VZCZCXRO3817
RR RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHKA #1083/01 3350937
ZNY CCCCC ZZH
R 010937Z DEC 09
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC 9728
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 8625
RUEHLO/AMEMBASSY LONDON 2198
RUEHGP/AMEMBASSY SINGAPORE 3098
RUEHMT/AMCONSUL MONTREAL 0001

C O N F I D E N T I A L SECTION 01 OF 02 DHAKA 001083 
 
SIPDIS 
 
STATE FOR SCA/INSB AND SCA/RA 
STATE PASS TO USTDA FOR JACOB FLEWELLING 
STATE PASS TO FAA FOR THOMAS NASKOVIAK 
NEW DELHI PASS TO FAA AARON WILKINS 
BANGKOK FOR USTDA MARK DUNN AND TSA ANJUM AGARWALA 
SINGAPORE FOR FAA 
MONTREAL FOR FAA 
 
E.O. 12958: DECL: 12/01/2014 
TAGS: EAIR ECON ETRD BEXP BG
SUBJECT: BIMAN AIRLINES PURSUING U.S. FLIGHTS AND BOEING 
PURCHASE 
 
REF: A. DHAKA 1023 
     ¶B. DHAKA 894 
 
DHAKA 00001083  001.2 OF 002 
 
 
Classified By: CDA a.i. Nicholas Dean, Reasons 1.4 (b) and (d) 
 
¶1. (C) SUMMARY: Bangladesh,s national airlines, Biman, is 
poised to begin making payments in its $1.2 billion deal with 
Boeing and resume U.S. flights with leased aircraft in 
December 2009.  Biman is working with a bank consortium to 
finalize pre-delivery financing and ensure expedited delivery 
of its first two Boeing 777s in 2011.  The company plans to 
wet-lease two 777s to resume U.S. flights to JFK airport in 
December.  The FAA has approved landing rights for these 
flights and is offering to help civil aviation authorities 
improve aviation safety.  As these pieces are coming together 
to support Boeing,s deal, several hurdles remain to confirm 
financing, leasing arrangements and resumption of U.S. 
flights. END SUMMARY. 
 
SLOW PROGRESS ON PRE-DELIVERY FINANCING 
--------------------------------------- 
 
¶2. (C) In October, Biman signed an amendment to its $1.2 
billion Boeing deal to confirm the expedited delivery of two 
planes in 2011.  Under the amended agreement, Biman committed 
to make a $117 million pre-delivery payment in October. 
After Biman missed this deadline, Boeing representatives told 
Econoff they could be flexible on the payment date, but they 
would press for Biman to make the payment by mid-December to 
ensure that the first plane deliveries would not be delayed. 
In October, Biman designated a local bank, Eastern Bank 
Limited (EBL), to lead a bank consortium providing 
pre-delivery financing.  Since choosing EBL, Biman has worked 
slowly to prepare financial projections and other 
documentation required for financing. 
 
¶3. (C) The Bangladesh Bank (BB) has agreed to deposit funds 
with members of the banking consortium to be used for 
pre-delivery financing.  Bangladesh Bank Deputy Governor 
Ziaul Siddiqui confirmed to Econoff and Boeing 
representatives that the Bank would maintain these deposits 
until delivery financing replaces PDP financing in 2011. 
Although the Bank is prohibited from directly financing 
"quasi-fiscal" transactions such as Biman,s airplane 
procurement, he said "the decision has been made" to 
indirectly support Biman,s transaction with Boeing. 
 
SOVEREIGN GUARANTEE STILL PENDING 
--------------------------------- 
 
¶4. (C) To secure pre-delivery financing, Biman also still 
needs the Finance Ministry to approve a sovereign guarantee. 
Although some GOB officials have resisted providing the 
guarantee, the Prime Minister has assured Boeing and the 
Ambassador that the GOB will provide whatever assistance is 
required to support the deal. 
 
BIMAN LEASING PLANES FOR JFK FLIGHTS 
------------------------------------ 
 
¶5. (C) On November 10, Biman signed an agreement with 
Euro-Atlantic  to "wet-lease" (including operation and 
maintenance) one Boeing 777 for one year in order to resume 
flights to JFK in December.  Euro-Atlantic has also signed a 
letter of intent to lease a second Boeing 777 to Biman under 
similar conditions.  These leasing arrangements were delayed 
in August when Biman acceded to pressure to cancel a tender 
that Euro-Atlantic had won.  Since the delay forced Biman to 
postpone the resumption of U.S. flights, Biman risked losing 
its JFK runway and gate access for one year.  As a result, 
the company reversed its decision and restored the 
Euro-Atlantic winning offer to lease two planes. 
 
¶6. (C) According to Boeing, Biman and Euro-Atlantic agreed on 
terms for a three-year "dry-lease" (without operation and 
maintenance) after the wet-lease expires.  However, 
Euro-Atlantic has been reluctant to sign the dry-lease.  This 
has raised suspicions at Biman and within the GOB that 
Euro-Atlantic wants to hold out for more favorable leasing 
terms when the aircraft market improves in 2010.  To ensure 
 
DHAKA 00001083  002.2 OF 002 
 
 
that Euro-Atlantic will follow through on its commitment to 
provide two planes under one-year and three-year wet/dry 
leases, Biman inserted an escape clause in its first lease 
allowing it to cancel the lease if Euro-Atlantic does not 
provide a second plane by December 15 and sign the dry-lease 
within 3 months. (Note: During a November 5 meeting with the 
Ambassador, the Prime Minister signaled that failure to 
conclude Biman,s leasing deal for U.S. flights could 
jeopardize its purchase of Boeings (Ref A).  Although Boeing 
is not a party to the lease, it helped to facilitate the deal 
and as a result, the GOB may hold Boeing responsible if the 
remaining leases are not signed.  End Note.) 
 
BOEING HELPING REVITALIZE BIMAN 
------------------------------- 
¶7. (U) In addition to helping secure financing for Biman,s 
plane procurement, Boeing is helping to modernize the 
airline,s information technology infrastructure and provide 
training to Biman personnel.  The IT modernization is part of 
an overall effort revitalize the airline, whose share of the 
Bangladesh aviation market has fallen from 58 percent in 1996 
to 26 percent. 
 
FAA APPROVES JFK LANDING RIGHTS: DOT APPROVAL PENDING 
--------------------------------------------- -------- 
 
¶8. (U) The Federal Aviation Administration approved runway 
slots for Biman to resume bi-weekly flights to JFK in 
November 2009.  Biman still needs to obtain approval of the 
U.S. Department of Transportation for Economic Authority to 
route the new flights through Manchester, UK.  Since the FAA 
ranks Bangladesh as a Category 2 country for aviation safety, 
Biman is authorized to resume the JFK flights through 
Brussels that were discontinued in 2007. 
 
FAA ENGAGEMENT ON AVIATION SAFETY 
--------------------------------- 
 
¶9. (U) The FAA is preparing a draft Memorandum of Agreement 
(MoA) with the Civil Aviation Authority of Bangladesh (CAAB) 
to provide technical assistance on aviation safety oversight 
in order to support the CAAB in seeking Category 1 status. 
Following an August 2009 visit by the FAA Senior Advisor for 
South Asia (ref B), the CAAB Chairman met with FAA staff in 
Japan in October 2009 to discuss cooperation on aviation 
safety issues.  The FAA agreed to propose a draft MoA for 
technical assistance, beginning with a GOB-funded technical 
assessment by the FAA.  To enable Biman to continue flights 
with dry-leased planes or with the first two Boeing 777-300ER 
planes it will acquire in 2011, the CAAB will need to regain 
Cat 1 status. 
 
COMMENT 
------- 
 
¶10. (C) Although Biman,s Boeing deal still appears to be on 
track, Boeing has expressed impatience with Biman,s gradual 
efforts to finalize pre-delivery financing and the GOB,s 
failure to approve a sovereign guarantee. While the Prime 
Minister has expressed consistent support for the deal, other 
GOB officials have continued to undermine Boeing by spreading 
misinformation about Biman,s leasing negotiations (ref A). 
To ensure that Boeing,s 2011 expedited delivery dates do not 
slip, Biman needs to finalize pre-delivery financing and 
leasing arrangements by mid-December.  To support Biman,s 
longer term plans, the CAAB needs to finalize its agreement 
for FAA assistance and conduct a technical assessment.  Post 
will continue to support progress on the Boeing sale and 
leasing deal while facilitating FAA engagement. 
DEAN