Iran Private Airlines on Weekend Plane Shopping Spree

EghtesadOnline: Major new agreements between Iranian airlines and rival plane manufacturers Boeing and Airbus were unveiled over the weekend, based on which Iranian carriers are to buy a total of 83 passenger jets from the two companies.

News ID: ۷۷۷۲۴۱

25 June 2017

On Friday, Qeshm Air announced a preliminary deal with Boeing to buy 10 B737Max passenger jets. The airline’s CEO, Mahmoud Shekarabi, said the agreement was signed recently in Tehran following talks during IATA’s 73rd Annual General Meeting held in Cancun, Mexico, on June 4-6.

“During this event, we had the opportunity to meet with top executives of prominent global plane manufacturing companies, including Boeing, Airbus and a few others,” he was quoted as saying by Fars News Agency on Friday.

“Boeing expressed readiness to sell planes to Qeshm Air [at the AGM], and in follow-up meetings in Tehran … We reached a good deal,” Financial Tribune quoted him as saying.

Shekarabi said Boeing has committed to receiving all the required permits for the order, including those from the US Treasury Department’s Office of Foreign Assets Control, adding that deliveries would start as of 2022.

The order is expected to be finalized by early August, according to the chief executive, who added that Qeshm Air is also planning to buy five secondhand Boeing 737-800 aircraft.

The airline's announcement came after Zagros Airlines and Iran Air Tours signed memoranda of understanding with Boeing’s European rival Airbus at Paris Air Show on Thursday to purchase a total of 73 aircraft. The orders mainly comprise the A320neo family.

“The A320neo Family with its unique features enabling operational efficiency and reliability will contribute to our growth and expansion strategy,” Iran Air Tours Chairman Majid Shekari was quoted as saying in an Airbus press release.

“Our success as a domestic and regional airline will be reinforced by this investment in the world’s leading single-aisle aircraft."

Airbus President Fabrice Bregier said his company looks forward to a “long-term partnership” with the carrier.

Iran Air Tours is ordering 45 Airbus–all of them from the A320neo family.

Zagros Airlines is ordering 28 new aircraft–20 A320neo and 8 A330neo aircraft. It is currently the largest domestic single-aisle Airbus operator in Iran with 11 A320ceo family aircraft, according to an Airbus statement.

“We have been a loyal operator of the A320 Family and the performance, operational and cost efficiencies of Airbus aircraft was the selling point for us to order these aircraft," Zagros CEO Seyyed Abdolreza Mousavi was quoted as saying.

“This represents a practical step for Zagros Airlines’ fleet renewal and expands our operations both domestically and internationally.”

Fresh Impetus

“The spate of new deals underscores the strength, desire and impetus for Iranian airlines to invest in new products and airplanes so that they can better compete on a pan-regional and international basis. The only way that they can stay relevant as the Iranian travel market opens up is by procuring new, advanced, fuel-saving airplanes like the 737MAX or A320neo families,” Saj Ahmad, chief analyst at the Dubai-based Strategic Aero Research, told Financial Tribune.

“Qeshm Air, along with Aseman Airlines, have opted for the hot-selling 737MAX, which took the Paris Air Show this week by storm—whereas Zagros and Iran Air Tours opted for the rival A320neo,” he added.

The weeklong Paris Air Show, known as the world’s biggest air show, has been held every odd year since 1949 at Paris–Le Bourget Airport in north Paris, France.

The event’s main purpose is to showcase military and civilian aircraft and equipment. This year's event will conclude on Sunday.

Boeing won the hot race for new orders with the European rival Airbus at the Paris Air Show where the American company showcased a new model of its best-selling 737 airliner.

Airbus said on Thursday it won 326 net new orders and commitments while US rival said its total was 571, including 147 new orders and commitments for the 737 MAX 10, plus 214 of other conversions to the MAX 10 from other models to support the launch of the new plane, Reuters reported.

Qeshm Air’s newly-announced Boeing deal comes after a firm deal the planemaker signed with Iran Aseman Airlines on June 10. Based on the contract, Aseman buys 30 B737Max jets, with the option of adding 30 more in the future.

The aircraft, which have yet to be licensed by the US, are scheduled to be delivered as of 2022.

Airbus also said on Thursday the new deals with Iran Air Tours and Zagros are contingent upon approvals, including those from the US Treasury Department’s Office of Foreign Assets Control.

The deals come amid uncertainty over US President Donald Trump's policy toward Iran’s nuclear deal.

Iran has received three Airbus and four ATR planes, as part of two Iran Air orders, including 100 Airbus and 20 French-Italian ATR planes.

Boeing has expressed confidence the deal it signed last year with the flag carrier will proceed without a problem. Iran Air’s first Boeing delivery is scheduled in April 2018.

Test for Trump

“These deals put US President Trump under pressure to get off the wall and make a decision about whether he’ll allow these deals to be signed off and come to fruition,” Ahmad said.

“Particularly in the case of the Boeing sales to these airlines, especially Iran Air, Trump can ill afford to sit on the sidelines because his promise about creating US jobs rides on orders like this and he’d have to be mad not to allow them to stand.”

Boeing has been lobbying non-stop to save the plane deals with Iran. It says its contract with Aseman alone will support 18,000 American jobs.

“Equally, Boeing wouldn’t want to lose these deals for fear of Airbus locking them out of such a lucrative market either—Trump knows that Iran has stuck by the Iran deal and it is high time the Boeing orders were given the green light,” Ahmad told us.

Assuming that there will be a green light from the US Administration, the analyst says, the proliferation of Iranian airlines into the Persian Gulf and beyond can only mean good things for business and leisure travelers.

“This will have the added spinoff benefit of stimulating demand and economic activity. This is why getting these deals signed off is hugely important—not just for Iran, but also for the tens of thousands of direct jobs at Boeing and hundreds of thousands of more jobs linked to them view their supply chain.”

Richard Aboulafia, vice president of analysis at aviation consultancy Teal Group Corp., was quoted by New York Times as saying that the willingness of Airbus and Boeing to engage with Iran “reflects a belief that Trump will need to choose between jobs and foreign policy considerations, and he hasn’t proven particularly able to roll back international trade agreements.”

Farhad R. Alavi, a managing partner at Akrivis Law Group, a Washington-based firm that specializes in sanctions and export laws, also said the aircraft deals have placed Trump in a conundrum.

“The civilian aircraft industry is one of a shrinking number of major manufacturing sectors where we maintain a very clear competitive advantage,” Alavi told New York Times.

“A hard line saying 'no' to such major aircraft deals at a time when demand has dwindled elsewhere does not inspire confidence in this president being committed to quality American jobs, particularly in the manufacturing sector.”