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Forbes-
By: Martin Rivers –
There is no doubt that Iran’s landmark agreement with Airbus to purchase 118 new aircraft will transform the fortunes of an aviation sector ravaged by international sanctions. The acquisition of brand new, western-built aircraft will help flag-carrier Iran Air reclaim its title as a leader in Gulf aviation, ending decades as an industry pariah unable to strike commercial deals.
Looking beyond the historic nature of the agreement, however, several questions remain about its particulars. With US manufacturer Boeing also angling for Iranian orders – albeit largely behind the scenes for now – industry experts are tracking developments closely. Here’s what we don’t yet know:
1. What aircraft are involved: according to Airbus, the 118-aircraft order can be broken down into 73 widebodies (45 A330s, 16 A350s and 12 A380s) and 45 narrowbodies (all A320-family). Those figures have been repeated by the Iranian government. Yet at least two officials are giving a different tally. Three days before the Airbus contract was unveiled, Mohammad Khodakarami, the deputy director of Iran’s Civil Aviation Organization, told me that most of the aircraft will be A320-family jets. That claim was then repeated by Asghar Fakhrieh Kashan, Iran’s Deputy Transport Minister, the day after the announcement, when he told local media that A320s and A321s make up the majority of the order. Iran has a large domestic market owing to its size and is already accustomed to the A320-family – unlike some of the newer types in its mega-order – so leaning towards the narrowbody workhorse is a logical move. Could Airbus be jumping the gun with an inflated widebody tally while talks with Boeing continue?
2. When will the aircraft arrive: Airbus itself has not provided a timeline for the delivery of the jets, but Kashan told delegates at last week’s CAPA Iran Aviation Summit that the first unit will arrive this year and the last in 2022. Make no mistake: that is an extraordinarily ambitious delivery schedule. Iran’s engineers and pilots may have acquired impressive expertise during their decades of isolation, but their technical knowhow is attuned to obsolete or ageing models of aircraft. Even with help from foreign partners, it will take time to update maintenance and operations practices for the latest generation of aircraft. Deliveries in the early stages of the learning curve will need to reflect this.
3. Who are the aircraft for: this is the biggest question on my lips. Airbus’s announcement is unequivocal that all 118 units are destined for Iran Air. That stretches credulity. The flag-carrier’s operational fleet stands at just 26 aircraft today, with another 19 planes in storage. It has already been linked to an order for 40 ATR aircraft, and has not ruled out buying from other manufacturers such as Boeing. Ballooning its Airbus fleet to 100-plus units is an ambitious, if not impossible, near-term goal. Given the broader requirements of Iran’s civil aviation sector – at competitors such as Iran Aseman Airlines, Kish Air and Qeshm Air – it would seem odd for Tehran to allocate all the Airbus acquisitions to one carrier. Divvying up the delivery slots between several airlines, while helping each to secure leases on mid-life aircraft, would be a more balanced national strategy.
4. How will the aircraft be paid for: prior to the announcement of the Airbus order, Iran’s central bank sealed two agreements with France’s Coface and Italy’s SACE. These export credit agencies could provide guarantees for European banks involved in the transaction. But Iranian entities still face heavy restrictions within the US financial system – specifically when it comes to processing dollar-denominated deals. While such technical hurdles are not insurmountable, they necessitate political will and a healthy risk-appetite on the part of western bankers.
5. Is the deal set in stone: are we talking about a Memorandum of Understanding, or a firm commitment? Are options or purchase rights included? Few clues are provided in Airbus’s statement, though we may find out more when its official orderbook is updated in February. Until then, all we have to go on are the manufacturer’s earlier remarks about Iranian negotiations. When I asked Fabrice Brégier, Airbus chief executive, about the status of talks with Iranian carriers last September, he was unequivocal. There were, he said, none: “Not to my knowledge, but we see a big market.” That was a shrewd response given the legal quagmire of striking deals while sanctions were still in force. However, if we take Brégier’s comments at face value, are we really to believe that a $25 billion aircraft deal was negotiated and concluded in the course of 12 days – the amount of time that passed between Implementation Day and the announcement by Airbus?
