Published on : Thursday, June 23, 2016
Boeing yesterday announced it has signed a memorandum of understanding with Iran Air “expressing the airline’s intent” to buy narrow and wide-body aircraft. If approved by the US government, it would mark the first time that new American-made airplanes are owned and operated by Iran since the 1979 Islamic Revolution.
The Real Deal
News of the landmark agreement comes one week after Ali Abedzadeh, director of Iran’s Civil Aviation Organization, told Iranian state media that a deal had been struck to provide the country’s flag carrier with more than 100 new passenger jets consisting of Boeing 737 and 777 aircraft, worth up to $25 billion at list prices. Iran Air released a statement on its website saying it would obtain the planes through a lease-purchase agreement, pending clearance from the US and Iran. While the Chicago-based aircraft manufacturer has so far declined to comment on the details of the agreement, it released the following statement: “Boeing will continue to follow the lead of the US government with regards to working with Iran’s airlines, and any and all contracts with Iran’s airlines will be contingent upon US government approval.”
The US and EU lifted decades-long financial sanctions on Iran and released frozen overseas assets worth between $29 and $100 billion after the International Atomic Energy Agency verified that Iran had obeyed the terms of a multiparty accord agreed upon in July 2015 aimed at curbing its nuclear program. From Iran’s perspective, the easing of sanctions is an opportunity to reform the national economy and attract $30-$50 billion in foreign capital over the next five years to boost annual economic growth, which has hovered from barely above zero to eight percent per annum in recent years.
In Need of a Fleet Lift
Iran has, for years, been struggling to maintain its aging commercial passenger aircraft fleet. With an average age of 23 years old, Iran’s 280-passenger jets are almost twice as old as the international average. While AvGeeks may love Iran Air for its vintage aircraft, the airline has relied on black market maintenance deals to remain operational, to the detriment of passengers’ well-being. According to the International Flight Safety Foundation, 1,672 people have lost their lives in aviation-related accidents in Iran since the 1979 revolution. The Iran Civil Aviation Organisation estimates the country will require 80 to 90 new aircraft each year over the next five years, just to keep pace with local demand. Airports and aviation infrastructure are also in need of modernization.
Following the CAPA Iran Aviation Summit in January, Airbus announced that it had secured a tentative order from Iran Air for 118 new aircraft, including A380 superjumbos and wide-body A350s, with a view to fulfilling the entire order by 2022. But the deal still requires approval from regulators in the US, where some Airbus parts are made, and an export license from the US Treasury.
Difference of Opinion
While the Boeing deal marks a big step forward in US-Iran economic relations, longstanding animosity between both countries combined with ongoing non-nuclear sanctions could cause complications. Congressional lawmakers who opposed the nuclear agreement with Iran have already voiced strong opposition to the Boeing deal. Republican Representatives Jeb Hensarling and Peter Roskam said in a letter to Boeing released on Friday that, “American companies should not be complicit in weaponizing the Iranian Regime.” Roksam claims that Iran is “using commercial airlines to send troops, weapons, missiles and cash to assist the Syrian dictator Bashar al-Assad in his slaughter of innocents.”
However, a USA Today editorial provided a counter argument: “Whatever one might think of the Iran nuclear deal, it won’t be reversed by attacking one of its undeniable benefits … If Boeing were to be denied, Iran would simply buy more planes from Airbus.”
Tags: iran air