MIAMI — Several months after opening its aerospace bonanza with a blockbuster order for 118 Airbus current and next generation airplanes, Iran Air is now reportedly close to placing a similarly massive order for Boeing jets. While the formal announcement of the order may not occur until the Farnborough Air Show next month, the Wall Street Journals Jon Ostrower and Doug Cameron broke news last week  of the contours of the likely deal, which still requires government approval.

In an order that mirrors its Airbus and ATR buyIran Air will acquire from Boeing both narrow and wide bodies, purchasing 80 directly from the manufacturer and leasing an additional 29 for a total of 109 added aircraft. The new build aircraft would include 40 737 MAXs, 6 737 NGs, 15 777-300ERs, 15 777-9Xs, and interestingly four 747-8s. In addition, Boeing will assist Iran Air in the leasing of 29 737 NGs for immediate lift.

Boeing order fills gaps in Airbus one, though 777-9X with A350-1000 is an odd fit

The Airbus order included 21 A320ceos, 24 A320neos, 27 A330ceos, 18 A330-900neos, 16 A350-1000s, and a dozen A380s. In that sense, Iran Air now has a strong fleet mix, that will span from 150 – 450+ seats and from short haul to ultra long haul flights. Our view is that Iran Air is likely to focus the Airbus narrow body order on the A321, particularly on the A321neo, while mostly taking Boeing 737-800s and 737 MAX 8s. This will become an increasingly common fleet mix for airlines around the world as availability constraints and economies of scale in massive subfleets take hold.

The 737-800 is probably the right sized aircraft for the Iranian market given current demand, and moving forward would be a good choice for the core of the narrow body fleet given that there are fewer routes from Tehran that would require the A321’s capacity that could not sustain the A330ceo/neo. Indeed, the 737-800s and MAX 8s are likely to be used on trunk domestic and regional routes, whereas the A321s are likely to be earmarked for longer and thinner routes to Europe, the Indian subcontinent, and Africa.

The A330ceos are a perfect fit for mid-distance routes to Europe, Africa, and Southeast Asia (all core markets for Tehran), and the A330neos fit the same mission several years out. There might have been a place for the 787 in Iran Air’s fleet, and arguably it would have made sense to buy 15-20 787-9s in lieu of one of the A350-1000 or the 777-9X (see below), but regardless the A330-900 can perform 75-80% of potential 787-9 missions without an issue.

The long haul order for both 777-9Xs and A350-1000s feels a little bit like overkill, especially with both the 747-8 and A380 on tap for the highest volume routes like Los Angeles, New York, London, and Tokyo. In fact it’s hard to see where Iran Air will deploy close to 30 350-400 seat aircraft on long distance routes with those cities excluded. Shanghai, Beijing, Seoul, and Hong Kong are certainly four no brainers, as are Sydney and Melbourne, but outside of these obvious candidates, there’s not a lot of immediately apparent options. The 777-9X feels like a lot of plane for Johannesburg, or certainly destinations like Manila, Osaka, Guangzhou, or Taipei. Kuala Lampur and Jakarta have enough volume but little premium demand, and Bangkok may soon develop as an outbound tourist destination. Outside of New York and Los Angeles (which are probably earmarked for the A380/747-8), nowhere in the Americas has anywhere near enough demand to sustain anything larger than a 787. London and Paris probably have the volume to sustain the 777-9X, but would either justify the A380 or multiple daily frequencies on the A330ceo/neo. All in all, this order feels heavy on the 350-400 seat planes.

Boeing gets an inevitable deal

At list prices, the order is worth in the neighborhood of $17.6 billion, and even applying a standard discount of 45%, Boeing is still walking away with $9.5-10 billion in actual revenue. This represents by far the largest deal between Iran and a U.S. company, and it was inevitable as a result of the relaxed restrictions on Iran’s economy. The Islamic country is certainly aware that its position amongst U.S. politicians, particularly Republicans, is precarious. Accordingly, this order was almost a certainty — as it immensely increases the cost and pain of resuscitating sanctions were the Republicans to attempt such a gambit. Still, a win is a win, and Boeing has won more orders to fill its production gap on the current generation 777 (especially powerful given the rate cut), as well as more orders for the 737 MAX, 777-9X, and critically for the 747-8 (adding a few months of additional production to the backlog).

There are still some outstanding questions, including how Iran Air will finance these aircraft (export financing has been an issue even in Europe), and whether the 747-8 orders are new build or those planned for Transaero. But irrespective of some uncertainty, this is nothing but a win for Boeing.