VZCZCXYZ0002
PP RUEHWEB

DE RUEHBUL #3447/01 3010654
ZNR UUUUU ZZH
P 280654Z OCT 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 2525
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0924
RUCNAFG/AFGHANISTAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS KABUL 003447 
 
AIDAC 
SENSITIVE 
SIPDIS 
DEPT FOR S/SRAP STAFF, SCA/FO, SCA/RA, SCA/A, EEB/TPP/BTA 
DEPT PASS AID/ASIA BUREAU 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS TDA FOR STEIN AND GREENIP 
DEPT PASS OPIC 
DEPT PASS EXIM 
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH 
 
C O R R E C T E D  C O P Y (ADDING CAPTION) 
 
E.O.12958: N/A 
TAGS: EAIR EAID ETRD PGOV BEXP AF
SUBJECT: Finance Minister Zakhilwal Interested in Improving Ariana 
Air Operations 
 
REF: KABUL 3346 
 
¶1.  (U) Summary: Afghan Minister of Finance Zakhilwal and 
Coordinating Director for Development and Economic Assistance 
(CDDEA) Wayne reviewed the USAID-financed assessment's of 
state-owned Ariana Airlines October 21.  The assessment notes 
improvements in human resource management and quality control are 
key to positioning Ariana for partial or full privatization.  The 
Minister requested assistance in improving Ariana's profitability of 
the airline, specifically in financial management, outsourcing some 
services and marketing.  The Asian Development Bank (ADB) will 
likely provide this support in the short term.  In a separate 
discussion with Ambassador Wayne, Safi Airlines owner Abdul Rahim 
Safi disputed the Minister's claims that Ariana does not receive 
preferential treatment from the Afghan government.  Safi also again 
requested U.S. Embassy support for EXIM financing for a Boeing 
purchase.  End summary. 
 
¶2.  (SBU) Minister of Finance Zakhilwal met CDDEA Ambassador E. 
Anthony Wayne October 21 to discuss the USAID-financed 
financial/operational assessment of Ariana Airlines.  The 
assessment's primary findings center on the need to address weak 
management and planning capacity (ref).  The assessment identified 
the need for an increased focus on (1) safety and maintenance; (2) 
the severe lack of technical staff; and (3) the limited integration 
between safety, management, and financial systems. 
 
¶3.  (SBU) As next steps forward, the study recommends Ariana produce 
a business plan which outlines a strategic focus - international, 
domestic, and cargo services - and reviews business growth, 
profitability, occupancy, fleet management, safety and maintenance. 
The study also argues that the airline needs to define a fleet 
replacement policy, staffing and training requirements, and 
outsourcing strategies while adopting comprehensive integrated 
information management systems. 
 
¶4.  (SBU) Delving into the assessment, Zakhilwal stated it is 
unlikely the government will withdraw from managing the airline in 
the near future.  The Finance Minister suggested pursuing near-term 
actions to improve operations in key areas of financial management, 
outsourcing certain services and marketing.  He also suggested 
strengthening service standards by ensuring a plan is in place and 
competent people are assigned to implement it. 
 
¶5.  (SBU) Responding to Ambassador Wayne's question whether Ariana 
benefits from preferential regulations and policies, the Minister 
said the airline is treated equally and is current on parking and 
landing fees.  Zakhilwal indicated all Afghan airlines pay fewer 
taxes than they owe.  He also said the Government's decision to give 
Ariana a sole-source award to transport pilgrims on the Hajj (21% of 
Ariana's income) was based on political considerations and because 
efforts to award the sensitive service on the basis of competitive 
bidding in the past had failed.  [Note: in 2002 a group of pilgrims 
angry over their canceled flight to Mecca, killed the Transportation 
Minister and dumped his body out the back of a plane onto the Kabul 
Airport tarmac.  End Note.] 
 
¶6.  (SBU) In a separate conversation on October 22, Ambassador Wayne 
spoke with the head of Safi Airlines, Abdul Rahim Safi.  Safi 
disagreed with the Finance Minister's assessments and said he has 
repeatedly protested to the government that, in addition to enjoying 
a monopoly on  ground services, Ariana receives a break on taxes and 
landing fees.  Safi said he believes Finance Minister Zakhilwal has 
decided to ignore these pleas in favor of Ariana (and cited the use 
of Ariana for the Hajj as another example of preferential 
treatment).  Safi noted he has also protested directly to President 
Karzai without result.  The airline owner said his family has put 
over $40 million into Safi Airways and is willing to continue to 
invest, but needs a level playing field.  Safi added he has talked 
to EXIM Bank about financing for new Boeing aircraft, but he has not 
been operating long enough to meet the EXIM requirement of four 
years of balance sheets.  He asked for U.S. Embassy help in engaging 
EXIM to find a way to obtain a loan or guarantees. 
 
¶7.  (SBU) Comment: The Asian Development Bank is likely to provide 
assistance to address some of the Minister's immediate concerns on 
improving profitability.  USAID will also consider providing support 
for the improvement of Arian's financial management, if the Afghan 
government demonstrates the political will and leadership to proceed 
with a concrete privatization plan for Ariana.  End Comment. 
 
EIKENBERRY