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Military


Iranian Civil Aviation - Recapitalization

Amid concerns that the US decision to withdraw from Iran nuclear deal would lead to the loss of close to $40 billion in contracts for Boeing and Airbus, Russian airplane builders had a historic opportunity to receive a new foreign market for its latest designs. President Trump announced 08 May 2018 that the US would withdraw from the Joint Comprehensive Plan of Action, the 2015 deal on the Iranian nuclear weapons program. Bloomberg described the decision as a catastrophic "lost opportunity," with Treasury Secretary Steven Mnuchin confirming to reporters there was little hope that the US and European aircraft-building giants would get a chance to sell close to $40 billion in new planes to Iran. The Treasury had confirmed that it would withdraw export licenses on the sale of planes to the country. Like Boeing, Airbus too would be subject to US export restrictions, because over 10% of the parts in its planes are made by US suppliers.

Airbus had 95 undelivered planes that it had hoped to sell to Iran, including 16 orders of its A350 wide-body, long-range jet airliner, and 28 for the A330neo, another wide-body that's still under development. Boeing had been more fortunate; its conservative approach following President Trump's election means that it never actually closed its planned transaction with Iran Air on planes including the 777-300ER wide body airliner. But the company did have some $16.6 billion in contracts for 80 jets, with these orders now almost certainly void.

There's no word yet on how much the new Il-96 would cost, with predecessors hovering in the $40 to $50 million price range. However, accounting for inflation and new technology costs, even a doubling, tripling or quadrupling of the price would still put the Il-96-400M well below the cost of the A350 (priced from $317 million to $336 million), and the Boeing 777 ($295 million to $361 million). The MC-21 was designed to be a direct competitor to the Boeing 737 and the Airbus A320, and priced at $72 million for the —200 variant and $91 million for the —300 (for comparison, the cheapest model in the A320 family costs $77.4 million).

The head of IranAir took delivery on 11 January 2017 of the first new Western jet under an international sanctions deal, calling it a “sunny day” for peace and friendship between Iran and Europe and a memorable one for aviation in the nation of 80 million people. IranAir Chairman Farhad Parvaresh invited the plane making chief of Airbus to fly onboard the new A321, which had been painted in IranAir’s livery, to Tehran where the airline plans to mark its arrival in its fleet with a ceremony. The 189-seat plane was the first of 100 ordered from Airbus.

Replacing Iran's antiquated civil aviation fleet was one of the biggest economic opportunities of the 2015 accord to lift sanctions, which was negotiated by the outgoing administration of U.S. President Barack Obama. President elect Donald Trump was a vocal critic of the pact. Despite Iran's great need for new planes to replace those from the sanctions era, it had entered the market at a time when Boeing, Airbus and smaller planemakers have all faced a downturn in orders, and are therefore expected to offer deep discounts.

Iranian officials have said the country needed as many as 500 jets to renew its fleet which had suffered under US-led sanctions for years. Iran’s current civil aviation fleet consists of 248 aircraft with an average age of 20 years, of which 100 are grounded. Iranian officials have announced that the country needs as many as 500 jets to rejuvenate its aviation fleet. "Out of 250 planes in the country, 230 need to be replaced," Ali Abedzadeh, the head of Iran's Civil Aviation Organisation, stated 20 June 2016.

Aviation giants Airbus and Boeing announced 23 September 2016 that they had received permission from the US government to sell aircraft to Iran, part of a series of landmark deals potentially worth some $50 billion in total following the 2015 nuclear accord. Apart from Boeing and Airbus, Iran had also already started talks with Canada’s Bombardier, Brazil’s Embraer and Japan’s Mitsubishi over plane supply agreements.

  1. Iran cooperated with Ukraine and Russia in the production and operation of Antonov An-140 airliner, which can carry 52 passengers. In December 1998 Antonov confirmed that it had signed a contract with the Iranian Government for the construction of 80 An-140 new generation turboprops. After purchasing the production license for An-140 from Ukraine in 2000, Iran built its first Iran-140 passenger plane in 2003. By 2016, a total of nine were in service.

  2. Vaporware

  3. In May 1997 it was reported that Tupolev was holding talks with Iranian officials over manufacturing its 212-seat Tu-204 and 100-seat Tu-334 twinjets in Iran.
  4. As of 2008 Iran’s Aviation Industries Organization planned to manufacture 100 advanced Tupolev Tu-214 and Tu-204 airplanes with a capacity of 210 persons each in cooperation with Russia within the next 10 years.
  5. Representatives of Iran's aviation industry planned to buy Ukrainian An-148 planes and arrange their batch licensed production in that country. Representatives of Iran Air and Iran Air Tour disclosed these plans following presentation of An-148 at Iran Air Show' 2008. By 2016, nothings seemed to have come of this scheme - none were reported in service, and there were seemingly no photographs of this aircraft in Iranian livery.
  6. Russia may supply nearly 100 Sukhoi Superjet 100 regional passenger jets to Iran within the next five years, Deputy Prime Minister Dmitry Rogozin said on 19 November 2015. “[The Iranians] are interested in the SSJ100 as a plane, which could become the main workhorse for their leading carriers,” Rogozin said in comments, carried by Rossiya-24 TV channel. “Yesterday evening, shortly before our departure, one of their flagship companies was negotiating with our United Aircraft Corporation on the delivery within the next five years of nearly a hundred Superjets, now ready to ship,” Rogozin added.

    Regional Aircraft

  7. An Iranian civil aviation official played down reports on negotiations with Japan's Mitsubishi Aircraft for purchase of regional passenger jets. The Japanese company said it was negotiating jet sales with Iran's flag carrier Iran Air and Aseman Airlines, as well as the country's aviation authorities. “These talks are only at the level of negotiations and speculation and nothing was final. So it cannot be looked at as a serious matter,” Secretary of the Iranian Airlines Association Maghsoud Samani was quoted as saying 17 July 2016. Mitsubishi Aircraft made its maiden test flight in November but development snags have delayed its planned entry into operation, dealing a blow to Japan’s long-held ambition to re-establish a commercial aircraft industry. On Wednesday, Mitsubishi Aircraft spokesman Miho Takahashi was quoted as saying that the company was researching the Iranian market which it believed needed around 100-150 regional jets over the next 10 years.
  8. Iran confirmed 23 February 2016 that it had ordered 50 planes from Brazil's Embraer, the world's third biggest commercial aircraft manufacturer. The confirmation was made by Mohammad Bagher Nobakht, the country’s government spokesman who emphasized that the deal with Embraer would be a hire purchase contract. The two countries had started discussions over the purchase of the planes, along with a potential package of taxis, buses and trucks, in October when Brazilian Trade Minister Armando Monteiro led a delegation to Tehran. the company expects the US Treasury Department to issue a license for it – like the one it issued for France’s aviation giant Airbus – to move ahead with a plan to sell at least 20 of its E-195 jets to the Islamic Republic. The value of the deal was estimated to be over $1 billion. An Iran trade deal could also be a shot in the arm for struggling automakers in Brazil, where car sales dropped by more than a quarter last year and demand for heavy trucks was nearly halved due to a severe economic downturn.
  9. Canada’s flag-carrier Bombardier said in October 2016 that it had no concerns to find a foothold in Iran’s aviation market even though it had been late on chasing opportunities in Iran. Bombardier’s CEO Alain Bellemare said he expects his company to be able to catch up with its rivals following Canada’s lifting of sanctions against Iran. Bellemare added that Bombardier had teams on the ground in Iran, stressing that the company was not concerned about winning its share of new orders in the Iranian market.
  10. On 01 February 2016, leading turboprop manufacturer ATR [an Airbus subsidiary] and Iran’s national flag carrier Iran Air today signed in Teheran a deal for the introduction of 40 newest generation ATR 72-600s. The agreement included firm orders for 20 aircraft plus 20 options, and was valued at one billion euro. The deal marked the arrival of the newest generation ATRs in Iran, where the first aircraft have been operating since 1992. In 2017, Iran Air expected to take delivery of 14 aircraft and by 2024 Airbus should have delivered all the ordered aircraft.

    Big Iron

  11. In January 2016 EU-based Airbus said it struck a deal with Tehran to export 118 jets, estimated to be worth some 22.8 billion euros ($25 billion), but had been waiting for Washington’s approval since. The company said it hoped to receive the second license allowing it to sell the remaining planes to Iran. Though based abroad, Airbus needed the approval of the US Treasury for the deal because at least 10 percent of the manufacturer's components are of American origin. The Airbus contract to sell 100 jets to IranAir, signed on 22 December 2016, would be worth $18-$20 billion at list prices, but the head of IranAir had been quoted as saying the value of the contract would not exceed $10 billion.

  12. Airbus signed basic agreements with two Iranian airlines over the purchase of a total of 73 planes. Airbus said 22 June 2017 that Iran’s Zagros Airlines would pick up 20 aircraft from the single-aisle Airbus A320neo family and eight A330neo planes. It added that another airline – Iran Airtour – would also buy 45 planes of the A320neo type. The agreements were signed on the sidelines of the Paris Air Show. Iran Airtour in a statement put the value of its deal with Airbus at €4.5 billion. It added that the planes would be from A318, A319, A320, and A321 models with passenger capacities ranging from 100 to 240 people.

  13. Boeing received a license to sell eighty planes to Iran, with a total list price of $17.6 billion, with deliveries beginning in 2017 and running until 2025. Iran Air also would lease 29 new Boeing 737s in a deal that Iranian officials have suggested would be worth some $25 billion in total. "Boeing has announced that its IranAir contract was worth $16.6 billion. However, considering the nature of our order and its choice possibilities, the purchase contract for 80 Boeing aircraft was worth about 50 percent of that amount," Deputy Transport Minister Asghar Fakhrieh-Kashan said 24 December 2016.

  14. Boeing said 04 April 2017 it agreed to sell 30 of its 737 MAX jets to Iran Aseman Airlines, Iran's third largest airline, in a deal worth $3 billion. The sale marked the second such Boeing deal made possible by the 2015 nuclear agreement signed by former US president Barack Obama to relieve sanctions on the Middle Eastern country. Iran Aseman Airlines was scheduled to start receiving the aircraft in 2022. Aseman Airlines flies both domestic and international flights from Iran. The European Union banned the airline in December 2016, citing safety concerns.

On 28 January 2016 Iran officials signed two agreements with Airbus covering new aircraft orders and a comprehensive civil aviation co-operation package. The agreements were signed at the Élysée Palace, Paris, during Iranian President Hassan Rouhani’s official visit to France with French President François Hollande. Iran Air signed an agreement with Airbus for the acquisition of the full range of new Airbus airliners (73 widebodies and 45 single aisle). This includes pilot and maintenance training and support services to help the entry into service and efficient operations of these new aircraft. The agreement for 118 new aircraft signed by Mr Farhad Parvaresh, Iran Air Chairman and CEO, includes 21 A320ceo family, 24 A320neo family, 27 A330ceo family, 18 A330neo (-900), 16 A350-1000 and 12 A380.

Ali Abedzadeh, Head of Iran’s Civil Aviation Organization (ICAO), said 25 April 2016 that “as the first phase of the contract inked between Airline of the Islamic Republic of Iran (Persian acronym: Homa) and Airbus Group SE, five to eight A320 and A330 jets purchased from Airbus would join Iran’s civil aviation fleet in the current year.”

Iran Air and Boeing reached a memorandum of agreement in June 2016, under which the US aviation giant would sell a total of 80 aircraft to Iran and help the country lease a further 29 under a $25 billion contract. However, a groundswell of opposition was building among pro-Israeli politicians in the US against plans to sell aircraft to Iran. Earlier this month, the Republican-controlled US House of Representatives approved measures to block the sale of Boeing aircraft to Iran. In July 2016 the US House of Representatives jeopardized the nuclear deal it agreed to with Iran last year by blocking the sale of commercial airliners to the country. The US House of Representatives tried to scuttle the deal, and passed (by 239 votes to 185) two legislative amendments which ban sales to Iran from Boeing and even Airbus, because it uses some components produced by Boeing.

On 11 December 2016 Boeing and Iran Air announced an agreement for 80 aircraft that includes 50 737 MAX 8s, 15 777-300ERs and 15 777-9s, valued at $16.6 billion at list prices.

  • The 737 MAX incorporates the latest technology CFM International LEAP-1B engines, Advanced Technology winglets and other improvements to deliver the highest efficiency, reliability and passenger comfort in the single-aisle market. The 737 MAX would be 14 percent more fuel efficient than today's most efficient Next-Generation 737s. The first 737 MAX was scheduled to enter service in 2017.

  • The 777-300ER was the most fuel and cost-efficient airplane in its class as well as the most reliable twin-aisle aircraft in the world. It also had the highest cargo capacity of any passenger airplane. To date customers worldwide have ordered more than 800 777-300ERs.

  • The 777X builds on the passenger-preferred and market-leading 777, as well as offering more market coverage and revenue capability than the competition. The 777X would include new engines, an all-new composite wing and would leverage technologies from the 787 Dreamliner. The first 777X was scheduled to enter service in 2020.

Based on its Memorandum of Agreement (MOA) with Iran Air announced in June 2016, the contract was reached within the terms of the U.S. Government license issued to Boeing in September. Boeing coordinated closely with the U.S. Government throughout the process leading up to the sale and continues to follow all license requirements as it moves forward to implement the sales agreement.

This agreement would support tens of thousands of U.S. jobs directly associated with production and delivery of the 777-300ERs and nearly 100,000 U.S. jobs in the U.S. aerospace value stream for the full course of deliveries. The first airplanes under this agreement are scheduled for delivery in 2018. Boeing and its more than 13,600 U.S. supplier and vendor partners across all 50 states are proud to ensure America continues to lead in global aerospace and to create jobs and opportunities in communities across the nation. Boeing's US supply chain currently supports more than 1.5 million U.S. jobs.

Richard Aboulafia, an aviation and aerospace analyst at the Teal Group, said in an interview that while there are a number of people talking up the deal, there's "very low level" of likelihood that most of the jets would be delivered to Iran. In an interview with Al Jazeera 20 June 2016, Aboulafia said that Iran had "no money" to pay for the deal. "It's great that they are going to do this deal, but it's more talk than actual money," he said. "The biggest hurdle is financial. A lot of financiers are not comfortable with financing planes going to Iran". He said that an economy that was under the control of a state like Iran "is not a recipe for success". He also said that for Boeing, the deal was a way to show that there was "growth somewhere, anywhere", but added that Iran "is not a big market".

Head of Civil Aviation Organization said 01 December 2016 that four European countries had been commissioned to finance Iran’s possible plane purchases from world air industry giants. Ali Abedzadeh told Mehr News that Germany would be the most probable candidate to finance through credits Iran’s prospective plane purchase agreements, with Italy, Ireland, and France possibly as contributors.

The government of President Hassan Rouhani, a pragmatist, pushed to finalize aircraft deals to show results from the nuclear accord with world power to end sanctions. He faced criticism at home from hardliners over the cost of the purchases.

There are a few aspects of the Airbus, ATR, Embraer and Boeing deals that are puzzling. As of 2016 Iran Air had only 36 flyable aircraft, and yet these four contracts alone would provide 317 new aircraft within a decade or so. It was not apparent how Iran Air could possibly absorb so many new aircraft, either with respect to traffic and routes, or with respect to maintenance and other operating personnel. Another strange thing was that of the 220 or so aircraft currently operated by Iranian airlines, Iran Air's three dozen aircraft account for only one-sixth of the national fleet. And yet no other Iranian airlines had stepped forward to buy new aircraft by the end of 2016. These dogs are not barking, but the reasons are unclear.

Managing director of Iran's Aviation Industries Organization (IAIO) Manouchehr Manteqi said in 2011 that Iran was planning to become a major aviation industry hub in the region. “[Iran's] President [Mahmoud] Ahmadinejad had approved the organization's mission to turn the country into an aviation hub,” Manteqi said.

Iran Air might use these aircraft for hub operations that gather and distribute traffic from markets in the geographic region surrounding the hub or gateway to domestic and international cities and to other hubs or gateways. Competition was increasing from government owned and funded carriers in the Gulf region, including Emirates, Etihad Airways and Qatar Airways. These carriers have large numbers of international widebody aircraft on order and are increasing service to the US from their hubs in the Middle East. Several of these carriers, along with carriers from China, India and Southeast Asia, are government subsidized, which had allowed them to grow quickly, reinvest in their product and expand their global presence at the expense of other airlines.

The United Arab Emirates (UAE) was leveraging its geographic location and proximity to international trading routes to play a central role in the global travel and aviation markets. On the commercial aviation front, the U.A.E. was home to eight international airports. Dubai International Airport was the world’s busiest airport based on number of international passengers – handling 78 million passengers and 2.5 million tons of cargo in 2015. The new Al Maktoum International Airport in Dubai (also known as Dubai World Central or DWC), with a planned annual capacity of 12 million tons of cargo and 160 to 220 million passengers, was expected to be the largest airport in the world when completed in 2030. Abu Dhabi was also expanding its airport with the state-of-the-art Midfield Terminal which was due to open in July 2017 and would boast an overall airport capacity 45 million passengers.

The U.A.E. was the hub for two world-class airlines, Emirates (since 1985) and Etihad (since 2004), and for two budget airlines, Fly Dubai (since 2009) and Air Arabia (since 2003). In terms of fleet size, Emirates Airlines was the largest operator of the super jumbo Airbus 380 and the Boeing 777. Etihad holds the largest order for the 787 Dreamliner. While Emirates had grown organically, Etihad had aggressively expanded through codeshare agreements and acquisition of shares in other airlines like Air Berlin, Virgin Australia, Alitalia, Jet Airways, AirSerbia, and Air Seychelles. Etihad currently had 198 inter-airline relationships and 49 codeshare partnerships, giving it a combined passenger and cargo network of nearly 600 destinations.




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