Boeing, Airbus orders worth $US40bn caught up in Trump move

Geneva Stokes
May 10, 2018

The United States risks greater isolation and unpredictability in its anti-Iran drive after President Donald Trump opted to pull out of the Iran nuclear deal despite warnings from European allies, advisers and even some fellow Republicans, experts say.

On the nuclear front, a collapse of the deal could also hasten the risk that Iran covertly attempts to reconstitute a nuclear program that once consumed US intelligence officials and military planners. "If those orders do come to fruition, if we do ultimately deliver airplanes, those represent opportunities for us".

"We are now alone on a more unsafe path with fewer options", retired Army general Martin Dempsey, a former chairman of the USA military's Joint Chiefs of staff, wrote on Twitter. "As we have throughout this process, we'll continue to follow the USA government's lead", Gordon Johndroe, a Boeing vice president, was quoted as saying in a statement as reported by the Washington Post.

Airbus has a $20bn order from Iranian airlines for almost 100 planes.

However, it faces potentially costly industrial decisions over the rest of the 20-plane deal.

Separately, Boeing and German carrier Lufthansa announced they had completed an order for four more 777s valued at $1.4 billion at list prices.

"We have no Iranian deliveries that are scheduled or a part of the skyline this year, so those have been deferred in line with the USA government processes", Boeing CEO Dennis Muilenburg told investors April 25.

The company's current 777 production rate "is not dependent on the Iranian orders", CEO Dennis Muilenburg said on an earnings call last month.

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Companies like Boeing were quick to tap into the unexplored potential shortly after, and in no time, Boeing made a deal with Iran Air and Aseman Airlines. Last month, Boeing said it had found new homes for jets it hoped to deliver to Iran this year, adding it had no Iranian deliveries scheduled or part of production this year.

The lack of a share price reaction is entirely due to the huge backlog of single-aisle planes - Boeing 737s and Airbus A320s - that will keep the companies' assembly lines busy for at least four or five more years regardless of the loss of a few orders.

While the Obama administration had licensed the sales by both Airbus and Boeing to Iran Air in late 2016, the planemakers handled the orders very differently. "Under the original deal there were waivers for commercial aircraft, parts and services and the existing licenses will be revoked", he added.

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".

The aircraft sales were among the most-sought-after contracts for Iran.

The Israeli military said on Tuesday that after identifying "irregular activity" by Iranian forces in Syria, it instructed civic authorities on the Golan Heights to ready bomb shelters, deployed new defenses and mobilized some reservist forces.

Airbus has 97 planes for Iran on its backlog. And now, with the reintroduction of economic sanctions on Iran, it looks like they aren't going to be happening. "Iran probably feels more comfortable trading with Europe".

And analysts don't expect the Iran order cancellations to affect Boeing in the long run. IranAir is its second-largest airline buyer after AirAsia.

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