VZCZCXYZ0005
PP RUEHWEB

DE RUEHKB #0729 2180443
ZNY CCCCC ZZH
P 050443Z AUG 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC PRIORITY 5771
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RULSDMK/DEPT OF TRANSPORTATION WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L BAKU 000729 
 
SIPDIS 
 
DEPT PLEASE PASS USTDA FOR DAN STEIN; STATE FOR EEB/TRA; 
EMBASSY MOSCOW FOR FAA 
 
E.O. 12958: DECL: 08/03/2018 
TAGS: ECON EINT EAIR AZ TX
SUBJECT: BOEING TO SELL ADDITIONAL AIRCRAFT TO AZERBAIJAN 
AIRLINES (AZAL) 
 
Classified By: Classified By: Ambassador Anne E. Derse, Reasons 1.4 (b, 
d) 
 
¶1.  (C) SUMMARY: On August 4, Boeing Regional Sales Director 
Serdar Gurz, visiting from London, reported a successful 
upgrade of Azerbaijan Airlines's (AZAL's) aircraft order from 
a total of five aircraft (three 787s and two 737-900s) to a 
total of eight aircraft: two 787s, two 767-300ERs, and four 
737-900s.  Gurz, who had previously briefed the Ambassador on 
Boeing's Azerbaijan/AZAL plans, also mentioned that USTDA 
assistance would be necessary to guarantee the sale, that the 
GOAJ had surprisingly decided to finance the aircraft 
purchase with funds from ABN Amro, that AZAL would soon 
purchase Georgian state carrier Air Zena (Georgian Airways), 
and that AZAL now plans to enter the U.S. market with its 
newly purchased 767-300ER.  Gurz said a public announcement 
of the purchase would be made by AZAL on Wednesday. 
 
¶2.  (U) In a July 25 meeting with the Ambassador, Boeing 
Regional Sales Director Serdar Gurz said that he came to 
Azerbaijan because Boeing was facing delays in the production 
of its new 787 "Dreamliner," and he sought to convince AZAL 
to reduce its 787 order so that Boeing could reduce fines it 
must pay in late penalties to 787 customers worldwide. 
Wanting to make the best of this difficult situation, Gurz 
said he planned to offer AZAL two priority time-slots for 
deliveries of 767-300ER aircraft, as well as an attractive 
price on additional 737-900 aircraft.  On August 4, Gurz 
called the Embassy to report that he had reached an agreement 
with AZAL for two priority deliveries of 767-300ER aircraft 
in exchange for AZAL's agreement to drop one of its three 787 
orders.  These 767-300ERs will be delivered around late 2010 
or early 2011; the two remaining 787s are now expected to be 
delivered in 2013.  Gurz also convinced AZAL to order two 
additional 737-900s for delivery in 2011 (in addition the two 
previously ordered for delivery in 2010).  Gurz mentioned 
that one of the 767s would be fitted with a VIP interior at a 
modification center in Texas, and would likely become 
Azerbaijan's new Presidential aircraft. 
 
¶3.  (U) Gurz mentioned that Boeing had already requested 
assistance from USTDA to help AZAL meet the FAA requirements 
to fly to the United States.  AZAL is already working with a 
reputable consulting firm (The Wicks Group) in order to 
achieve this goal.  Boeing believes that if AZAL were unable 
to secure that permission, the sales of these 767s and 787s 
could be in jeopardy.  Gurz said the first aircraft (a 767) 
could potentially be ready for flights to the United States 
as early as May 2011 if AZAL can secure the needed FAA 
approvals. 
 
¶4.  (C) Gurz said he believes that AZAL will soon purchase 
Air Zena (Georgian Airways) because the President of Georgia 
asked the President of Azerbaijan to make this happen.  Gurz 
said that AZAL Chairman Jahangir Asgarov and Azerbaijani 
President Ilham Aliyev are very close, and this should 
therefore be considered a "done deal."  Gurz asked this 
information not be transmitted outside USG channels. 
 
¶5.  (C) Gurz said that Boeing had worked hard to secure an 
extremely attractive financing package for AZAL: an offer of 
LIBOR plus zero percent from Barclays.  However, the 
Azerbaijani Ministry of Finance had later chosen to accept an 
alternate financing package from ABN Amro, citing a long-term 
relationship with that bank.  Gurz said he did not know the 
rate offered by ABN Amro, and that he did not want to know 
the specifics of that transaction.  He added it was 
inconceivable that ABN Amro could have offered a rate 
superior to LIBOR. 
 
¶6.  (C) Gurz said that in terms of maintenance and safety, 
AZAL compared favorably with other state airlines in Central 
Asia.  "I have no problem with flying AZAL," Gurz said, but 
he expressed reservation about flying with Turkmenistan 
Airlines, saying its head was "the nicest guy on Earth, but 
he knows nothing about aviation." 
DERSE