.  They also assured Liser that the fact that 
Boeing's full proposal came in later than Airbus offer had no effect 
on the ATC Board members' final recommendation. 
 
MCC Must Have Clear Procurement Procedures 
----------------------------------------- 
¶13. (SBU) AUSTR Liser cautioned that in the Millennium Challenge 
Corporation (MCC) Compact process, the GOT needs to ensure that bids 
are not solicited verbally.  She was adamant that "in the new 
Africa, with more modern and excellent leadership, there must be a 
clear track record; an RFP allows for that."  Liser reminded Mattaka 
and the Board members that Boeing has had a productive and 
long-standing relationship with Air Tanzania, and the company could 
not help but be disappointed at these developments.  She strongly 
suggested that maintaining a dialogue and continuing the 
relationship with Boeing is essential, particularly since aircraft 
delivery dates or other circumstances can change. 
 
Comment 
------- 
¶14. (SBU) President Kikwete had directed the Minister of Planning, 
Dr. Ngasongwa, and CEO Chair David Mattaka to answer all of AUSTR 
Liser's questions and concerns about the ATC process to acquire 5 to 
6 new planes to expand the Air Tanzania fleet.  While the meeting 
clearly was to prove "transparency," and many facts and timetables 
were checked and rechecked in detail, the Embassy retains a 
troubling concern that ATC and the GOT may have made the decision to 
go with Airbus even before the process began in March 2007.  Since 
the Minister of Infrastructure's September 2007 press leaks and the 
ad with the Air Tanzania logo on an Airbus, rumors have persisted 
that Chinese assistance programs to Tanzania could be tied to 
certain business deals that benefit China, including possibly a 
behind-the-scenes-agreement that Air Tanzania's new planes be 
ordered from the co-production facility that Airbus is now building 
in China.  In meetings with senior GOT officials, post will continue 
to echo AUSTR Liser's strong admonition that the lack of full 
transparency in any major acquisition by the GOT can have a severe 
detrimental effect on Tanzania's investment climate.  End comment. 
 
GREEN