Purchase of a half billion dollar jet raises questions in a land where the minimum wage is $5 a day
*Updated Oct. 9 (below)*
In the past six weeks Mexico has reported that its sputtering economic engine nearly stalled in 2013, posting the worst results seen since 2009, and that the country is losing rather than creating real jobs. On Tuesday it followed with an encore: January 2014 was more of the same.
With those thoughts and more in mind, a grass roots citizens movement hopes to cancel the nation's purchase of what will be the most expensive executive aircraft in the world: a half billion dollar Boeing 787 Dreamliner scheduled to be delivered to president Enrique Peña Nieto in 2015.
In fairness to the current PRI administration, it didn't order the state of the art jet. The previous PAN government of former president Felipe Calderón Hinojosa did, in August 2012, and with good reason.
Mexico's president and his cabinet are flying on 25-30 year old military planes. The government had never purchased an aircraft for the exclusive use of the chief executive. Calderón lost two of his top cabinet members to aircraft accidents while in office (in 2008 and 2010). Although both were blamed on pilot error rather than mechanical failures, there was a general sense that it was time to upgrade.
Mexican press reports have been all over the lot on the actual cost of the new Dreamliner since the government signed a letter of intent with Boeing 20 months ago. In 2013, depending on which model of the aircraft a customer ordered and how it was to be outfitted, the 787's normal, "plain vanilla" price ranged from $212 million to $289 million dollars. But Peña Nieto's jet, still on the drawing boards, is billed as the most electronically sophisticated aircraft ever to be built by any aircraft manufacturer, with navigational aids and security systems purportedly surpassing those on board Air Force One.
Mexico's flag carrier took delivery of its first 787s last year. They've been in service for six months.
Mexican sources originally reported the price tag at a whopping $750 million dollars, and claimed that with the maintenance and training contracts factored in, the Dreamliner would cost the nation almost $1.2 billion, to be paid for over 25 years. Other sources later said it was a $350 million dollar jet, still far exceeding what airlines have paid for their copies. Enrique Peña Nieto will travel in style, aboard Boeing 787 Dreamliner.
The latest reports put the Mexican Dreamliner's cost at 6.31 billion pesos, which is about $485 million USD. In a country where the official minimum wage is $5.06 per day, and 70% of households reported food shortages in 2012, that's not setting well with everybody. An advocacy group has taken shape online, and they've written a letter to Boeing CEO W. James McNerney Jr., demanding he unilaterally cancel the contract (copy below). There's been no response from the giant manufacturer's front office, and there probably won't be. In 2013 Boeing reported net income of $4.585 billion dollars on sales of $87 billion. Not long before an independent financial report said it had $10 billion in "cash on hand."
EPN will be riding stylishly, in a Dreamliner whose livery will match the national colors of the Republic
Mexico's new 787 will be the most expensive presidential aircraft in the world, but the country "got a deal on it," some say, since it was ordered in the summer of 2012 when Boeing closed a big sale with the nation's flag carrier. Aeroméxico places huge order with Boeing.
The government will plunk down $130 million at delivery, and get a "coupon book" for the balance: 10 years of installment payments @ $120 million each, according to a Mexican news service. The total reported acquisition cost, including parts and maintenance: is thus $1.33 billion USD. Boeing bosses say Mexico is the first non-commercial purchaser of the Dreamliner.
Although the 787 was ordered by the Calderón administration, the new PRI government gave it the final green light on Oct. 23, 2012, five weeks before Peña Nieto took the oath of office. His transition team signed off on the deal, allegedly so that the new president's hands would be free of the stain of such an enormous expenditure.
Calling Mexico's purchase of the Dreamliner "the illegal diversion" of resources promised for other projects, opponents claim the cash which will be spent on the new aircraft could sustain an average Mexican household for thousands of years. The price tag is greater than the budgets of at least 17 of Mexico's 32 states, and more than the budgets of the federal energy, labor and tourism departments, they note. The money should be spent on the estimated $3.5 billion in damages caused by Sept.'s hurricanes, which delivered an unprecedented dual coast whammy to Mexico in less than 30 days, they argue. Credit Suisse: storms will further reduce Mexican growth. Repairs will take many years.
President Peña Nieto's 787 will be able to fly 15,750 kilometers (9,765 miles) without stopping to refuel. With the controversy created by the purchase, sure to intensify when the Dreamliner touches down for the first time in Mexico City next year, he may find it desirable to travel far and frequently.
Letter to Boeing CEO Walter James McNerney, Jr. (unedited):
"80% of the Mexican people live in the worst Poverty, with No food in their table, many of them have No home, the education is very Bad, NO jobs, Violence growing with out control, Raped woman, traffic of drugs and people risen every single day, standard wages 1 dollar per hour!! Under this Circumstances Enrique Peña Nieto can NOT be flying in this equipment at this outrageous price $750MDD when there is in Mexico so much Misery.
"In an other hand I do know that this purchase it is NOT legal because was made with funds that should be going to a Relieve fund for people affected in the last year´s weather disasters.
"Felipe de Jesus Calderon, Gral Galvan and mr Meabe incur in a fraud ordering such a luxurious jet liner to be used for the current resident of Los Pinos (presidential house).
"What I demand from you is to Cancel the Purchase and a new acquisition will be ordered if needed, at the time Mexico has other prioritys than this."
CEO McNerney's Boeing compensation package from 2007 to 2009 (via Wikipedia):
"While CEO of Boeing in 2007, W. James McNerney Jr. earned a total compensation of $12,904,478, which included a base salary of $1,800,077, a cash bonus of $4,266,500, options of $5,871,650, and other cash of $966,251. His total compensation in 2008 increased to $14,765,410, which included a base salary of $1,915,288, a cash bonus of $6,089,625, and options of $5,914,440. In 2009 his pay decreased to $13,705,435, which included a base salary of $1,930,000, a cash bonus of $4,500,300, options of $3,136,251, stock of $3,136,242, and other compensation totaling $1,002,642."
June 13, 2013 - Aeroméxico: Boeing 787 Dreamliner is on the way
June 8, 2014 - Peña Nieto, con un avión que ni Obama tiene
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