Airbus given green light to sell planes to Iran

Stock SectorSeptember 20, 20166min13
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Iran's plan to rebuild its airline industry
Iran’s plan to rebuild its airline industry

Cleared for takeoff!

Airbus has just been given the green light by the U.S. government to sell planes to Iran despite fierce political opposition to the deal.

The Treasury department has approved the sale of 17 A320 and A330 passenger aircraft, part of a much bigger deal Airbus signed with Iran after economic sanctions were lifted.

Airbus(EADSF) needs U.S. government approval to sell aircraft to Iran because many parts are made in the U.S. and the American authorities want to ensure the country doesn’t use the planes for military purposes.

Airbus signed the deal in January, agreeing to provide a total of 118 planes to Iran for about $26 billion. This is among its biggest ever sales, and includes 12 A380 super jumbo jets.

Airbus expects the U.S. government to approve the sale of the remaining 101 planes in the next few weeks, Airbus spokesperson Justin Dubon told CNNMoney.

Iran is working to modernize a fleet that is among the oldest and most dangerous in the world. Years of sanctions left Iran’s airlines with outdated and unsafe aircraft. The sanctions were lifted after Iran agreed to curtail its nuclear program.

The country also agreed to buy 80 jetliners from Boeing(BA) in June, and lease another 29 Boeing aircraft.

Boeing has yet to receive U.S. government approval, but told CNNMoney it expected it soon.

“We believe [the Airbus] license application was submitted prior to our similar request and that the government follows a ‘first in, first out’ policy. We look forward to receiving our license from the government shortly,” the company said in a statement.

Related: Airbus faces criminal corruption probe in Britain

Many sanctions against Iran still remain. For example, the U.S. continues to block companies from doing business with Iran in U.S. dollars. This has complicated the financing of these huge plane contracts, since many banks are concerned about working with Iran.

Several big banks, including HSBC(HSBC) and BNP Paribas,(BNPQF) were fined billions of dollars for dealing with Iran while more extensive U.S. sanctions were in place.

Airbus said it believed financing wouldn’t be a problem.

“There are institutions out there that could do it,” said Dubon. “There is liquidity in the market and there are several avenues [we can pursue]. Even if there’s reticence by some banks.”

U.S. approval could provide welcome relief for the struggling A380 super jumbo, which cost Airbus $25 billion to develop. Sales have been disappointing and the company recently slashed its production outlook for the plane due to a lack of customers.

CNNMoney (London) First published September 21, 2016: 12:02 PM ET





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