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NEWS ANALYSIS El Al chooses Boeing amid intense pressure from U.S.

WASHINGTON, Dec. 22 (JTA) — The Clinton administration often pulls out all the stops to help U.S. companies compete for large contracts overseas. Boeing is no exception — and this time it was Israel that felt the heat. When Boeing faced off against its archrival Airbus for a multimillion dollar contract with El Al, top Clinton administration officials leaned on Israel’s national airlines to buy American. At the end of the day, El Al’s board of directors voted unanimously to buy five commercial 737 jets from the Seattle-based manufacturer for $180 million. By choosing Boeing, Israel avoided a confrontation with the Clinton administration at a time of strained relations between Jerusalem and Washington. It also revived the question of whether Israel is obligated to buy American because of the U.S. foreign aid it receives. The purchase, relatively small by industry standards, took on greater importance because El Al has flown an all-Boeing fleet since Israel’s founding. The contract, meanwhile, dealt a stinging defeat to the French Airbus, which also lost out to Boeing in recent deals with Saudi Arabia and Turkey. Senior French officials had weighed in on behalf of Airbus, but with less success than their American counterparts. At the end of a marathon two-day board meeting last week, El Al officials denied that there was U.S. pressure. The officials said the decision, issued one day later than expected, came after Boeing lowered its offer a reported 6 percent to come closer to the Airbus price. Despite claims to the contrary, there was little doubt there had been significant U.S. pressure — from U.S. Secretary of State Madeleine Albright on down. Albright had raised the issue with Israeli Prime Minister Benjamin Netanyahu during a meeting in Europe last week, according to sources. Netanyahu, in turn, dispatched his finance minister, Ya’acov Ne’eman, to address the El Al board. Meanwhile, Stuart Eizenstat, the U.S. undersecretary of state for economics, was dispatched to Israel to plead Boeing’s case. “We lost no opportunity with everybody from the prime minister to the bell cap to mention the importance we attach to Boeing’s continued participation with El Al,” Eizenstat
told a group of Israeli government officials and business leaders in Israel. Although the United States never threatened the $3 billion it provides Israel annually in foreign aid, Eizenstat recalled a 1992 agreement under which the United States provided $10 billion in loan guarantees to assist Israel’s resettlement of Jewish refugees. Eizenstat said that as part of that program, Israel had made a commitment to “enhance in a substantial way its purchase of U.S. goods.” “That doesn’t mean we’re supposed to win every tender,” he added, “but this would be an excellent way of underscoring Israel’s commitment.” Zalman Shoval, who was Israel’s ambassador to the United States at that time and helped negotiate the deal, supported Eizenstat’s interpretation of the agreement. Israel has “no formal obligation to buy American,” Shoval said during a visit here last week. “But the spirit certainly was that we would try to give preference to American goods.” On the Israeli side, Israeli Defense Minister Yitzhak Mordechai also entered the debate. He warned El Al — whose largest shareholder is the Israeli government — that rejecting Boeing could affect Israeli-U.S. defense relations. Mordechai reportedly told El Al that Israel could be hurt in the U.S. Congress at a time he is seeking funding for defense projects. He also said it could jeopardize deals with McDonnell Douglas, a Boeing partner that supplies jets to the Israeli air force. American Jewish organizational officials also weighed in on behalf of Boeing. El Al should “take into account” that Israel’s relationship with the United States is different from its relationship with France, Malcolm Hoenlein, executive vice chairman of the Conference of Presidents of Major American Jewish Organizations, said he told El Al officials. For its part, Boeing had launched its own campaign to win over the Israeli flying public. In a commissioned survey of Israeli “experienced travelers,” the company found that more than 70 percent of Israeli passengers would prefer to fly aboard a Boeing jetliner for international travel. Boeing also created an Internet site that hailed 50 years of El Al-Boeing cooperation. From the first transport plane sold to the new state to the airlift of Ethiopian Jews, Israel has used Boeing, the Web site boasted. And just in case Israelis forgot that Boeing acquired McDonnell Douglas last year, the company’s site said the arms manufacturer is under contract to build 25 F-15I military aircraft for Israel. Meanwhile, the next battle between Boeing and Airbus for El Al’s business is already brewing. El Al is scheduled to purchase another batch of commercial planes next year.