US scripted AI-Boeing deal: Cable

Air India Board had approved the deal on the previous day. 

While insisting that the US should use high-level visits to urge the GoI government of India to quickly approve the sale, it quotes the then civil aviation secretary Ajay Prasad,who told embassy officials that he expected the PIB Public Investment Board and Cabinet approval process to be complete in three months. The longer the decision drags on,the greater the opportunity for Airbus to orchestrate a campaign to disrupt the sale, the cable said.

The acquisition points towards Indian governments attempt to turnaround the two national carriers. The new GoI plan is to: strengthen the carriers quickly by expanding their fleet; restore their financial strength and raise their value on the markets; float an IPO on the bourses; and then gradually,privatise them completely, the cable said.

In 2005,while Air India finalised the purchase of 50 Boeing aircraft,Indian Airlines also sealed a deal to purchase 43 Airbus aircraft for nearly Rs 9,000 crore.

The Comptroller and Auditor General too had referred to the undue haste followed in Air Indias purchase deal from US manufacturer Boeing in its audit report on the civil aviation ministry last week.

To hasten the deal,the US embassy put in a special request to the ministry of external affairs Joint Secretary Jaishankar that the GoI conclude the deal prior to PM Singhs visit to Washington in mid-July. Jaishankar agreed to put this request into the system, the cable said.

The Rs 33,197 crore Air India-Boeing deal in 2005,the biggest order for the US supplier till that year,was referred by the CAG as irregular and non-transparent. The deal also saw change in seat configuration during the negotiation process.

The report on aircraft acquisition by the two national carriers,including Indian Airlines,tabled in Parliament last week,noted that the deal was processed considerably faster,with many activities eg. price negotiations taking place concurrently with or in anticipation of approvals. The civil aviation ministry,however,denied this charge.

The leaked cable said that even though the deal was yet to be ratified by Public Investment Board and the Cabinet,it noted that it was unlikely they would reverse the selection.

The cable also refers to controversial Dreamliner aircraft 27 of which were included by Air India which was on a drawing board then. The order for 27 Dreamliner 787s helps strengthen the viability of this new aircraft on which Boeing has bet heavily, the cable said. The delivery of these aircraft is behind schedule by almost three years,for which Air India has demanded a hefty compensation from Boeing. 

While attaching strategic significance to the Air India-Boeing deal,which will help redress the growing trade imbalance between two countries, the US embassy said that the expected 1 billion offsets from the deal could help Boeing enter into strategic partnerships in co-production in the defense and related sectors.

The US embassy called Boeing winning the deal a perfect campaign which followed a well scripted combined US government-Boeing effort.

The cable said that the US agreed to push Boeing deal in India on two conditions,an assurance by Boeing that it would make its most competitive offer the first time around; and the visible commitment of the Boeing leadership to the sale.