Iran Finalizes Lease Finance Deal for 77 Airbus Jets

Iran has finalized a deal to finance the purchase of 77 passenger aircraft from Airbus, says a deputy minister of roads and urban development.

The prospective purchase is part of a multibillion dollar order Iran placed with the French planemaker to buy more than 100 planes.

“The purchase, which is in the form of long-term lease finance, will be financed by an international leasing company,” Asghar Fakhrieh-Kashan, who is directly involved in negotiations with Airbus and Boeing, was quoted as saying by Mehr News Agency on Tuesday.

He did not mention the name of the lessor.

On November 7, Reuters quoted unnamed Iranian officials as saying that Tehran had reached a deal with a foreign leasing company to finance the first 17 jets it plans to buy from Airbus.

Although officials have not named the leasing company involved, industry sources said in September that Iran was in advanced talks with Dubai Aerospace Enterprise—the largest aircraft leasing firm in the Middle East—to finance the purchase, the report added.

Under the deal, the leasing company would take over part of Iran’s order for dozens of new jetliners and then lease them to the country’s flag carrier Iran Air, it explained.

The deputy minister’s announcement of the new lease finance deal comes a day after he made it clear that Iran cannot afford to make cash payment for the order it placed with Airbus. He said that in reaction to an Airbus official’s remark saying French planemaker might be able to go ahead with the delivery of a single A321 narrow-body before the end of this year, should Iran pay in cash.

After last year’s nuclear deal between Iran and world powers led to the removal of sanctions in January, Iran signed a draft agreement with Airbus to buy 118 jetliners worth $27 billion at list prices.

The Airbus deal included 12 A380s—the world’s largest jetliner—but that part of the deal has already been thrown into doubt after some experts in Tehran objected that most Iranians would not benefit from the long-distance jet.

The deal was followed by another multibillion dollar agreement with American planemaker Boeing for about the same number of planes as in the Airbus order.

Both Airbus and Boeing have been granted initial permits by US Department of Treasury’s Office of Foreign Assets Control to do business with Iran. Airbus also needs a US export license as it uses parts manufactured in the United States.

According to Iran’s Minister of Roads and Urban Development Abbas Akhoundi, the orders would meet part of Iran’s need for 500 planes within the next 10 years.

The airplane deals represent a big economic prize for western companies, as they help Iran renew its aging fleet of aircraft after years of economic sanctions.

But negotiations have been held up by the reluctance of many western banks to provide finance, fearing a regulatory backlash if there is a new setback in relations.

Analysts have expressed concern that a recent vote in the US House of Representatives to ban Boeing and Airbus from doing business with Iran might put the plane deals at risk. The vote came a few days after Donald Trump was elected as the next US president.

Claude Brandes, Airbus’s vice president with responsibility for customer finance in the Mideast, said last week that his company is evaluating the implications of the congressional vote and that the vote has created a “state of uncertainty”, as the European company is negotiating final terms.

“Whatever the substance of the measure, it’s not great in terms of timing,” Brandes said. “We need to see the wording and we need to see how the Iranians react.”

Fakhrieh-Kashan said Airbus representatives arrived in Tehran on Monday for a new round of talks on some details.

“Right now, the contract to buy 112 planes from Airbus is final and ready to be signed,” he said, adding that negotiations with Boeing are also continuing.