Airbus Secures Deal for 100 Planes

Europe's Airbus signed a firm contract on Thursday to sell 100 jets to Iran Air, completing a return by western plane giants and paving the way for deliveries to start next month, a year after sanctions against Iran were lifted.

The deal took weeks of shuttling between Airbus headquarters in Toulouse, France, and Tehran, complicated by a shortage of expert legal advice as Iran completes its biggest commercial deals with the West since its 1979 Islamic Revolution.

Confirming details first reported by Reuters, Airbus said almost half the jets would be for short to medium routes and that deliveries would start early next year.

The contract includes 46 of the narrow-body A320 family that includes the A321 model, 38 long-haul A330s and 16 of Europe's newest long-range model, the A350.

Such a deal would be worth $18-20 billion at list prices, depending on variants flown, but Iran is expected to receive steep discounts from foreign manufacturers as its aviation renewal coincides with a drop in demand elsewhere.

The head of Iran Air was quoted earlier as saying the value of the contract would not exceed $10 billion.

It is expected to be followed by a formal deal to buy turboprop aircraft from ATR, half-owned by Airbus.

The breakthrough comes days after Iran signed a $17 billion deal with Boeing for 80 jets and is expected to sharpen efforts by the US company to persuade the incoming US administration to allow the trade to go ahead, aviation experts said.

The first jet, an Airbus A321 already painted in Iran Air livery, may arrive before the January 20 inauguration of US president-elect, Donald Trump, who has opposed an international deal to lift sanctions in return for curbs on Iran's nuclear activities.

"When Airbus and ATR aircraft start going into Iran, Boeing will point to that to argue that it should implement its own deal," said an aviation source who closely followed the talks.

Boeing declined to comment.

> Moving Quickly

Despite rivalries, the Airbus and Boeing deals with Iran are unusually intertwined because each depends on continued US clearances for the sale of planes built with US parts.

"Everyone has an interest in moving quickly. The Iranian government wants to show results from the nuclear deal; Airbus wants to get deliveries moving and Boeing wants the leverage it can get from European deliveries to Iran," another source said.

The ability to renew Iran's aging and accident-prone fleet is widely viewed as a test of the pragmatist policies of Iranian President Hassan Rouhani ahead of presidential elections in May, Reuters reported.

Airbus said the deal was subject to US Treasury export licenses granted in September and November 2016.

Republican critics of the nuclear pact want Trump to block the aircraft deals and have sought to hamper them by voting to tighten restrictions on use of the US financial system.

Airbus is expected to be paid in euros instead of the usual dollars and is likely to provide its own financing for the first few jets, adding to cash strains caused by a spike in customer financing for Turkey this year.

Planemaking chief Fabrice Bregier called the deal "a significant first step" in modernizing Iranian aviation, adding it included training, airport operations and air traffic management.

However, both sides confirmed the Airbus A380 had been jettisoned from a provisional list first agreed in January.

Reuters first reported in June that the original proposal for 12 A380s-seen as a symbol of Iran's determination to catch up with Persian Gulf rivals and a shot in the arm for Airbus as it struggled to sell the world's largest airliner-was threatened by domestic opposition in Iran.

US regulatory delays further reduced the order by six planes, lowering the total order to 100 from 118 jets.

> A Test for Trump Policy

Airbus followed Boeing in completing a multibillion-dollar plane deal with Iran Air, creating another big test case for how the incoming Trump administration responds to the West’s accelerating economic opening with the Islamic Republic, the Wall Street Journal wrote.

The two contracts are far and away the most valuable commercial agreements between western firms and Iran since the completion of a nuclear pact between the US and other world powers and Tehran. In exchange for Iran curbing its nuclear program, the international community agreed to lift many of the sanctions that have isolated Iran economically for years.

Since then, many western firms have scrambled to assess opportunities and a few have made concrete obligations with Iranian counterparts in industries, including energy and auto manufacturing. Commercial aviation has been a particular priority for Iran, which has struggled to modernize its aging fleet of mostly Boeing jets, bought before the 1979 Islamic Revolution.

Uncertainty has heightened over the fate of many of these commercial inroads in Iran since the election of Trump. On the campaign trail, Trump said he opposed the Iran nuclear deal. Critics in the US Congress have said they would try to unwind the Boeing deal, in particular.

Trump has not weighed in publicly on Boeing’s contract with Iran, and he and his team have not detailed their position on the nuclear deal with Iran since the election.

Even though it is a European company, Airbus is vulnerable to any big shift in US policy toward Iran. Airbus requires specific US approval for the sales because its jets include many American parts and technology that are subject to American export controls. It received that approval, from the US Office of Foreign Assets Control, earlier this year.

The US has other levers that could make completing the Airbus transaction more difficult—for instance, forbidding any financing or payments to be routed through institutions with access to the American banking system.

Farhad Parvaresh, the head of Iran Air, says Airbus would “probably” finance some of the first planes to be delivered.

Airbus did not disclose financing details. Iran has previously said it would finance a chunk of the two plane orders domestically and rely on foreign financing for the rest.

Airbus is also expected to deliver its planes to Iran Air much faster than Boeing. That could set up the Airbus deal as an earlier litmus test than the Boeing one for how Trump responds.

Parvaresh says he expected three to four Airbus planes by March. One person familiar with the situation said at least one plane could arrive before Trump’s Jan. 20 inauguration.

In announcing its deal earlier this month, Boeing said booking the Iran Air sales in its official order book was still subject to “contingencies”. That caution is common with deals involving state-owned airlines. They can include final green lights from governments and often are linked to potential financing arrangements, said people familiar with the sales process.

On Thursday, in its weekly order-book update, Boeing said it had not yet included its Iran order in that tally.

Iranian officials said earlier this week they would seek repayment with interest on any money they paid for the Boeing jets if Washington interfered with the order.

For Boeing and Airbus, the Iranian purchases are a big help. After years of record orders by airlines for the newest planes, global appetite has been ebbing. Airbus booked only 410 net orders in the first 11 months of the year, compared with 1,007 for the same period of last year.

Boeing’s 468 plane orders through Dec. 13 also trail last year’s figures.