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

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May 09, 2018
Boeing wfolding wingtip FAA approval
The Boeing 777-9 . Photo: Boeing.

Boeing and Airbus orders worth almost $US40 billion at list prices are collateral damage in the Trump Administration’s decision to pull out of a nuclear pact with Iran.

Both Boeing and European rival Airbus look set to lose the orders the after US Treasury Secretary Steven Mnuchin said Tuesday export licenses enabling them to sell the planes would be revoked.

Airbus is affected because it uses US parts in its aircraft the US Offices of Foreign Assets Control licenses are required for products with 10 percent or more US technology content.

Airbus Group in 2016 secured an order for 100 aircraft —  including 16 A50s and 38 A330 family aircraft and 46 from the A320 family — , worth $US19 billion at list prices. The deal came as sanctions were lifted on Iran and its airlines moved to modernize their aging fleet.

That same year, Boeing struck a deal with Iran Air that including 15 widebody B777-300ERs, 15 Boeing 777-9s  and 50 737 MAX 8s worth a total of $US16.6 billion at list prices.

Read: Qantas Boeing 787 smashes speed records.

The following year came an agreement with Iran Aseman Airlines for 30 narrow-body 737 MAX jets and purchase rights on an additional 30 jets.

The airlines would have paid both manufacturers significantly less than list prices but the deals are still worth billions.

Boeing said at the time the Iran Air deal alone 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”.

Both manufacturers are examining the implications of the Trump decision.

“Following today’s announcement, we will consult with the US Government on the next steps,’’ Boeing said in a statement sent to AirlineRatings. “As we have throughout this process, we’ll continue to follow the US Government’s lead.”

The Iranian orders represent a small percentage of the massive aircraft backlogs of both manufacturers.

Boeing chief executive Dennis Muilenburg also said during the company’s last earnings call that company understood the risk and implications of the Iranian aircraft deal to its B777 production.

He said Boeing had no Iranian deliveries scheduled this year and they had been deferred in line with US government process.

Boeing is slowing production of the 777 to compensate for weakening demand for legacy aircraft ahead of the arrival of its newer 777X versions.

But Muilenburg said the production rate the company had put in place was not dependent on the Iranian orders.

“If those orders do come to fruition, if we do ultimately deliver airplanes, those represent opportunities for us,’’ he said. “Again, we’re going to follow the U.S. government’s lead and we’ve ensured that from a skyline management standpoint and from a production systems standpoint, we are not dependent on those aircraft.”

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

The order is for two more Boeing 777-300ERs for subsidiary Swiss International Airlines and two freighters for Lufthansa cargo.