The excitement of trading with Iran’s airlines is bringing OEMs some uncertainty. This is going to be unwelcome to suppliers who dislike adding uncertainty to an already uncertain industry.
Let’s start with Superjet. News from Iran now suggests the SSJ is not going to be welcomed in Iran. The Association of Iranian Airlines is the source, and to see the comment from that source as saying “the plane is not well-known to Iranian airline companies” is fatuous. Virtually every modern commercial aircraft is unknown to Iran’s airlines and the SSJ issue has been fixed. Then to ascribe concern about the recent technical fix after saying as recently as December 10th that Iranian airlines were interested in buying the SSJ is perplexing.
The Boeing-Iran Deal
Boeing and Iran have finalized the terms of a transaction for 80 aircraft with a list price of $16.6 billion. The transaction includes 50 737s and 30 777s to be delivered from 2018 to 2028. But just when you thought it was safe to sell airplanes to Iran again, politics is once again coming into play.
The political intrigue surrounding the deal is interesting, with the change of US administrations and Donald Trump becoming President. The President-Elect has been critical of the recently negotiated agreement on nuclear power with Iran, and will likely seek to re-negotiate or cancel that treaty, and potentially re-introduce economic sanctions. That would certainly drive Iran into the arms of Airbus.
We note with interest that there is news about doubts Iran Air will take delivery of those A380s. The Airbus order has yet to be formally completed. We have also heard the deal on the A380 is unlikely to be completed.
Iran’s decision on the A380 may have been a deal sweetener for both sides. But there is a big risk for the airline to acquire an aircraft this size. Iran Air has to re-enter the market and attract traffic. The airline has ambitions to turn Tehran into a regional hub like Dubai, Abu Dhabi and Doha. For Tehran to reach the same levels as these hubs is a long way off. Almost certainly longer than the five years when the A380s are meant to come on stream.
Iran does have a far larger O&D potential than the three regional hubs because it is… Continue reading
As of the end of 1Q16 there were 1,660 active commercial aircraft in the Middle East. Of these 270 or 16.3% were based in Iran. Iran had a total of 324 (active plus inactive) commercial aircraft listed, but many are parked for a lack of spares or being unsafe to fly.
Iran has the second largest commercial aircraft fleet (including parked aircraft) after the UAE. No wonder the OEMs are so keen to get into that market. Airbus made a big splash with its $27Bn order. Everyone has been wondering why Boeing has not also benefited from Iranian interest. After all, Iran is expected to buy from every OEM in order to minimize its fear of renewed sanctions. The wider the business interest and fear of economic pain, the higher the hurdle to renew sanctions.
Boeing is as eager as any OEM to… Continue reading
The blockbuster deal Iran and Airbus made recently has yet to be concluded. The reason? The US Office of Foreign Assets Control (OFAC) can block the deal because more than 10% of components in Airbus planes are of American origin.
Understanding the role of OFAC is important in figuring out how the Iran deal could work. The US Treasury has a long running issue with western aviation assets (link; link) that are in Iran. The US Treasury has already attempted to stretched its will across the Atlantic. As the last link shows, this had been utterly ineffectual.
But keeping the US banking system and other suppliers wary of large fines and legal trouble has had a chilling effect on getting the Airbus deal with Iran done. This is frustrating Airbus. And if it is frustrating Airbus, it becomes… Continue reading
We sent the following questions to a senior manager at an Iranian airline. The purpose of these questions to better understand what has been going on inside the country in the past few years and what the future looks like. Our interests are not of a political nature, though obviously, anything regarding Iran and sanctions is political. The responses to our questions are eye opening in their frankness and provide a better understanding of how one Iranian airline manager sees things.
- Many of Iran’s airlines are less than ten years old. How come so many started up in the midst of sanctions, when conditions must have been very tough?
First of all, please allow me to explain that the number of Iranian airline companies has not increased but rather undergone a decrease from 15 to 13 throughout the last ten years and fewer airlines have been founded… Continue reading