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Summary of Kac Case

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Submitted By Victor2592
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* An internal dispute within Kuwait Airways Corporation or KAC among the Chief Financial Officer and the firm’s chairman lid on a story of corruption. KAC should have bought airplanes from Boeing but instead it did the opposite. KAC was expected to buy them from Boeing because Boeing represented USA, the ones that intervened favorably in Kuwaiti territory. However, KAC firm’s chairman meets in London the boss of Airbus in private, the result was an announcement at the imminent air show that KAC was going to purchase airplanes from Airbus. It was really odd because it was public funds and they had to go through a formal process and approvals from the Ministry of Finance and public spending inspectors before being announced. Boeing’s offer after the announcement was to sell their airplanes for $100 million cheaper than its rival’s, but it was too late. As a result a Boeing’s boss and American officials met the Prince of Kuwait to talk about any possible gain from Boeing after US’s support to Kuwaiti government, the agreement ended up with a purchase of engines from General Electric and orders for several wide-bodied planes. When it gets weird is when the Firm’s chairman set up a business name ALAFCO its name goes for Aviation Lease and Finance Company. ALAFCO is supposed to buy the aircraft and lease them to KAC. By buying planes through ALAFCO, the firm’s chairman intended to bypass governmental approval. Airbus also sent money to help set up and run ALAFCO itself claiming that it was a type support they give to customers. The KAC’s chief financial officer insisted that the transaction for the planes must be subject to formal procedure in Kuwait, fortunately the Ministry of Finance told KAC not to proceed because the purchase was not justified. KAC canceled its option and ALAFCO never bought any Airbus plane. WAS Airbus DESTINATED to FAIL IF IT COMPETED fairly against BOEING AND WHY OR WHY NOT?

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