Sanctions on Iran Cost Boeing, Airbus About $20 Billion Each
10 May, 2018, 00:22 | Author: Kristen Mcgee
US President Donald Trump's decision to withdraw from the Iran nuclear pact threatens new business for several big companies, including Boeing, Airbus and General Electric.
The aircraft sales were among the most sought-after contracts for Iran.
The US planemaker, cognisant of the risk of a deal snap-back, did not record the Iranian jets on its backlog.
"If those orders do come to fruition, if we do ultimately deliver airplanes, those represent opportunities for us, " he said. French Finance Minister Bruno Le Maire said he plans to speak with U.S. Treasury Secretary Steven Mnuchin this week to see how European companies might be shielded.
Boeing said it will continue to take its cue from United States government policy on sales to Iran after President Donald Trump announced the USA would withdraw from the Iran nuclear pact.
Boeing also had announced a contract in April 2017 to sell Iran Aseman Airlines 30 Boeing 737 MAX aircraft for $3 billion, with purchase rights for another 30 aircraft.
At list prices, those are valued at just shy of $20billion.
Although Airbus and Boeing are arch-foes in the $120 billion annual jet market, their deals with Iran had brought them into alignment because each depended on the same USA licences.
But Muilenburg said the production rate the company had put in place was not dependent on the Iranian orders.
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Mnuchin said that the new sanctions would allow countries doing business with Iran to wind down those activities in either 90 or 180 days, depending on the type of products being sanctioned. Industry sources said Boeing had been tentatively due to send Iran three 777s this year but had reshuffled deliveries with other buyers.
The stock price of all of the top U.S. weapons manufacturers shot up just as Trump announced he's pulling his country out of the pact which lifted sanctions on Iran in exchange for Tehran limiting its nuclear program.
While European countries are staying in the deal, Airbus will likely have to pull out of the contract as it needed a US license for the deal since over 10% of parts and labor were provided by USA companies.
In a statement Tuesday, Airbus spokeswoman Mary Anne Greczyn said the company is "carefully analyzing the President's announcement and will be evaluating next steps".
With industrial capacity in the United States, Airbus is also subject to U.S. sanctions. However, it faces potentially costly industrial decisions over the rest of the 20-plane deal. A cancellation of Airbus's Iranian orders - which it booked early to pip Boeing in the 2016 order race - could wipe out its entire tally of 86 net orders for this year.
Renewed U.S. sanctions "will not directly affect Iran's ability to produce and sell its crude" oil, wrote energy analyst Pavel Molchanov, in a report to clients of Raymond James and Associates. "Iran probably feels more comfortable trading with Europe".
Iran President Hassan Rouhani mirrored the sentiment, saying he was happy to do business with the other partnering countries.
The announcement means Boeing will lose out on a lucrative new market for jetliners, but the move will likely cost the company less than it will Airbus.
"No new contracts are permitted" he said. Boeing is even considering boosting production to as much as 70 planes a month in 2020 or so. Alstom SA signed a memorandum of understanding in 2017 to build metro and suburban rail cars in Iran, but the effort has gone nowhere and the company says it now has no projects in the country.
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