Why Iran Air Turned Down Boeing’s Offer for Two 747-8

In Boeing’s talks with Iran Air after major powers signed the nuclear deal with Iran in 2015, the American planemaker offered to sell two available wide-body 747-8 jetliners to the flag carrier, but the airline refused to take them.

The pair of intercontinental jumbo planes were originally built for Russia’s OJSC Transaero Airlines that went bankrupt in 2015.

The American company tried to include the planes in the contract it secured with Iran Air later in December 2016—an offer the Iranian company refused, CNN reported on Wednesday quoting an anonymous person familiar with the matter.

The removal of international nuclear sanctions against Iran in January 2016 allowed Iran Air to order 80 planes from Boeing as well as 100 from Airbus.

The airline has so far received three Airbus jets whose orders had been cancelled by the original customers. Iran has said these deliveries helped facilitate the country’s post-sanctions engagement with the global community.

Likewise, an early Boeing delivery would have been a huge development, as many big banks and businesses have been holding back engagement with Iran amid uncertainty in the US as a result of US President Donald Trump’s opposition to Iran.

The first Boeing delivery is to be delivered to Iran in April 2018, as many customers are standing in line prior to Iran Air.

So why did Iran Air miss the chance to receive two available planes? The airline says they could not be delivered rapidly after all.

“They made an offer. We did assessments and held negotiations in this regard. The planes had problems that would have delayed the delivery by at least one and a half years,” Farhad Parvaresh, former CEO of Iran Air—also known as Homa—told Financial Tribune.

“So Homa could not accept them with such a delivery schedule,” he added, without elaborating on the planes’ “problems”.

To fulfill its demand for wide-body jets, Iran Air opted for 777s. Its $17-billion order includes 50 of Boeing’s narrow-body 737MAX-8s, 15 wide-body 777-300ERs and 15 777-9s, which are to be delivered to Iran Air over 10 years.

In its Airbus deal, the airline has ordered long-range A330s and A350s. Although in a preliminary deal they included the European planemaker’s biggest plane A380, the massive jet was later crossed out from the shopping list.

The A380 is a rival to Boeing’s 747-8. When Airbus launched its super-jumbo program in the 1990s, Boeing decided on “stretching” 747 jumbo jet, which was the biggest commercial plane at the time.

But the B747-8 is not something Iran Air would want based on its fleet expansion plan,Saj Ahmad, chief analyst at the Dubai-based Strategic Aero Research, told Financial Tribune.

“Iran Air was never really interested in 747s. It’s always wanted 777s. Even though Boeing may have offered them, Iran Air was never obliged to take them as part of its planned multibillion dollar deal. My understanding is that Iran Air actually preferred the 777-300ER and 777-9, in the same way that Emirates does with a view to emulating their business model to capture growth through its Tehran hub. Quad-jets are done for, as we can see with the recent rate cut on the A380, which Iran Air also rejected.”

Ahmad said Iran Air’s rejection of the 747-8s signals a shift away from large quads to 777s to form the eventual backbone of its fleet, without letting concerns over the US government approval of the deliveries affect its development plans.

“Boeing has indicated first deliveries of Iran Air’s 777-300ERs will take place next year, so it’s likely and hopeful that the Trump Administration will finally sign off this deal and allow it to proceed,” he said.

“Boeing will, of course, be telling the US government that missing out would mean ceding a huge market to Airbus and it would hurt US jobs.”

Boeing CEO Dennis Muilenburg recently said Boeing is “continuing to make steady progress” regarding its Iran business.

“All of this is being governed by US government policy and we’re staying completely within that licensing process, stepping our way through the gates. That is moving forward on track and we still expect to begin delivering airplanes next year,” he told reporters on July 26.