Sign Up for FREE Daily Energy News
  • Stay Connected
  • linkedin
  • twitter
  • facebook
  • youtube2

Copper Tip Energy Services
Vista Projects
Copper Tip Energy
Vista Projects

U.S. Exit from Iran Deal Puts Pressure on European Planemakers

These translations are done via Google Translate

May 9, 2018, by Tim Hepher

PARIS (Reuters) – America’s withdrawal from the Iran nuclear accord signals the collapse of $38 billion in plane deals between Tehran and Western companies and leaves Airbus facing greater risks than arch-rival Boeing, according to people involved in the deals.

President Donald Trump announced on Tuesday he was pulling his country out of the 2015 accord, and his administration said it would revoke export licenses needed by planemakers to sell commercial planes – which require U.S. components – to Iran.

Tehran has ordered 200 passenger aircraft for state carrier IranAir worth $38.3 billion at list prices, including 100 from Europe’s Airbus (AIR.PA), 80 from U.S. rival Boeing (BA.N) and 20 from smaller Franco-Italian turboprop maker ATR (LDOF.MI).

Airbus is more exposed on wide-body jets, for which sluggish global demand forced it last month to revise down part of its production plans. Iran has ordered 53 wide-body jets from Airbus and 30 from Boeing, which are yet to be built.

Losing the order deals a further blow to Airbus’s newest wide-body jet, the A330neo, which faces weak demand months before it enters service, three industry sources said. IranAir is its second-largest airline buyer after AirAsia (AIRA.KL).

By contrast, Boeing Chief Executive Dennis Muilenburg signaled last month that his company was no longer as dependent on the Iran orders as it had been, following an aggressive effort to improve sales of its current-generation 777-300ER wide-body jets which were part of the Iran deal.

Airbus and Boeing said they would study the U.S. decision, but declined to comment on the risks they faced.

“We will do the right thing,” Jeff Knittel, chairman of Airbus Americas, told Reuters.

Neither planemaker will be as concerned about the potential loss of a total of around 100 narrow-body plane orders from the Iranian deals, as demand for those jets is strong and they will have no problem in allocating production slots to other buyers.

Two European sources said Airbus was resigned to losing the historic Iran deals which had taken months of preparation, culminating in a Paris signing by President Hassan Rouhani in 2016. Rouhani said on Tuesday Iran was committed to the deal.


A collapse of aircraft deals struck under the nuclear pact would also hit Airbus’s 2018 order book harder than Boeing’s.

A cancellation of Airbus’s Iranian orders – which it booked early to pip Boeing in the 2016 order race – could wipe out its entire tally of 86 net orders for this year. Investors keep an eye on new orders as a gauge of jet market confidence.

ROO.AI Oil and Gas Field Service Software

Boeing is ahead with 221 net orders for 2018, and had delayed booking the orders from its $16.5 billion Iran contract – Iran’s biggest with America since the 1979 revolution.

“Airbus was very aggressive about booking orders and delivering planes and Boeing were very conservative; Airbus gets hit a bit worse,” said Teal Group analyst Richard Aboulafia.

Still, Boeing’s wide-body portfolio is not without risk.

“In terms of optimistic expectations, Airbus comes out worse. In terms of hoping for (wide-body) revenue that won’t be there, neither feels good right now,” Aboulafia added.

The situation looks mixed for small but profitable ATR.

Analysts say the turboprop maker has had a good Iran deal so far, managing to deliver more aircraft than its larger rivals with 8 already in service.

It looked on course to deliver the remaining aircraft later this year and may just be able to squeeze one or two more into Iran before the end of a 90-day wind-down period in August.

However, it faces potentially costly industrial decisions over the rest of the 20-plane deal. Analysts say the deadline for deliveries suggests ATR had started building some of the remaining planes, potentially leaving it with unsold aircraft.

ATR was not available for comment.

Trump’s speech pulled the shutters down on the wider aircraft deals unexpectedly quickly and marked a sharp contrast with scenes over two years ago when plane sellers and leasing companies flocked to Tehran eager to drum up new business.

Although Airbus and Boeing are arch-foes in the $120 billion annual jet market, their deals with Iran had brought them into alignment because each depended on the same U.S. licenses.

But as opposition to the Iran accord mounted in the U.S. Congress, which holds the key to defense and other contracts, and as markets for its jets improved elsewhere, Boeing seemed to change its tone with the comments by Muilenburg last month.

“It’s not just Trump but the anti-Iran mood in Congress,” explained a person familiar with the U.S. transactions.

Reporting by Tim Hepher; Editing by Pravin Char

Share This:

More News Articles