Boeing Keeps A Low Profile In Iranian Aircraft Bonanza

This week’s CAPA Iran Aviation Summit was the first international conference held in Tehran since the lifting of nuclear sanctions on January 16th. As noteworthy as the long list of western attendees, however, was the one all-important delegation that failed to turn up. The world’s largest aircraft manufacturer and potentially one of the prime beneficiaries of a revivified Iranian economy, failed to make an appearance.

Event organizers blamed “visa problems” for Boeing’s absence — a hard pill to swallow given that 85 aerospace companies and indeed several western journalists managed to get their paperwork in order. A more plausible explanation is that the US State Department urged Boeing not to attend the summit, mindful of the political sensitivities surrounding any perceived payoff from the nuclear deal. Pitching rapprochement with Iran to a skeptical US public is challenging enough; headlines about multi-billion dollar aerospace contracts would hardly soften the blow.

But that those headlines will soon be written is clear. Parliament member Mahdi Hashemi told delegates that the country needs to expand its operational fleet from 150 to about 500 commercial aircraft over the next five years. The buying spree will end decades of aviation-related sanctions enforcement by Washington, which deliberately shackled the sector over fears that Tehran uses its civilian fleet for military purposes. Whatever its moral justification, America’s policy of blocking fleet renewal in Iran was counter-productive: local carriers side-stepped sanctions through the black market, in turn compromising safety standards and deepening anti-Western sentiment among the travelling Iranian public.

The first sign of US rethink came in January 2014, when temporary sanctions relief under the Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5+1 countries allowed western firms to “ensure the safe operation of Iranian commercial passenger aircraft”. That opened the door for Boeing to rekindle ties with Iranian carriers, selling spare parts and maintenance-related services for their dilapidated fleets. But it was January 16th 2016, Implementation Day for the lifting of nuclear sanctions, that truly opened the floodgates. An updated clause in the JCPOA now allows “for the sale of commercial passenger aircraft and related parts and services to Iran,” making aerospace the only US sector that can export goods to Iran. (The lifting of sanctions primarily applies to non-US firms, which will no longer be extra-territorially pursued by America’s Office of Foreign Assets Control over Iranian deals.)

Boeing, however, is not the only horse in the race. Iran’s President, Hassan Rouhani, is expected to agree an order for between 114 and 127 Airbus jets during this week’s state visit to France, where the European manufacturer is based. A commitment for 40 turboprops produced by Franco-Italian firm ATR is also believed to be imminent. Speaking to me during the CAPA summit, Mohammad Khodakarami, the deputy director of Iran’s Civil Aviation Organization, said the Airbus acquisitions will predominantly consist of narrowbody A320-family jets. He confirmed that A380 mega-jumbos are also “part of the contract,” though the A330 and A350 would seem to be better suited to Iran’s 16 domestic carriers given their limited size.

Either way, with aircraft already flying off the shelves in Toulouse, Boeing executives are working tirelessly behind the scenes to schmooze Iranian officials and secure their slice of the pie. Khodakarami previously said that Iran will “purchase planes from Boeing and Airbus in equal numbers” — a clear invitation for both companies to sweeten their discounts if they want to tilt the order-book in their favor.

http://www.forbes.com/sites/martinrivers/2016/01/27/quietly-does-it-boeing-keeps-a-low-profile-in-iranian-aircraft-bonanza/#69bda32f1c8a