IranAir Reminds Boeing About 2016 Contract Commitments

EghtesadOnline: IranAir had sent a letter to Boeing in late 2020 asking the Chicago-based jet maker to clarify the status of the deal it signed with the Iranian airline in 2016, Aireza Barkhor, the company’s, CEO said on Sunday.

News ID: ۷۸۶۳۳۱

12 April 2021

“We reminded the aircraft maker of its commitments and the human rights issues US always claims to advocate. It is the right of the Iranian people to experience safe aviation operations and have access to adequate and efficient aircraft spare parts as per the contract,” he was quoted as saying by IRNA.

Echoing the same remarks, Minister of Roads and Urban Development Mohammad Eslami said on Saturday, “Boeing must be accountable for its contract with Iran Air.”

In 2016, Boeing announced an order for 80 brand new aircraft. Including a mix of widebodies and narrow bodies, IranAir planned a fleet transition to newer jets after being shut out from taking new aircraft due to economic sanctions.

However, when those sanctions were reinstated in 2018, it threw IranAir’s order in doubt. Now, as Iran and the US are set to resume talks that could lift the sanctions, IranAir’s order could be back on Boeing’s books, Simple Flying wrote.

The agreement signed on December 11, 2016, included 50 737 MAX 8s, 15 777-300ERs and 15 777-9s. At the time, the order was valued at a whopping $16.6 billion at list prices, though IranAir may have received some discount with the order.

After months of US negotiations with Iran and Boeing, the order was announced, after the US government verified a sale agreement. There were still some contingencies to be cleared at the time before Boeing started delivery of the new planes to IranAir.

At the time of the order, the only jet that IranAir committed to taking that was already in commercial service was the Boeing 777-300ER. The MAX would not enter service until the summer of 2017 and the 777X is still undergoing development, though certification is pressing forward.

However, after then US president, Donald Trump, came into office as US president and new sanctions went into effect against Iran, IranAir lost both its Airbus and Boeing orders for as long as the sanctions were in effect.

Prospects Brighten

After new US President Joe Biden took office, Iran reached out to the US to find out the status of its Boeing order. Biden has repeatedly stated that he would move toward removing sanctions and revive the nuclear agreement with Iran.

It will take some time for a deal to come to fruition, but so will negotiating a new aircraft order. Since the initial order, the Boeing 777X has been delayed and the MAX suffered a huge public blow with a major grounding that stretched on for well over a year.

Both of those factors work against Boeing, though Iran Air would also love to have a new fleet of jets.

In addition to Iran Air, Iran Aseman Airlines signed a memorandum of agreement (MOA) with Boeing for 30 new 737 MAX jets at a list price value of $3 billion. The MOA also included options for an additional 30 MAX jets with deliveries slated to start in 2022. This order also did not come to fruition amid the sanctions.

Air carriers in Iran have suffered from sanctions that limited their ability to induct new planes and forced them to operate aging jets like Airbus A300. Some of the older commercially operating aircraft in the world fly in Iran, and Iranian airlines are hoping to gain new orders. Before the sanctions went into effect, IranAir was able to take delivery of some of its Airbus orders. However, it still needed to fly older aircraft and conduct expensive and difficult maintenance on them.

Boeing would benefit financially and publically from a new order with IranAir. The 777X program could use a lift, and the MAX has been selling relatively well since the US lifted the grounding order for the aircraft in November 2020.

It will take time for talks to yield a final agreement and sanctions to be lifted. After they are lifted, it is expected that Iranian carriers will eagerly secure delivery slots with Boeing to revitalize their fleet and launch new routes to new destinations.

For now, it is a good sign that the US and Iran are starting to work again on laying the groundwork for a new agreement, but it will take some time. An agonizing wait for both Boeing and Iranian carriers, it could be incredibly fruitful for both, Simple Flying concluded.

IranAir also signed contracts shortly after the landmark nuclear deal for 100 Airbus jets and 20+20 ATR turboprops.

An Airbus A321, two Airbus A330s and 13 ATR 72-600 turboprops, five of which were delivered hours before the reimposition of the first batch of sanctions in August, have been delivered to Iran as part of the contracts.

The rest of the orders were cancelled, as OFAC revoked previously issued licenses allowing the sales of brand-new airplanes to Iran. This is while selling airplanes to Iran was among the issues directly addressed in the nuclear agreement.

IranAir Taken Off Privatization List

The government has decided to cancel plans to privatize IranAir, Minister of Roads and Urban Development Mohammad Eslami said recently.

“Unless the airline company undergoes structural changes in terms of its legal, management and financial framework, its privatization will fail,” he was quoted as saying by ILNA, noting that IranAir is considered a “national asset”.

Touraj Dehqani Zanganeh, the head of Civil Aviation Organization of Iran, said IranAir needs to operate at least 50 new jets to become profitable.

"Iran has only 10 new airplanes at the moment … The ministry [of roads and urban development] is not capable of solving IranAir’s problems; policymakers at higher levels should come up with a proper solution for tackling the airline's ongoing hurdles," he was quoted as saying by Fars News Agency.

"A number of brand-new planes were added to IranAir's fleet following the lifting of international sanctions in 2016; this was helpful but unfortunately the delivery of new jets was halted," said Zanganeh, who is a former CEO of IranAir.

Earlier, Barkhor had said that IranAir has made no profit in the past decade.

"An all-inclusive decision must be taken to help the airline settle piles of debts. Our foreign debt amounts to $800 million and we also have 30 trillion rials [$120 million] of domestic debts," he added.

In 2019, Shahram Adamnejad, deputy minister of roads and urban development, said IranAir posted an operating profit of 410 billion rials ($1.6 million) in the last Iranian year (March 2018-19).

He also put the operating loss of IranAir at 2,260 billion rials ($9 million) in the fiscal 2017-18, stressing that the net profit of the company is still negative.

The prolonged period of time that IranAir was under international sanctions and barred from purchasing spare parts and new planes has led to a dramatic rise in its average fleet age and a fall in its safety record.