Economy, Business And Markets

Boeing Says Following Obama Admin’s Lead, Not Congress

Boeing Says Following Obama Admin’s Lead, Not Congress Boeing Says Following Obama Admin’s Lead, Not Congress

Boeing CEO Dennis Muilenburg says his aerospace company is following the lead of the US government when it comes to furthering the multibillion dollar deal for passenger aircraft that the planemaker has tentatively struck with Iran Air.

“We are staying completely within the US government-approved process on this deal,” he said on the sidelines of a 100th anniversary celebration for Boeing employees Friday afternoon, as reported by The Business Journals–the online media division of American City Business Journals for Boeing.

However, “government” means following the lead of President Barack Obama’s administration, rather than the vociferous critics in Congress who voted earlier this month to block Boeing’s deal with Iran.

So far, Boeing’s Iran deal consists of an initial memorandum of understanding with Iran Air. It intends to sell 80 aircraft to Iran Air and lease it another 29 aircraft, putting the deal’s value at about $25 billion. The agreement includes 80 aircraft worth $17.58 billion to be sold directly by Boeing, including 34 wide-body jets: 15 each of the 777-300ER and 777-9 models and four of the 747-8.

It also includes the direct sale of 46 narrow-body jets: 40 of the upcoming 737 MAX model and six of the current 737NG model. Under the same provisional deal, Boeing will arrange for Iran Air to acquire a further 29 737NG aircraft through leases. Deliveries of the purchased jets are scheduled to start in 2017 and run through 2025.

“The next step of the process” is “going through US government license approval”, Muilenburg said.

If Boeing obtains that approval, then it would move to signing a firm sales agreement.

The Boeing CEO said the potential deal with Iran Air is “a significant opportunity” that represents “significant US manufacturing jobs”.

His comments came after the US House of Representatives passed two amendments aimed at blocking the use of Department of Treasury funds for granting licenses for export or reexport of commercial passenger aircraft and their parts and services to Iran as enabled by the nuclear deal between Tehran and world powers last year.

A further amendment would prohibit any US financial institution from participating in the export of passenger aircraft to Iran.

The move, however, is widely expected to be vetoed by the administration of President Obama.

  “Unfair Disadvantage”

In a first reaction by Boeing, the company’s commercial jetliner chief said if its deal to sell Iran passenger aircraft is blocked by the US Congress, all other US companies that supply to its rivals should be prohibited as well.

Ray Conner said any effort to legislatively block its deal with Iran Air should not unfairly disadvantage the planemaker against its rivals.

Airbus has said it, too, requires Washington’s approval to export airliners to Iran because the planes involve US-made parts.

The global business of selling jetliners means US firms such as engine makers and providers of other components contribute significantly to the designs of Boeing’s biggest rivals like Europe’s Airbus Group SE.

Airbus in January signed a cooperation agreement for supplying 118 jetliners to Iranian airlines worth more than $25. The Airbus accord covers 45 single-aisle planes comprising 21 from the current generation of A320 family and 24 re-engined A320neos.

There are also 73 wide-body aircraft, including 27 A330s, 18 A330neos and 16 of Airbus’s latest A350s. Based on the draft agreement, Iran also has the option to add up to 12 A380s to these purchases in the upcoming years.

Echoing Muilenburg’s remarks, Conner said the House amendments “will be between Congress and the administration and we’ll follow the lead of which the government tells us what we can do and what we can’t do”.

“If we’re not allowed to go forward, then sure as heck no other US company should be allowed to go forward either. That would mean any other US supplier to any other manufacturer,” he was quoted by the Wall Street Journal as saying.

  Commitment as Per JCPOA

The recent game of trying to impede the furtherance of the Boeing-Iran deal in the US comes as deputy spokesperson at the US Department of State Mark C. Toner confirmed in a press briefing in April that the US is committed to issuing due licenses for the sale of aircraft to Iran.

“In general, the US, as part of the JCPOA, is committed to license three limited categories of activity that would otherwise be prohibited … One of those things includes the licensing of sale to Iran of commercial passenger aircraft,” he has been quoted as saying.

Meanwhile, Iran is also in talks with Mitsubishi Aircraft Corporation for the Japanese planemaker to supply the country with its regional passenger jet currently under development.

The Japanese company, which is a unit of Mitsubishi Heavy Industries, began market surveys into Iran last September, four months before the lifting of western sanctions against Iran over its nuclear program.

The planemaker has been touching base with flag carrier Iran Air and Iran Aseman Airlines, as well as the country’s aviation authorities, the Tokyo-based The Nikkei reported.

Iran Air is weighing the purchase of 80 70-seat Mitsubishi Regional Jets for domestic routes.

Mitsubishi Aircraft is partnering with the Japanese government in this endeavor, aiming to make use of state-backed financing. Since it is developing the 90-seat model first, the company plans to deliver the 70-seater in 2019 at the earliest.

The Mitsubishi Regional Jet, or MRJ for short, is a twin-engine regional jet aircraft manufactured in a partnership between majority owner Mitsubishi Heavy Industries and Toyota Motor Corporation with design assistance from Toyota affiliate Fuji Heavy Industries, already a manufacturer of aircraft.

It will be the first airliner designed and produced in Japan since the NAMC YS-11 of the 1960s, which was produced at a loss. Its first flight was in November 2015, with deliveries scheduled for 2018 (for the 90-seat model).

Embraer of Brazil and Canada’s Bombardier are also marketing their aircraft in Iran.

Iran is modernizing its aging fleet of airliners decimated by years of sanctions that prohibited it from acquiring new jets or buying spare parts from their manufacturers.