ATR Offers to Finance 8 Planes in Iran Order

European airplane manufacturer ATR has offered to finance eight planes from a total of 20 turboprop aircraft Iran Air has ordered from the top manufacturer of regional planes, the Iranian flag carrier’s CEO Farhad Parvaresh said.

David Vargas, the ATR spokesman, confirmed in an email to Financial Tribune that his company has signed a deal for 20 ATR 72-600s, a twin-propeller aircraft, and said Iran Air has an option to purchase another 20. He did not comment on the value of the deal.

Parvaresh said the deal is worth $400 million, but added that Iran is likely to get a discount.

ATR has already been granted the permits by the US Treasury Department’s Office of Foreign Assets Control.

Aircraft sales need US permits if at least 10% of the planes’ components are made in the United States.

Parvaresh was quoted as saying by the official news service of Iran’s Ministry of Roads and Urban Development that the French-Italian company will deliver nine ATR 72-600s in 2017 and the rest in 2018. He said four of the aircraft will arrive within a month after the contract is signed.

A formal signing ceremony was held in Tehran on Thursday after Asghar Fakhrieh-Kashan announced the deal on Monday. He said the first four planes would be delivered in 15 days.

Iran Air signed a draft agreement with ATR soon after sanctions on Iran’s aviation industry were lifted on January 16, 2016, as part of a nuclear accord Tehran signed with the world powers earlier in 2015.

The contract came after tough negotiations that nearly came to a halt amid uncertainties over the after-sales services of the planes' Canadian engines.

The engines are made by a Canadian subsidiary of Pratt & Whitney. It is America's top military engine-maker that supplies the F-35 fighter project.

Political risks of dealing with Iran have forced the company to take a cautious stance, at a time when US President Donald Trump is attacking aerospace firms for going over budget.

Parvaresh said ATR has itself agreed to provide the after-sales services, until the Canadian company agrees to work with Iran.

ATR is the Toulouse, France-based partnership of Airbus and Italy's Leonardo S.p.A., which specializes in regional turboprop aircraft of 90 seats or less.

The deal comes atop two multibillion dollar agreements Iran Air signed with the European plane manufacturer Airbus and its American counterpart Boeing to purchase 180 planes.

Airbus has already proceeded to deliver three planes, including a single-aisle A321 and two wide-body A330 jetliners.

Parvaresh has said Iran Air will use an Airbus backstop financing for the first six deliveries, but the rest will be financed by third-party international financiers.

So far, two financiers, one from a Persian Gulf littoral state and another from China, have offered to finance the planes, he said earlier this year, without further elaboration.

Iran Air is also planning to sell $500 million worth of sukuk bonds to cover a portion of what the company should pay in cash to Airbus.

Fakhrieh-Kashan said earlier this month that the first passenger jet from Iran Air’s Boeing order will join Iran’s air fleet within a month, much earlier than the official delivery in 2018. The brand-new aircraft is said to be one initially ordered by cash-strapped Turkish Airlines that cancelled the order.

The American planemaker also earlier confirmed a preliminary deal with Iran Aseman Airlines, the Islamic Republic’s third largest carrier, to supply 30 B737-Max jetliners worth $3 billion based on list prices. It was the first Boeing deal since the hardline US president and an opponent of the nuclear deal took office.

Iran Air’s shopping list includes all sorts of planes, but regional planes are of special importance for the company to resolve the issue of uneconomical flights to small airports in provincial destinations.

Iran has the capacity to add 50 regional planes to its fleet within the next 10 years, in addition to the 20 turboprop ATR aircraft, the CEO of Iran Air said in August 2016.