Financing issues present the last hurdle in Iran's 'historic' Boeing deal

Published June 19th, 2016 - 04:23 GMT
Boeing was pipped by European rival Airbus who signed a preliminary agreement in January to sell Iran 118 aircraft valued at $27 billion. (Wikimedia Commons)
Boeing was pipped by European rival Airbus who signed a preliminary agreement in January to sell Iran 118 aircraft valued at $27 billion. (Wikimedia Commons)

Iranian airlines could purchase Boeing passenger jets in an alternative currency rather than the industry-preferred dollar if the United States’ financial system does not open up to Iran, a Boeing executive suggested on Thursday.

Boeing has spoken with Iranian airlines about all of its models currently in production, Marty Bentrott, Boeing’s vice-president for Middle East sales, told reporters in Dublin on Thursday at the International Air Transport Association (IATA) annual meeting.

“There is some very positive interest,” he said.

Boeing was pipped by European rival Airbus who signed a preliminary agreement in January to sell Iran 118 aircraft valued at $27 billion.

“There is plenty of opportunity still for Boeing,” Bentrott said, who himself has visited Tehran since the plane maker was granted permission to engage in commercial discussions.

The approval allows Boeing to advise certain Iranian carriers of the technical capabilities of its aircraft, discuss the airline’s fleeting requirements and finalise general terms and conditions necessary to complete a transaction including on pricing. But the plane maker will have to apply to the US Treasury for a second license if it wants to complete any sale in what is seen as one of the last major untapped markets for new jets. Bentrott declined to say when Boeing could apply for the sale licence. “We just have to make sure we follow all the appropriate guidelines,” he said.

Even if they receive that licence, the plane maker is likely to face other obstacles to completing a deal. Boeing, and its rival Airbus, price their aircraft in the dollar. This is an issue for the plane makers because the US has so far continued to block Iran from accessing its financial systems and access to the dollar.

“We’re going to have to figure out a way collectively for them to be able to finance the assets,” Bentrott said. “Its no different for us that it is for Airbus.”

Asked if Boeing could sell its aircraft to Iranian airlines in an alternative currency, Bentrott said “there is a number of different options that could be explored”.

The US has maintained most of its sanctions on Iran, some related to state sponsorship of terrorism, the country’s missile test programme whilst others date back to the 1979 revolution. This is despite January’s lifting of nuclear related financial sanctions that paved the way for Airbus deal that includes 12 A380s.

Bentrott also said Boeing has engaged in talks to sell its 737 narrow-body series to new Omani low-cost carrier Salem and Saudi Arabian Airlines’ new low cost carrier Flyadeal. Both carriers plan to start operations in 2017 and Bentrott said he expects Salem would initially order only a few aircraft.

There is also interest in the Middle East for a stretched version of its new 737 MAX and a mid-market sized aircraft. He said a decision on whether Boeing would build the aircraft could be made this year. 

By Alexander Cornwell
 

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