Iran Air Boeing 747 Photo: Iran Air

MIAMI — Over the weekend, Boeing confirmed an agreement with Iran Air for the purchase of 80 new airplanes, encompassing 50 737 MAX 8s, 15 777-300ERs, and 15 777-9Xs. The purchase comes just days ahead of the predicted confirmation of a portion of Iran’s order for at least 60 out of 116 Airbus airplanes.

The Boeing deal marks the first official aerospace contract between Iran and the United States, and it’s the largest business deal overall between the two countries since the lifting of sanctions after the nuclear deal in July of 2015. The deal is worth more than $16.6 billion at list prices.

The planes included in the deal changed from the original figures discussed in June, with 40 737 MAX, 30 777s, six 737 NGs (plus leasing 29 further), and four 747-8s. The leasing of 29 additional 737NG aircraft is still on the table, and those would presumably still be usable for Iran Air, which needs both immediate and long-term increases in the capacity of its fleet. However the 747-8 aircraft are not part of this deal and may not play a role in any subsequent purchases.

Boeing gets the 777 line extension but loses it on the 747-8

For Boeing, the deal is a victory for the 777 line, which has seen a dearth of orders over the past year and a half. Boeing is particularly thrilled with the deal for the 777-300ER, as it tries desperately to avoid further production cuts to the 777 Classic line in advance of the launch of the re-engined 777X at the end of the decade. The 737 MAX 8 order is paired with one for the A320neo family on the Airbus side, so it’s not necessarily an order that changes the game, and the 737 NG line has more than enough orders to bridge production to the MAX next year.

The big news and biggest blow for Boeing is the loss of the 747-8 order, cutting four orders from an already weak base. At present there are just 29 unfilled order for the 747-8 including the 14 747-8F that UPS ordered on October 27 of this year.

Iran Air would have added four to that total, which does represent roughly 8 months of production at the current 0.5 aircraft per month rate. But at any rate, Iran’s order isn’t going to make or break Boeing’s ability to maintain the 747-8 line until it fulfills the contract for the next Air Force One. That order might anyway be at risk with the advent of President-Elect Donald Trump, who has questioned the validity of the current Air Force One contract.

Signing the deal is the easy part

While Boeing and Iran Air now have a deal in writing, there are still innumerable risks to the eventual deliveries of these airplanes to Tehran’s Imam Khomeini International Airport. First and foremost, with the election of President-Elect Donald Trump, and the reality of Republican control of both Congress and the Presidency, there is substantial risk to the overall Iran nuclear deal, let alone the specifics of selling airplanes to Iran.

Within hours of the deal being announced, Republican lawmakers such as Representative Peter Roskam immediately vowed to fight for a resumption of sanctions on Iran, in part implicitly backed by the commentary of President-Elect Trump on the campaign trail and Vice President-Elect Mike Pence suggesting that the Iran deal will be up for renegotiation once the Trump administration is in place.

Even if the raw geopolitical risk of eliminating the Iran deal outright doesn’t come to fruition, there is still a secondary risk around the potential loss of export financing from the Export-Import Bank (Ex-Im). This Ex-Im financing is already the subject of a bill in Congress helpfully titled the “No Ex-Im Financing for Iran Act” and sponsored by former presidential candidate Marco Rubio.

The Republican congress is already skeptical of the entire Ex-Im process, viewing it as a government handout to a well-connected company. Specifically in the case of Iran, a country that it deplores. Congress may take their ire one step further and functionally block the deal entirely. Regardless of the dramatic irony of the US Congress killing a deal that will sustain thousands of manufacturing jobs after a presidential campaign that was built entirely around the premise of keeping manufacturing jobs in the United States, this is a very real risk.

Positioning Tehran as a Connecting Hub

For Iran Air specifically, the deal inks into place aircraft for needed growth and potentially positions Tehran as a connecting hub of the future. Like Istanbul, Iran Air will have the benefit of a large home market so the mix of narrowbodies with extended range (the 737 MAX 8 and A321neo) and large long range widebodies (777-9s) to serve the United States, Australia, and big markets like London and Tokyo could turn Tehran into a Middle Eastern connecting hub to rival Abu Dhabi and Doha (Dubai and Istanbul will be hard to catch).

There are some market dynamics to consider, namely when Iran will gain acceptability as a safe connecting point. But overall, this order could be the first step in Iran’s aviation ascendance.