Boeing aircrafts operated by different airlines sit on the tarmac at Changi Airport in Singapore. (Photographer: Ore Huiying/Bloomberg)

Trump Exit From Iran Pact Halts $40 Billion Boeing, Airbus Deals

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(Bloomberg) -- The U.S. withdrawal from a nuclear accord with Iran slams shut what had been a brief opening for historic aircraft sales by Boeing Co. and Airbus SE to the Islamic Republic.

President Donald Trump’s announcement that the U.S would seek to reimpose sanctions left little hope that the planemaking duopolists will be able to consummate $40 billion in aircraft deals struck by Iranian carriers during the brief trade thaw. Both companies’ export licenses to Iran will be revoked, Treasury Secretary Steven Mnuchin told reporters.

The plane orders, badly needed to upgrade the Islamic Republic’s museum-vintage airliners, would have had the potential to build Tehran into an aviation hub that could better compete with Dubai and Qatar, the region’s aviation super powers.

They also represent a lost opportunity for Chicago-based Boeing and Toulouse, France-based Airbus. The European planemaker is subject to U.S. export restrictions to Iran because more than 10 percent of the parts on its jets originate with U.S. companies such as United Technologies Corp., Rockwell Collins Inc. and General Electric Co.

Airbus said it will “carefully analyze” the implications of the U.S. withdrawal from the nuclear deal with the Islamic Republic before deciding how to proceed. “This might take some time, ” a spokesman for the company said by email.

Boeing Response

“We will consult with the U.S. Government on next steps. As we have throughout this process, we’ll continue to follow the U.S. Government’s lead,” Gordon Johndroe, a Boeing vice president, said in a statement.

While the Obama Administration had licensed the sales by both Airbus and Boeing to Iran Air in late 2016, the planemakers handled the orders very differently. Airbus recorded the sales in its order backlog and delivered three jets, while its ATR venture shipped eight turboprops.

Boeing never closed its transaction with Iran Air, and downplayed the historic deal’s prospects after Trump took office. In recent months, the planemaker had quietly lined up other customers for some of the 777-300ER jetliners once intended for Iran Air this year.

“Looking back, they took very different approaches: Boeing was very conservative in booking and building, and Airbus was very aggressive,” said Richard Aboulafia, an aerospace consultant with Teal Group.

Airbus Orders

Airbus manufacturer has 95 undelivered planes bound for Iran Air in its backlog. They include 16 crucial orders for its biggest A350 wide-body and 28 for its yet-to-be-delivered A330neo. Another 12 smaller turboprops manufactured by ATR, are still due to be delivered to Iran’s national flag carrier.

Investor reaction was muted since Trump had long been critical of the nuclear pact. Boeing shares dipped less than 1 percent to $338.49 at the close of trading in New York, while Airbus shares were little changed in Paris.

“We have no Iranian deliveries that are scheduled or a part of the skyline this year, so those have been deferred in line with the U.S. government processes,” Boeing CEO Dennis Muilenburg told investors April 25. “If those orders do come to fruition, if we do ultimately deliver airplanes, those represent opportunities for us.”

©2018 Bloomberg L.P.

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