Boeing hasn’t delivered any of the jets to Iran or logged them in its order book
Boeing Co., the world’s largest aerospace concern, stands to lose roughly $20 billion in business with Iran after the U.S.’s controversial withdrawal Tuesday from the 2015 nuclear agreement with the Middle East nation.
Boeing has agreements to sell 110 planes worth roughly $20 billion to Iranian airlines, based on list prices. The U.S. withdrawal, which pledges punishment for banks and businesses doing transactions in Iran, stretches to Boeing’s French rival Airbus SEAIR, -1.01% , which had a multibillion-dollar sale planned, and to parts maker General Electric Co. GE, +1.42%
Licenses for Boeing BA, -0.61% and Airbus to sell passenger jets to Iran will be revoked, U.S. Treasury Secretary Steven Mnuchin said after President Trump made his announcement to pull the U.S. out of what he considers a “defective” Iranian nuclear deal, defying allies and despite warnings that it could ratchet up tensions in the volatile region.
While new contracts are banned, companies and banks will have 90 days or 180 days to wind down their ties before risking penalties, the administration said. It did not expand on what those penalties might entail.
IranAir had ordered 200 passenger aircraft: 100 from Airbus, 80 from Boeing and 20 from Franco-Italian turboprop maker ATR. All the deals are dependent on U.S. licenses because of the primary use of American parts in commercial planes.
Boeing hasn’t delivered any of the jets to Iran or logged them in its order book. Chief Executive Dennis Muilenburg said last month that any deliveries had been deferred beyond 2018 and sales to Iran weren’t included in its production plans.
The Iran business is only a fraction of Boeing’s total order book. Boeing ended the first quarter with a backlog of more than 5,800 airplanes, including more than 4,600 orders for 737s.
Boeing said its backlog remains unchanged since it had not recorded the Iran deal. Boeing’s European rival Airbus, however, has included its deals with Iranian airlines in its order book, the Wall Street Journal reported.
Boeing announced the largest of its deals with Iranian airlines in December 2016: 80 jets for Iran Air – including 50 of the 737 MAX 8 model. In April 2017, Iran Aseman Airlines signed an agreement to purchase 30 Boeing 737 MAX planes, with an option to buy 30 more. Boeing at the time said the Iran Air deal would support 100,000 U.S. jobs.
Meanwhile, the company’s current 777 production rate “is not dependent on the Iranian orders,” Muilenburg said on an earnings call last month.
“Following today’s announcement, we will consult with the U.S. government on next steps,” Boeing said in a statement Tuesday. “As we have throughout this process, we’ll continue to follow the U.S. government’s lead.”
Shares of Boeing ended Tuesday down 0.6% and traded fractionally lower in limited after-hours action. The stock is up nearly 15% so far in 2018.
Read more: https://www.marketwatch.com/story/boeing-will-lose-out-on-20-billion-in-iran-deals-as-airbus-ge-impacted-2018-05-08