In a significant first step Airbus to sell 100 aircrafts to Iran

The value of the contract is not expected to exceed $10 billion.

In a development that bodes well for Airbus and Iran’s lagging economy, European airplane manufacturer, Airbus, has signed a firm contract to sell 100 jets to Iran’s flagship carrier, IranAir.

The development marks a return of western planes to Iran and paves the way for deliveries, which are to commence next month.

The deal comes a year after U.S. led sanctions were partially lifted. It is the biggest commercial deal Iran has had with the West following the 1929 Islamic revolution.

Airbus has confirmed the deal and has stated that nearly half of the jets would be for medium to short routes and that deliveries would begin in early 2017.

Significantly, the contract includes 16 of Airbus’ latest long-range A350s, 46 of the narrow-bodied A320s, including some A321, and 38 long-haul A330s.

Normally, such a deal would command a price tag of $18-20 billion at list prices, however Iran is likely to receive steep discounts since its aviation renewal coincides with a drop in demand elsewhere.

The head of IranAir has been quoted as saying, the value of the contract is not expected to exceed $10 billion.

Even American airplane manufacturer, Boeing has reportedly signed a $17 billion deal for 80 jets. However, with the new Republican administration taking office, the company is expected to persuade them to allow it to go ahead with the deal, said aviation experts.

“When Airbus and ATR aircraft start going into Iran, Boeing will point to that to argue that it should implement its own deal,” said an aviation source who closely followed the talks.

Boeing declined to comment.

Although Airbus is European while Boeing is American, despite the rivalries between the two giants, airplanes deals tend to be intertwined since they both depend on continued U.S. clearances for the sale of airplanes since they contain U.S. manufactured parts.

“Everyone has an interest in moving quickly. The Iranian government wants to show results from the nuclear deal; Airbus wants to get deliveries moving and Boeing wants the leverage it can get from European deliveries to Iran,” said a source.

Incidentally, the deal is widely seen as a litmus test for Iranian President Hassan Rouhani whose pragmatic policies are trying to reshape Iran’s ageing and accident-prone fleet.

Airbus has stated the deal is subject to U.S. Treasury export licences granted in September and November 2016.

Critics of Iran’s nuclear pact, will want Trump to block such deals and have sought to hamper them by voting to tighten restrictions on Iran’s usage of U.S. financial system.

Airbus is likely to pay Iran in Euros rather than dollars and is likely to provide its own financing for the first few aircrafts.

Fabrice Bregier of Boeing, has termed the deal as “a significant first step” in modernising Iranian aviation. He went on to add that the deal includes training, airport operations and air traffic management.

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