Aircraft Sales to Iran – A Bad Idea?

The Boeing-Airbus deal to sell aircraft in the order of $8 billion to Iran has sparked more than a little controversy. The Treasury Department has granted aviation licenses for an initial delivery of 17 airplanes with a total of 118 planes to make their way into the country in the future. However, the deal provides for the sale of over 300 commercial aircraft between Boeing and Airbus. To date, 3 aircraft have already been delivered by Airbus.

Of course, there are many advantages and disadvantages to allowing the deal to continue. One of the major pros being of an economic nature and the greatest pitfall, Iran’s proven history for using commercial aircraft to transport weapons and other commodities in support of President Bashar Assad of Syria.

Another major area of concern is how withdrawing the licences to deliver the aircraft will impact the Nuclear Arms Deal with Iran. The deal includes a significant relief of sanctions against Iran in exchange for curbing the country’s nuclear program.

While Europe and Congress fear that Iran could withdraw from the Nuclear accord if they do not see the benefits of the relaxation of sanctions, the Trump administration insists that the issues of using the commercial aircraft in support of Syria be addressed before the deal can go forward.

Airbus may be ready to continue delivery of aircraft but a ban from the United States could put an immediate stop to this. Many of the parts used to build their aircraft come from the US and a ban would mean a halt to manufacturing and therefore delivery. This could negatively impact relations with Europe as it could mean the loss of a $40 billion deal for Airbus.

This may seem like a significant amount of money but neither Airbus or Boeing are likely to be that hard hit if a ban is implemented by the Trump administration. However, the loss of an ongoing relationship with Iran for future aircraft contracts could become commercially significant.

The human factor must also be taken into consideration. Iran’s existing fleet of aircraft is literally falling out of the sky and they are in desperate need of new aircraft. From 2016 (when sanctions were first lifted) to the end of 2017, over 90 airplane crashes resulted in the death of about 1,700 people. On the other hand, there is a large inventory of used aircraft for sale, and arguably enough to supply a country the size of Iran, if new manufacture sales are stopped or delayed.

To date, the US Treasury Department has issued no further licenses to export aircraft to Iran and has withheld the licenses previously issued to Boeing and Airbus. But it seems that this is not going to prevent Iran from getting the planes it needs. A deal with Canadian manufacturer Bombardier is underway and it is rumored that Treasury has granted licenses for the delivery of 10 airplanes.

Although this deal pales in significance when compared to the Boeing and Airbus deals, it does show that the relaxation of sanctions and determination from Iran will result in the acquisition of the much needed commercial aircraft, no matter how long it takes, where the planes come from or how many smaller aircraft manufacturer’s need to be approached.

Whether to allow aircraft sales to Iran is a good idea or not depends on which corner you may be standing in. For Boeing and Airbus as well as many other industries down the line, the deal makes sound financial sense and therefore is a good idea.

For Iran it would also be great to update their existing commercial fleet. However, the big question remains – will Iran use the new planes to ferry arms and troops to Syria?

No matter what their intentions for the use of the commercial aircraft, it seems that new planes will be obtained somehow, with or without the approval of the United States.