Iran Air Airbus A300 Photo: Iran Air

MIAMI — Earlier this morning, Iran Air confirmed its order for 100 Airbus aircraft, following up its confirmation of an order for 80 Boeing jets last week, trimming roughly 18 planes from the initial announcement of 118 orders in January of 2016.

The original order consisted of 21 A320ceo family planes, 24 A320neo family planes, 27 A330ceos, 18 A330-900neos, 16 A350-1000s, and 12 A380s. The final order dropped 6 of the 27 A330ceos and 12 A380s, shaving an order that was worth as much as $27 billion at real world prices to under $10 billion after the standard airline purchasing discounts are applied according to Iran Air CEO Farhad Parvaresh.

Another Blow for the Airbus A380

The Airbus A380 (and the Boeing 747-8i) were probably always a little too ambitious for Iran Air, even in a world freed of economic sanctions, especially given the price point. Along with the 15 777-9Xs on order, Iran Air earlier this year had tentative plans to include 31 very large aircraft (VLAs) in its fleet.

As Iranian business ties will take time to develop and because customer acceptance of Tehran as a connecting hub is likely to be a slow build, it will be a while before Tehran’s Imam Khomeini International Airport is a hub on the order of magnitude of Abu Dhabi or Doha, let alone Dubai or Istanbul.

The only hub in the Middle East to sustain a large volume of A380s is Dubai, as even Istanbul, probably the second most powerful hub in the region, has seen the 777-300ER as its largest aircraft type. And Istanbul has infinitely stronger business ties with countries around the world, so it is unlikely that Tehran will be as strong of a hub out of the gate.

Given that, it is likely that Iran Air will initially be dependent on origin and destination (O&D) traffic, which in turn is dependent on the Iranian disapora. Looking through the lens, the only cities in the world that can sustain a 400+ seat aircraft are Los Angeles, Toronto, Frankfurt, and London. (Istanbul and Dubai are the other key cities in the Iranian diaspora, but are short distance flights that will benefit from frequency).

Beyond those, you get to cities that may or may not have enough volume like Kuala Lumpur, Stockholm, Tokyo, Paris, Melbourne, Amsterdam, Vancouver, Mumbai, and Moscow, but its not even clear that those destinations could support a 777-300ER, let alone something larger.

The A380 simply doesn’t fit Iran Air’s network at this time.

For Airbus now, it’s once again back to the drawing board with the A380, as the backlog stays constant at 119 jets with really only Emirates clamoring for the A380neo.

Airbus and Boeing gap narrows

While the initial news around the orders was that Airbus had gotten the better end of the deal, winning 118 orders against 80 + 29 (109) for Boeing and 12 for the A380 against four for the 747-8i, the revised order drops the gap from 38 firm orders to 20. Boeing won twice as many 777 orders versus the A350-1000, and won more MAX orders (though there was no love for the 787-9). In fact, Iran Air could end up operating more Boeing jets than Airbus ones if it takes the 29 737NG aircraft via lease as initially reported.

Broadly speaking, this makes sense. The United States is the pivotal country in the Iran nuclear deal from a geopolitical sense, and at the moment there is a ton of churn and uncertainty around the deal itself. Iran already alleges that the US has violated the deal via the Iran Sanctions Extension Act, and with tension ratcheting up in advance of the inauguration of Donald Trump as President of the United States, Iran needs as much leverage as possible with the United States.

This inevitably means that Iran’s future order book is likely to split between Airbus and Boeing in the future in order to maintain maximum leverage over Boeing (you lose $10 billion in exports).