Boeing and Airbus Could Lose Billions Because of President Trump’s New Iran Sanctions
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President Donald Trump announced Tuesday that the US would officially be pulling out of the Iran nuclear deal, delivering on one of his campaign promises.
Trump also said he would be re-instating economic sanctions of the “highest level” on Iran. Caught in the crosshairs of the policy reversal — once again — is Boeing, as is competitor Airbus. After sanctions were originally lifted during the Obama administration in 2015, Boeing inked a deal to sell 80 jets to Iran Air (including 50 737 MAX 8s and 15 777-300ERs) and 30 737 MAXs to Iran Aseman Airlines with an option for 30 more — worth about $20 billion according to list prices.
Likewise, Airbus signed a deal with Iran Air for 100 aircraft (46 A320s, 38 A330s and 16 A350 aircraft), some of which it has already begun delivering.
Under the new re-imposition of the sanctions, the US Treasury Department is giving commercial aircraft and aircraft part manufacturers in deals with Iran a 90-day “wind-down period” to end all business with the country. After that deadline — August, 6, 2018 — the Treasury will revoke the licenses that authorize manufacturers to export to Iran, and any company dealing to the country would face sanctions.
The fact that many international aircraft manufacturers rely on American-made aircraft parts to build their planes complicates matters.
European-based Airbus told Reuters it is “carefully analyzing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations.”
“As we have throughout this process, we’ll continue to follow the U.S. government’s lead,” a Boeing spokesperson told Reuters.
Boeing already shook off performance worries this year amid trade war fears with China after Trump levied aluminum and steel tariffs on the country in March; China retailed with tariffs on US goods, including certain aircraft. China is one of Boeing’s fastest-growing markets, leading experts to predict trouble for its bottom line if the looming trade war took hold.
But Boeing reported much better than expected profits and aircraft deliveries in the first quarter of 2018. Boeing’s total revenue for the first three months of 2018 was $23.38 billion — a 6% increase year over year. Its aircraft deliveries also rose 9% in Q1 of 2018, and the company’s backlog of orders clocks in at more than 5,800 airplanes, valued at $415 billion.
Those favorable numbers mean Boeing is likely primed to shake off the loss of a $20 billion deal with Iran as well. In fact, the aircraft builder had been wary of potential cancellations since signing the orders with the Iranian carriers. Boeing CEO Dennis Muilenburg told investors on an earnings call in April it was pushing back the delivery of its 777s that were set to go to Iran later in 2018, saying Boeing would “continue to follow the US government’s lead here.”
New aircraft were one of the main incentives for Iran to originally sign the nuclear deal with the US and Europe. Iranian airlines have some the oldest jets in the world, and officials there had previously expressed the need to buy up to 500 new jets in the near future and resume direct flights to the US, according to CNN Money.
Featured image by ERIC PIERMONT/AFP/Getty Images.
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