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Iran deal could unleash big pent-up commercial aircraft demand
July 14, 2015 / 4:27 PM / 2 years ago

Iran deal could unleash big pent-up commercial aircraft demand

NEW YORK/BERLIN, July 14 (Reuters) - Airplane sales to Iran were cleared for take off after Tehran signed a nuclear agreement with six major powers on Tuesday, opening a potentially significant opportunity for Boeing Co and Airbus Group after decades of isolation.

The agreement would lift all economic commercial sanctions including those relating to commercial aviation.

It still faced a difficult vote in the U.S. Congress, where majority Republicans oppose it. The full Senate is unlikely to vote on it before September, a key senator said. But President Barack Obama vowed to veto a “no” vote.

Boeing said it saw a chance to sell planes to renew Iran’s fleet of jetliners, which are 23 years old on average, according to Ascend Flightglobal, a UK consultancy.

Iranian and Western industry officials estimate that Iran, a country of 80 million people, will need 400 aircraft worth up to $20 billion in the next decade, suggesting there will be business for both major Western suppliers due to the long waiting times for new planes.

“Business activity will increase in all areas,” said Helene Rang, head of NUMOV, the German Near and Middle East Association, a respected think tank based in Berlin.

“This will be especially true of the aerospace industry because there is a huge amount of catching up to do,” she said before the deal was announced. “This will offer enormous opportunities for both Airbus and Boeing.”

Boeing and Airbus noted, however, that the trade restrictions will not fall instantaneously.

“We are very much awaiting guidance from the government on this,” Boeing spokesman Tim Neale said, adding that the planemaker will remain sidelined until Congress acts.

Airbus also voiced caution. “The agreement between Iran and the six nations has yet to be formalized and implemented,” a spokesman for the European plane maker said. “Once this takes place we will evaluate what commercial implications it has in strict compliance with the accord.”

Others saw the long wait times for new Airbus and Boeing planes driving leasing and used jet sales.

Richard Aboulafia, analyst at the Teal Group in Fairfax, Virginia, said updating of Iran’s aging jet fleet could take time. “Just because you lift sanctions doesn’t mean you deregulate,” he said.

Iran’s airlines would likely choose less expensive leases or buy used planes over buying new jets from Boeing or Airbus, he said. (Additional reporting by Tim Hepher; Editing by Christian Plumb)

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