Delays Threaten Deals With Boeing, Airbus

EghtesadOnline: Agreements for Iran to buy more than 200 jetliners from Boeing and Airbus, the most prominent commercial outcomes of the nuclear accord reached a year ago, face delays that could reduce or even unravel them, aviation lawyers and analysts said.

News ID: ۷۳۵۳۰۷

24 July 2016

Legislation passed by the House of Representatives on July 7 would essentially block the multibillion-dollar agreements with Boeing and Airbus, despite provisions in the nuclear accord that allowed for such deals.
While US President Barack Obama is expected to veto that legislation, it has pushed back the clock for the airplane deliveries, much to the annoyance of Iranian officials, reads an article in the New York Times.
Below are excerpts:
“I was not expecting it, but I’m not surprised, either,” said Farhad R. Alavi, managing partner at the Akrivis law group, a Washington firm that specializes in sanctions compliance.
“It’s very consistent with past efforts by Congress to undermine the nuclear deal.”
According to Financial Tribune, Boeing’s chief executive, Dennis A. Muilenburg, speaking this month at the Farnborough International Airshow in Britain—an important annual industry event, may have added to the skepticism. He said that if his company could not sell planes to Iran Air, the state-run airline, under a memorandum of agreement reached in June, then “nobody should”.
Muilenburg was alluding to the Airbus deal, which was publicized to great fanfare when President Hassan Rouhani of Iran visited France, where Airbus has its headquarters, in January.
The Iranians are also finding it difficult to find financing from foreign banks still skittish about doing business with the country. The depressed price of oil, Iran’s main export, is not helping matters.
The delayed aircraft deals have sent ripples of uncertainty through the aviation industry, potentially affecting anticipated work by financial institutions, suppliers, service providers, insurers, reinsurers and others, according to lawyers knowledgeable about how large aircraft purchase contracts are handled.
Other Options
Iranian aviation officials, impatient to begin rejuvenating the country’s aging fleet of 250 aircraft—of which more than a third are said to be grounded—have hinted they may go elsewhere to buy planes.
The Iranians have expressed interest in a midsize jet under development by Japan’s Mitsubishi conglomerate, Reuters reported recently.
In another possible sign of reduced expectations, there is speculation that the Iranians may cancel orders for 12 Airbus A380 jumbo jets, part of the 118-plane deal with Airbus that Rouhani announced seven months ago.
[Embraer of Brazil and Canada’s Bombardier are also marketing their aircraft in Iran.]
Doubts also have emerged about whether Iran can lease new planes as an alternative, or a supplement, to buying them.
Even under a newly relaxed sanctions regime stipulated by the nuclear accord, both Boeing and Airbus need licenses from the United States Treasury Department’s Office of Foreign Assets Control to sell aircraft to Iran. Airbus planes use American parts that are subject to United States government approval.
Both Boeing and Airbus have repeatedly said they are awaiting the licenses and cannot proceed without them. Treasury officials have declined to comment on when the licenses might be issued.
Boeing has rejected accusations by some congressional critics that its desire to sell airplanes to a country hostile to the United States is wrongheaded.
“Basically what we’ve told them is, ‘Look: The US government and five other governments negotiated this agreement. Airplanes were a part of it,” Tim D. Neale, a Boeing spokesman, said in a telephone interview.
He also suggested that Boeing was not prepared to relinquish any competitive opportunity to Airbus concerning the Iranian market. Iranian aviation officials have said they will need 500 planes in coming years.
“If Airbus were able to go into that market and we weren’t able to be in there, too, and if Iran stays on the straight and narrow path and the moderates prevail politically and the market really grows in years ahead,” Neale said, “they would have that market to themselves.”