Iran Orders Planes From Boeing, But Can It Pay for Them?
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Yesterday Iran and Boeing announced an agreement for the purchase of 80 new commercial aircraft for use by Iran Air, the country’s national airline. But it wasn’t immediately clear whether the nation could come up with financing for the purchase, or if the sale would have enough political support in Congress and from the incoming White House to avoid being blocked.
News headlines reported the value of the deal at over $16 billion, but Boeing’s press release notes that figure is based on list prices. It’s common for airlines to receive large discounts off the list price for major orders, so it’s unlikely the agreement will approach anywhere near the announced top line amount.
Included in the order are 50 737 MAX 8s, 15 777-300ERs and 15 777-9s, to be delivered starting in 2018. The 737 is one of the most popular commercial airplanes in the world, with over 9,000 built since its introduction in 1966. The 777 is a long-range widebody aircraft, first introduced in 1995 and with over 1,400 copies produced.
The deal is possible due to last year’s nuclear accord between the Obama administration and the Iranian government, an agreement which has been highly criticized by Republicans in Congress.
The House of Representatives passed a bill earlier this year effectively prohibiting American banks from financing aircraft sales to Iran. While the bill has not passed the Senate and would face a likely veto by President Obama, the matter could be brought up again when a new Congress convenes in January. President-elect Trump’s opinion on aircraft deals with Iran has fluctuated, ranging from criticism of any negotiations with Boeing to insisting Iran spend more money with Boeing rather than its European competitor Airbus.
Regardless of the cost, without financing from American banks Iran could have a difficult time finding ways to pay for the planes. The Iranian government proudly trumpeted the agreement, but also noted it was not yet finalized.
Boeing asserted that the sale would support up to 100,000 jobs in the United States aerospace industry. However, as of last month the company already had over 4,000 orders in its 737 backlog. While the first plane is not scheduled to be delivered to Iran until 2018, the company’s CEO has stated multiple times that the 737 is “oversold.”
In case you were wondering, Iran Air’s frequent flyer program is called SkyGift, but it does not partner with any of the major airline alliances. Yet.
Featured image courtesy of Boeing.
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