Economy, Business And Markets

Airbus Wants to Secure Deal With Iran

Domestic Economy Desk
Airbus Wants to Secure Deal With Iran
Airbus Wants to Secure Deal With Iran

Airbus chief executive Tom Enders may despise European politicians for interfering with his futuristic drone project, but he does admire, at least, the French government for having sent an invitation to Iran’s Minister of Roads and Urban Development, Abbas Akhoundi, to visit to Paris Air Show 2015.

In the year’s greatest aerial event, as all eyes were on Indonesian flag carrier Garuda to place a deal for the purchase of 30 Airbus jetliners, the world was kept in the dark about the details of Akhoundi-Enders negotiations to seal a much valuable deal on the acquisition of 400 planes.

Meanwhile in Vienna, the clock is ticking for Iran and world powers to reach a final nuclear accord by the end of June, which would put an end to a more-than-a-decade-long dispute that resulted in the imposition of unprecedented sanctions by the West on Iran’s economy.

  Impact of Sanctions

According to former roads minister Ahmad Khorram, a report compiled by the ministry in 2011 shed light on the extent of the damage caused by sanctions on Iran’s economy.

Based on the report, the loss incurred by the country as a result of sanctions stood at $102 million in 2011. That was before unilateral sanctions by the United States and the European Union were imposed. Ministry’s revision of the report put the damage at $160 billion in 2012 and $200 billion in 2013.

Embargos on Iran’s aviation industry, however, date back as early as 1979’s Islamic Revolution. The sanctions were severely intensified after the nuclear dispute, and were further tightened in 2012 after the EU disconnected Iran’s banks from SWIFT system, as a result of which Iranian airlines found it more difficult to make international purchases.

Experts believe Iranian airlines’ lack of access to spare parts and standard maintenance services, along with impossibility of buying new planes have resulted in a huge number of plane crashes.

Airplane accidents in Iran since 1979 have caused more than 1600 fatalities. In 2014, three plane accidents happened in one year which shows that the country’s fleet of 20 years in age, has reached a critical point.

  Need for Fundamental Renovation

An interim nuclear deal reached in 2013, helped ease the sanctions. As per the deal the US gave permission to General Motors and Boeing to enter business with Iran, which led to a few purchases by Iran Air, including spare parts, drawings and navigation maps from Boeing, in addition to the overhaul of 18 aircraft engines by General Motors.

Also Iranian Taban Airline’s purchase of two Boeings with the average age of 19 years from Tajikistan in March and May did little to reduce the age of Iran’s fleet.

In May, Iran’s Mahan Air set a record in the purchase of aircraft over the past decades after the acquisition of 15 second-hand planes, including nine Airbus planes. The new planes with an average age of 15 years reduced the age of Iran’s fleet from 20 to 19 years, which according to Akhoundi is not enough. The country’s fleet needs a fundamental renovation, he believes.

  Stiff Competition

Back in March, head of Iran Civil Aviation Organization, Alireza Jahangirian, for the first time revealed that the country needed to buy 40 planes per year, going for the next 10 years.

He also noted that with regards to the recent thaw in Iran-West relations, many world airplane manufacturers have held negotiation with Iranian airlines and assessed the market.

Before Mahan Air’s jetliner purchases were announced, Marty Bentrott, Boeing’s vice president of sales for the Middle East, Russia and Central Asia, was quoted by Bloomberg as saying that, “We’ve done a pretty good assessment on our side and we think the demand, should things open up, would be very strong.”

Apart from Boeing, Commercial Aircraft Corp of China Ltd. and Russia’s Sukhoi, maker of Superjet 100 are candidates for future aircraft purchases in case the sanctions are removed, said an analyst at aircraft engine maker, Pratt & Whitney Canada’s Aviation Center of Excellence research office in Dubai.

Although with regards to the recent talks in Paris, Airbus seems to be closer to seal the deal with Iran, Akhoundi has tried to keep the negotiations low-key.

He also pointed out that Iran holds a positive view on all the appeals made by western companies, nonetheless, “those who stood by the country in hard times are preferred.”