Airbus seals deal with Iran for sale of 100 aircraft

An Airbus A321 with the Iranian flag and description ”The airline of the Islamic Republic of Iran” is parked at the Airbus facility in Hamburg Finkenwerder, Germany, December 19, 2016.

By Tim Hepher | 22 December 2016

Europe’s Airbus signed a firm contract on Thursday to sell 100 jets to IranAir, 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 narrrow-body A320 family which 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 IranAir 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 U.S. company to persuade the incoming U.S. administration to allow the trade to go ahead, aviation experts said.

The first jet, an Airbus A321 already painted in IranAir livery, may arrive before the Jan. 20 inauguration of 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 U.S. clearances for the sale of planes built with U.S. 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 ageing 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.

Airbus said the deal was subject to U.S. Treasury export licences 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 U.S. 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 modernising 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 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.

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