LONDON — Just how big a bonanza may be awaiting airliner manufacturers if international sanctions against Iran are finally lifted?
If Iran complies with the various conditions demanded by the ‘E3+3’ group (UK, France, Germany, Russia, China and US) and the European Union to ensure its nuclear ambitions are tamed, then those sanctions may be lifted in a few months’ time.
That prospect has airliner salesmen salivating, because Iran has a civil fleet largely made up of increasingly decrepit aircraft that need to be replaced. The country has an estimated population of 82 million and a civil air fleet of around 200 aircraft with an average age of 26 years. One lessor, Ireland-based Avolon, reckons that 400 new aircraft may be needed in the next few years.
But, just how many of those orders will end up with Airbus and Boeing? The two main airframers, riding a huge wave of orders, have virtually no available slots on their final assembly lines until 2020. And, according to Boeing Commercial Airplanes president and CEO Ray Conner, talking to journalists in Seattle recently, it may be some time before western manufacturers even get an opportunity to head to Tehran clutching order forms.
“We’re still waiting for the go-ahead [from the US government] to even have those kind of discussions to get in to visit the country,” he said. According to Avolon’s president and CCO, John Higgins, speaking at his company’s Q2 results presentation last month, this means that at least the first stage of any re-fleeting in Iran will fall to lessors, both for new and used aircraft.
An added potential problem for Boeing is the failure by the US Congress to re-authorize the ExIm Bank, which plays an important role in foreign sales by financing foreign buyers’ purchases and guaranteeing loans. The ExIm Bank’s authorization may, of course, be reinstated. But for the moment, it is not allowed to take on any new business.
UK-based chief analyst at Strategic Aero Research, Saj Ahmad, who has considerable experience in the Middle East, believes the Iranian situation is not yet clear, but some factors deserve attention. Firstly, the long waiting times for new Airbus and Boeing products means that manufacturers such as Embraer, Bombardier and Sukhoi may step in to fill much of the gap. Iran’s size means that many city pairs are too far apart for comfortable car travel, which makes regional airliners an ideal ‘fit’ – Fokker 100s and Avro RJs still provide many internal services. He also believes that many Iranian carriers could be happy to lease 10-year-old examples of the Boeing 777 or Airbus A330 for long-haul routes. Those still have relatively low flight cycles, give good economy and can be picked up relatively cheaply.
On the regional front, Ahmad believes that second-hand Embraer regional jets may find a niche. With the Brazilian manufacturer just two years away from introducing its E2 range of jets, Iranian carriers are unlikely to want to spend money on new current model E-Jets, he believes. Perhaps the company with most to gain, however, is Sukhoi with its SSJ100 Superjet. Iran’s longstanding political and economic links with Russia make it a natural partner. And the Superjet, says Ahmad, has shown itself in service to be a thoroughly solid performer. Russian banks and lessors, moreover, are likely to be keen to cut attractive deals to sell the aircraft. “If I was an advisor to Iran, I would push them in that direction,” he comments.
Apart from Iran’s need for new aircraft, however, Ahmad says that the country will first have to pump money in to renewing its airport infrastructure, “which leaves a lot to be desired.” If the country does open up, not only will Iranian airlines want to fly outbound, but many more carriers – especially regional operators from the Persian Gulf region – will want to fly in. And airports may struggle to cope. Interestingly, in mid-September, Iran’s Civil Aviation Organization announced just such a move, proposing the construction of five new airports and upgrades to the terminals at 27 of the nation’s 51 civil airports.