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VIP aircraft sales are confidential transactions. Aircraft sales involving world leaders are especially secret. Except when they end up in court. The sale of an A340 corporate jet to Muammar Gaddafi by His Royal Highness Prince al-Waleed Bin Talal Bin Abdul Aziz Al-Saud – one of the richest people in the world – is a fantastic example of the complexities involved in selling corporate airliners.
The details of the sale, which took more than five years to complete, were revealed in an English court in July when Daad Sharab, a Jordanian deal maker, argued that Alwaleed owed her $10 million in commission. The court ruled in her favour. Although Alwaleed is expected to appeal against this.
Sharab was born in Saudi Arabia but is a Jordanian national. She is chairman of the Trans Arab World for Commercial Mediation (TAWCO) a company that gets involved in a range of transactions and investments. She was a commercial adviser to Gaddafi until 2010 when she fell out with him and was detained in a compound in Tripoli. When bombing started she was moved to a prison but then freed by rebels who allowed her to leave the country after Gaddafi was overthrown. The court case was actually delayed because she was under house arrest the first time it was due to be heard.
Before paying commission, Alwaleed made $25 million selling the aircraft. But it took him almost five years and demonstrates the issues – and egos – involved in selling VIP airliners.
Gaddafi was the third owner of the A340-213 (MSN 151) and the story starts in 1999 in the oil rich Southeast Asian country of Brunei. The Sultan of Brunei, the country’s ruler, had grown suspicious of the amount of money his brother Price Jefri Bolkiah was spending. He ordered an investigation – which involved more than 100 specialist accountants – and the prince was accused of misusing $14 billion of state funds.
The Sultan of Brunei froze his brother’s accounts and started selling off assets that Prince Jefri has acquired. This included nine business jets the prince had bought. The star of Price Jefri’s aircraft collection was an A340 that had been delivered by Airbus 1996 and registered as V8-JBB. Jefri had spent $250 million buying and customising it.
In 1999, just three years after delivery, the Sultan was looking for a quick sale. Prince Alwaleed, the nephew of the king of the Saudi Arabia, offered $95 million. The Sultan agreed.
Alwaleed who estimates his personal wealth at $29.6 billion (and disputes Forbes’ Rich List’s valuation of $20 billion) clearly had the cash to pay. But instead, he offered a more complex deal. He paid $15 million in cash with the remaining $80 million paid in a 13.5% shareholding in a company he owned called the Trade Centre Company. He registered it HZ-WBT4.
It is unclear if Alwaleed bought the jet for himself or because he felt there was an opportunity to make money selling it to someone else. He already had a Boeing 767 that he had bought in October 1996 for $62 million and in 2001 he took delivery of a new 747-400 for $47.6 million. (According to court documents he signed the deal in June 2001 with delivery expected in September 2001- so he may have been an opportunistic buyer taking a slot that had become available or the court may have been confused about final payment.)
Within a year of buying it he had already started the process of selling it. He wrote a letter to Colonel Muammar Gaddafi, the President of Libya, offering him the chance to buy the A340.
The Middle East is a core market for corporate airliners and Gaddafi was an obvious possible buyer. Because of international sanctions – which were lifted in 1999 – Gaddafi was one of a few Middle Eastern leaders without his own jet. Prince Alwaleed wrote to Gaddafi several times. But Gaddafi did not reply.
Prince Alwaleed needed a fixer so he called Sharab. She was well known for having a good relationship with Gaddafi and had represented the Prince in Libya before, including arranging a transaction to build a hotel in Tripoli.
In August 2001 he asked Sharab to meet him on his yacht in Cannes. Apparently he had heard that the Prime Minister of Lebanon had sent him an aircraft to Tripoli and he wanted to beat him to the sale. He told her he was looking to sell either one of his two aircraft as he had ordered another one from Boeing and did not need three.
She says that the Prince then sent one of his advisers to London finalise the agreement. They had dinner in Ayoush, a Moroccan restaurant near Bond Street in London (it was because of this meeting that she was able to ask an English court to rule on the case). Sharab said that the Prince’s adviser agreed to pay her $2 million in commission if she could sell one of the two aircraft. She was also offered a further $1 million if she could get Gaddafi to invest in an agricultural project in Egypt that one of his companies was leading. (In court the Prince argued that this was not the case and that commission rate was up to him.)
Although the process appeared to be agreed nothing much happened until a year later, in August 2002, that he contacted her to ask her to sell the aircraft to Gaddafi.
Gaddafi was busy at the end of 2002 so Sharab could not get a meeting with him until January 2003. She flew to Tripoi. The good news was that he expressed interest in the Airbus – even though he was also considering five or six aircraft that had been offered to him. A few days later she called the Prince and said that he should send both aircraft – the A340 he had bought from Brunei and his 767 – to Libya for viewing.
He flew both aircraft to Libya on April 10 and travelled on one himself. Sharab was already in the country. Gaddafi chose the Airbus, apparently because he thought four engines were safer than two. Having chosen the aircraft Gaddafi then insisted that it remain in Libya until the sale was concluded. This was to make sure that the aircraft could not be tampered with. The Prince had his personal possessions moved from the Airbus and then flew back in the Boeing. In court, there was disagreement about what Sharab and the Prince discussed whilst this was happening.
Sharab says that although they were asking for $135 million, the Prince thought that they would be lucky to get $110 million (which would still be a profit of $15 million). Sharab argues that the Prince agreed to give her any amount that she sold the aircraft for above $110 million – although the Prince disputed this.
The negotiations dragged on until June with Sharab making several more trips to the country.
Whilst the negotiations were going on, on May 18, Prince Alwaleed wrote a letter to Gaddafi saying: ““The aircraft price of $135m represents what the aircraft cost us. This includes the various extras and modifications that were made to the aircraft since we bought it. This amount is borrowed from a bank in Switzerland and the bank is waiting for payment to it this being in accordance with the agreement concluded with your Excellency.”
When questioned in court the Price admitted that there no modifications or extras had been fitted to the aircraft since he had bought it from the Sultan of Brunei. The Prince argued that this was just a sales tactic.
Sharab’s counsel used this letter – and cross examination of Alwaleed – to argue that the Prince does not always tell the truth and it may have contributed to Sharab winning the case.
Meanwhile back in Tripoli on June 18, 2003, after several more visits to Libya, Sharab had got Gaddafi to agree to pay $120 million for the aircraft, plus invest another $20 million in the agricultural project.
Gaddafi wanted to pay in two tranches. The first $70 million going straight to the Prince. Second there was an agreement between KADCO and the Libyan Agriculture Investment Company (LAICO) where the Libyan firm would pay $70 million, $20 million as part of an investment in the Egyptian agricultural project – and $50 million for the aircraft.
The Prince received the first $70 million payment in August 2003. Everything looked good. But then the other $50 million did not appear.
The Prince and Sharab tried to get the second payment. In December 2003 he asked Sharab to return to Libya she delivered a handwritten letter from the Price.
In February 2004 Sabri Shadi, the chairman of Afriqiyah Airways, Libya’s national airline which planned to operate the A340, met with the Prince’s representatives. Even though he had not been involved in any of the earlier negotiations he told them that the price of the aircraft was $70 million and Gaddafi would not pay more.
It is worth remembering that the aircraft had been parked in Tripoli since April 2003 and this had been agreed as a condition of the sale. In March 2004 it was moved to Germany for pre-arranged maintenance. The Libyans were happy with this and expected the aircraft to fly back to Tripoli when the maintenance was completed.
However, Alwaleed – who had become frustrated with the Libyans and still owned the aircraft – instead flew it from Germany to Saudi Arabia. He did not tell Gaddafi that he had done this.
This did not go down well. Even though on the aircraft sale she was representing the Prince, Sharab had other projects involving Gaddafi and met him during this time to discuss these. Gaddafi was not happy. In April 2004 she called the Prince and told him to return the aircraft or repay the $70 million back to Gaddafi. (The Prince also argued that this was another reason that she did not deserve the commission).
The Prince refused and said he would only return the aircraft when the remaining $50 million was paid.
This was a difficult situation for Sharab but she flew to Libya to try and get the money. Gaddafi said that he thought the Prince had taken the aircraft to Saudi Arabia in bad faith. He was also concerned that the aircraft had been left unguarded. He told her to tell the Prince that he wanted his $70 million returned and that the deal was off.
The Prince wrote back in May saying that he was happy to cancel the deal but that he would keep the $70 million as compensation. Not surprisingly Gaddafi did not agree to this and the deal was in deadlock for another three months.
In August 2004, the Prince asked Sharab to come to Paris and meet him at the George V hotel. The George V is regarded as one of the best hotels in Paris. The Prince owns it.
According to Sharab, she told the Prince that the only way to save the deal was for him to fly to Tripoli and apologise in person. She suggested that Revolution Day – September 3 – was the best day for this.
Sharab and her daughter travelled to Paris and then flew on to Libya with the Prince. Rather than risk flying in one of his own aircraft, which he was worried that Gaddafi might impound, the Prince chartered another jet. (In court, Sharab argued that Gaddafi would not do this to a guest as a point of honour. But in his summing up the judge commented that having invited Sharab to Libya, Gaddafi had in fact put her under house arrest.)
A public meeting between the Prince and Gaddafi was broadcasted live on Al-Jazeera,the Middle Eastern TV news channel. There was also a private meeting with the Prince and another adviser, Gaddafi, Shrab and her daughter and Abdullah Al-Hijazi, the manager of Gaddafi’s private office. Although, Sharab say that Al-Hijazi became heated on behalf of his boss, Gaddafi finally announced that he would buy the aircraft. A new agreement was reached.
The next day Sharab and one of the Prince’s key advisers met with: Al-Hijazi; the Libyan minister of Treasury; and the heads of two state investment companies to refine the deal. Despite Gaddafi’s agreement at the meeting the day before, the first part of the meeting was spent discussing their wish to cancel the deal and get Prince Alwaleed to return most of the $70 million. But eventually they agreed to buy the A340. They said that the original agreement involving the aircraft and the agricultural investment would be cancelled. Instead the Libyans would just pay the remaining $50 million for the aircraft.
The Prince signed the new agreement the next day (September 10). He ended up waiting six months for the Libyans to sign and they finally returned the agreement in March 2006. It took another six months for the outstanding $50 million to arrive in his accounts.
In September 2006 the Prince finally transferred the aircraft to Libya. The sale had taken three and a half years to close once Gaddafi had agreed to buy the aircraft. The Prince made $25 million on the sale – although Sharab argued that $10 million of commission was due to her.
Once he had taken control of the A340, Gaddafi enjoyed having his own aircraft. He painted it the same livery as Afriqiyah Airways, and called it Afriqiyah One. It was registered 5A-One to reflect this. As well as flying him and his family around it was also used to collect Mohamed Al Gharab, the man found guilty of the bombing of a Pan Am aircraft that exploded over the town of Lockerbie in Scotland, when he was released from jail.
In March 2011 it was grounded when a no-fly zone was declared over Libya following a UN resolution. Six months later rebels fighting to overthrow Gaddafi captured the airport. Although several aircraft at the airport were completely destroyed during the fighting, Afriqiyah One only suffered some shrapnel damage. Once they had taken control of the airport several rebels posed with the guns inside the luxury A340. A few months later its owner was killed.
|1996||Prince Jefri of Brunei takes delivery of MSN-151 paying $250 million|
|1999||Prince Alwaleed buys the jet for $95 million|
|2001||Prince writes to Colonel Gaddafi|
|2002||August||Sharab starts selling to Gaddafi|
|2003||April||Prince flies both aircraft to Libya|
|June||Gaddafi agrees to pay $120 million|
|July||Written contracts signed|
|August||First $70 million received|
|December||Sharab delivers handwritten note from Prince asking for remaining money|
|2004||February||Head of Afriqiyah Airways says they will only pay $70 million|
|March||Aircraft flown to Germany for maintenance|
|April||Aircraft flown back to Saudi Arabia|
|May||Gaddafi cancels deal. Prince agrees but wants to keep $70 million|
|2005||September||Prince flies to Libya. Gaddafi agrees to pay $70 million. Prince signs agreement|
|2006||March||Libyans sign agreement|
|September||Cash arrives. Aircraft transferred to Gaddafi|
|2011||March||No fly zone imposed on Libya|
|August||Rebels take control of Tripoli Airport|