Economy, Business And Markets

Boeing’s Iran Deal at Risk

In December, Boeing announced an agreement for Iran Air to buy 80 aircraft.In December, Boeing announced an agreement for Iran Air to buy 80 aircraft.

Boeing’s agreement to sell 80 passenger jets to Iran may not be directly impacted by new US sanctions on Tehran, but the deal still could unravel.

This was stated in an article published on American basic cable, Internet and satellite business news television channel CNBC’s website. Excerpts follow:

US President Donald Trump’s administration on Friday imposed new sanctions on Iran after a ballistic missile test by the Islamic Republic. The US claims the missile test was a violation of a United Nations resolution.

Iran, however, says the missiles were not intended to be capable of carrying nuclear warheads and only pursue defensive purposes so they were not in violation of any UN resolution.

“The Trump administration is absolutely determined to ratchet up tensions and the Iranians will of course … want to do the same,” said Richard Aboulafia, vice president of analysis at Virginia-based industry consultancy Teal Group.

In December, Boeing announced an agreement for Iran Air, the country’s flag carrier, to buy 50 of its narrow-body 737 passenger jets and 30 of the wide-body 777 aircraft. The aircraft manufacturer valued the deal at $16.6 billon, based on list prices for the planes.

Industry observers suggest Tehran could pull out of the Boeing deal if tensions continue to worsen. Besides the new sanctions, Trump’s travel ban against Iran and six other majority-Muslim countries also drew criticism from Tehran and vows of retaliation.

Besides the airplane sale, the Boeing deal involves aircraft maintenance services as well as ongoing support with spare parts on the jets.

On Friday, a Boeing spokesman said the Chicago-based company was still operating under the US Treasury Department’s Office of Foreign Assets Control license, which provided federal authorization for the plane sale during the administration of ex-president Barack Obama.

“Should we receive new guidance from the Treasury Department, we will act accordingly,” the Boeing official added.

The first airplanes under the Boeing deal are scheduled for delivery in 2018. Last month, France’s Airbus delivered its first passenger jet to Iran Air under a separate commercial aircraft contract that includes wide-body A380s, the world’s largest passenger jet.

Iran’s aging fleet of passenger jets is among the oldest in the world due to commercial and financial sanctions that were in place for decades. The average age of Iran Air’s planes now exceeds 20 years and Tehran has been looking to Airbus, Boeing and other airplane manufacturers to modernize its fleet.

Iran’s Fars News Agency reported on Saturday that another western airplane manufacturer, French-Italian aircraft company ATR, was preparing to sell turboprop short-haul airplanes to Iran. 

Analysts say financing airplanes to Iran remains risky business. That is partly due to Iran not being a signatory country to the Cape Town Treaty, which provides legal remedies for default in financing agreements as well as the repossession of capital goods such as aircraft.

“Boeing will probably have to backstop a lot of that [financing] on its own,” said Moody’s analyst Russell Solomon, who covers the aerospace and defense industry. 

That said, he believes Boeing may only go so far without having third-party financiers.

Indeed, Airbus is believed to have provided backstop financing for as many as six passenger jets to Iran, but is relying on third-party financiers for the rest.


The A380s have been dropped from the Airbus deal a couple of months ago already.

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