Spare parts now getting to Iran Air as Boeing takes advantage of eased sanctions

Iran Air 747SP-86 (20998/275) EP-IAA "Persian Gulf" captured in gorgeous sun on February 16, 2009.

(Photo by Robbie Shaw)

Commercial airplane manufacturer The Boeing Company had entered into an agreement with Iran Air in the second quarter of 2014 to sell airplane parts.

The deal was pretty significant as sanctions imposed on Iran after the 1979 U.S. hostage crisis had impacted the country’s civil airplane industry. Iran’s commercial airplanes were aging over the years, raising concerns regarding their safety.

In its third-quarter 2014 filing Boeing disclosed that it sold aircraft manuals, drawings and navigation charts and data to Iran Air, the country’s flag carrier airline. The company generated $120,000 in gross revenues and $12,000 in net profits during the third quarter from these sales.

License Granted Post Relaxation of Sanctions

In Nov 2013, Iran agreed to curtail its nuclear ambition in exchange of partial lifting of sanctions for six months starting Jan 20, 2014. In Jul 2014, the six world powers namely Britain, China, France, Germany, Russia and the United States agreed to extend the period for four more months.

The lifting of the embargo provided an opportunity for the commercial airplane manufacturers to again venture into the Iranian civil aviation markets legally. Iran, in the last three decades, had to depend on the grey markets to acquire spare parts for their commercial airplanes.

Commercial aircraft manufacturers like Boeing and Airbus applied for a license from the U.S. Office of Foreign Assets Control (“OFAC”). Boeing received the required OFAC license and the parts sold to Iran in the third quarter were consistent with the conditions provided in the license.

Can Iran be a New Destination?

The ongoing talks with Iran and the super powers have opened up a small window for the commercial airplane manufacturers, with Boeing planning to sell more airplane parts to Iran Air. Boeing is also negotiating with Iran Air Tours, a subsidiary of Iran Air, for the supply of goods and other services.

However, the airplanes which are presently operational in Iran have aged considerably and simply replacing the parts would not make them adept to the most advanced technology. So, eventually Iran Air will have to replace the aging fleet with brand new aircraft.

If we look at the bigger picture, Iran could turn out to be a new hunting ground for the commercial airplane manufacturers. Iran Air will be needing hundreds of new airplanes to replace its aging commercial fleet. However, everything will depend on the conduct of Iran and the decision of the powers that be.

The global aerospace giants are looking for every opportunity to expand their operations. Apart from Boeing, the engine manufacturer General Electric Co. also received the requisite sanction from the U.S. government to export spare parts to Iran.

(Zacks Equity Research)