Two Reuters articles are recommended reading prior to our story here. First this one, which describes how OPEC is having a tough time curbing production. The previous swing producer, Saudi Arabia, says these cuts are only needed for six months. But there are dissenting voices; this is an important one “If OECD stocks were to continue to draw in 2017 at the same pace as that seen over July-December, then it would take us around a year to return to the five-year average in stocks,” IEA oil analyst Olivier Lejeuene said.
Oil markets are in an over supply position. It appears long term oil demand is declining or growing more slowly. And producers that recently were not selling, such as Libya and Iran are back. Nigeria and Libya are exempt from OPEC production cuts. Then there are the US-based frackers who are now the new swing producers They are not going to follow any OPEC guidance. They will grasp any opportunity to produce and sell oil. Continue reading
Boeing has an $16.6bn deal with Iran for 80 aircraft. Many in the industry were wary of the deal’s next steps after the change of government in Washington, DC. President Trump imposed a temporary travel restriction that included Iran. Then news emerged that Iran had test fired a ballistic missile last Thursday, which was seen by Washington as a provocation. On Friday, following a missile test masquerading as an orbital test flight, the US imposed new economic sanctions against several Iranian officials and entities involved in Tehran’s missile testing program. On Sunday, Iran fired another missile. Continue reading
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 a far bigger country. But it… 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 get back into the market. As the… Continue reading