Economy, Business And Markets

Doubts Grow Over Iran’s Purchase of Airbus A380

Doubts Grow Over Iran’s Purchase of Airbus A380Doubts Grow Over Iran’s Purchase of Airbus A380

As western planemakers seek to finalize lucrative deals to sell some 200 jets to Iran, doubts are growing over the sale of a dozen Airbus A380 superjumbo jets to the country's national flag carrier, Reuters quoted "several people familiar with deal" as saying.

Iran's return to the international market for new aircraft after decades making do with an antiquated fleet is one of the biggest business opportunities opened by the lifting of sanctions after a deal to limit its nuclear program.

The order for the double-decker superjumbo jetliners grabbed attention in January as part of a provisional deal for 118 Airbus jets worth $27 billion signed in Paris in the presence of Iranian President Hassan Rouhani.

The inclusion of the world's largest jetliner was hailed as a symbol of thawing relations and a sign of Iran's determination to compete economically with political rivals on the Arab side of the Persian Gulf that fly the jet.

The order also threw a lifeline to the A380 itself, following a slump in orders that has left the future of one of Europe's highest profile industrial projects in doubt.

But people familiar with the deal say there are increasing signs that Tehran is having second thoughts about whether to take delivery.

"We always made clear this is an option," an Iranian official told Reuters, asking not to be identified.

"It is possible to switch to other models," he added.

An industry source familiar with the region said Iran was committed to the rest of the order, but was less interested in taking the A380s.

Another Iranian official said main obstacles to completing the full order were remaining US financial sanctions.

Others said the A380 part of the order, worth $5.2 billion at list prices, can be canceled or amended without penalty under the contract before Airbus starts building the jets.

One industry source acknowledged "the A380 part is less solid" than the remaining 106 aircraft, despite the fact that Airbus had pressed Tehran to include the slow-selling model.

> Financing Questions

Before any of the deal can be completed, Airbus must obtain US export licenses due to the US technology on board its jets.

Problems in financing must also be resolved as some banks have shied away from financing either the Airbus deal or a similar order for Boeing to sell or lease 109 jets to Iran Air.

Those uncertainties have also raised questions over the timing of the payment of deposits to Airbus on the wider order.

"Following the preliminary agreement for 118 aircraft signed in January with Iran Air, negotiations are progressing, and as with all agreements, it takes time for them to be firmed up and finalized," an Airbus spokesman said.

Discussing the Airbus order in February, its chairman told Reuters the A380 would not arrive for another five years and that the airline would in the meantime monitor the expansion of Tehran's Imam Khomeini Airport.

While Airbus faces uncertainty over the A380 part of the deal, Boeing appears to have won a slight reprieve for the latest version of its 747 jumbo, which has also been suffering from poor sales.

A person familiar with Boeing's own provisional deal with Iran Air said it included four 747-8s.

Both the A380 and 747-8 have seen production cuts, as airlines switch to smaller two-engined models like the Airbus A350 or Boeing 777.

But regional sources say Boeing's 747 has a more naturally receptive audience in Iran, given the experience of its pilots and engineers in keeping old 747s flying during sanctions.

Eager to prepare for the projected transport growth post-sanctions, Iran has ordered seven types of Airbus and Boeing jets. But some analysts are cautious about how quickly new types, especially ones like the superjumbo, can be introduced without improvements in infrastructure and marketing.


Mammoth Orders Signal Ambition to Join Airline Elites

Iran’s recent signing of an outline deal for 109 Boeing jetliners five months after agreeing to buy 118 from Airbus Group SE underscores the scale of the country's airline ambitions.

The purchase of almost 230 planes would create a fleet three-quarters the size of that at British Airways and larger than the current lineup at Abu Dhabi-based Etihad Airways, one of three Persian Gulf carriers that transformed air travel in the years Iran was stymied by trade sanctions linked to its nuclear program, Bloomberg reported.

While it’s not certain that flag-carrier Iran Air will take all of the jets specified under the accords—with the US contract in particular still facing significant hurdles—the arrival of new models seems set to swell the business to global proportions.

“There is no doubt that they want to emulate carriers like Emirates and Etihad,” said John Strickland, an airline analyst at JLS Consulting in London.

“People poured scorn on the ability of the [Persian] Gulf carriers to fill their aircraft but they’ve done so. And Iran has had a bigger air market over the years that’s been put in a straitjacket by the international sanctions.”

> Wide-Body Roster

Most of the jets on order are likely to replace older ones that would have been retired years ago had it not been for the block on buying new models, he said.

The planned wide-body fleet is particularly eye-catching, with Iran Air set to operate batches of 425-seat 777-9s, and 467-seat 747-8s, with the 12 superjumbos on order matching the number due to be taken by international heavyweights British Airways and Air France.

In addition, the carrier plans to operate 16 A350-1000s, the largest variant of Airbus’s newest twin-aisle model, which can accommodate 366 passengers, and for shorter routes has ordered 45 A330 wide-bodies, including 18 examples of the re-engined Neo version.

Iran Air, which currently fields a fleet including Airbus’s original A300 and Fokker NV 100s from the defunct Dutch planemaker, has also ordered 45 single-aisle A320s, among them 24 Neos, together with the 737 Max, Boeing’s own re-engined narrow-body.

It has not said why it wants both models, when carriers tend to take just one to reduce fixed costs.

> Broader Aims

Though Iran has long said the lifting of sanctions would spur significant plane orders to serve its 80 million population plus a diaspora of 5 million overseas, a possible fleet of 120 wide-bodies–more than currently operated by long-haul specialists such as Singapore Airlines Ltd.–smacks of wider objectives.

That could include building Tehran into a hub where people change planes on intercontinental journeys, emulating the model established by Emirates of Dubai and followed by Qatar Airways, Etihad and, further west, Turkish Airlines.

The Iranian capital shares similar geographical advantages, located at a crossroads between Europe, Asia, Africa and the Middle East, with most of the Americas also within range.

At the same time, the transfer market will be tough to crack with such strong neighboring incumbents, as well as carriers such as Air France-KLM Group and Deutsche Lufthansa AG desperate to hang on to lucrative long-haul traffic.

“Iran is certainly coming from behind,” Strickland said. “But it has the advantage of a large population that will support point-to-point traffic that the [Persian] Gulf carriers don’t have because of their small home catchments.”