Sunday, January 08, 2017

Iran Starts to Modernize Air Fleet With First Airbus Jet Since End of Sanctions: Delivery of plane will follow multibillion deals announced last year

The Wall Street Journal
By ASA FITCH in Dubai and  ROBERT WALL in London
Jan. 8, 2017 11:03 a.m. ET

Iran has taken ownership of its first new Airbus SE jetliner since sanctions were lifted on the country last year, allowing it to revamp an aging airline fleet through controversial plane deals also involving Boeing Co.

The European plane-maker Sunday said “technical acceptance” of the first plane to Iran’s flagship state-owned carrier, Iran Air, has been completed, effectively marking the transfer of ownership of the aircraft. A formal handover event will take place at a later date.

Iran Air Chief Executive Farhad Parvaresh said the plane’s pilot and co-pilot were in France waiting to fly it to Iran later this week, according to the official Islamic Republic News Agency. The airline plans to use the plane for domestic flights, he said.

Iran Air late last year finalized deals to buy 100 planes from Airbus and another 80 from Boeing, the world’s largest maker of jetliners. The orders are worth more than $34.5 billion at list price, though buyers typically get deep discounts.

Iran is in dire need of modern jets. Its commercial air fleet has became one of the world’s oldest and least safe, under sanctions that have spanned decades and made obtaining aircraft and parts difficult.

The plane deals are the highest-profile commercial agreements between Western firms and Iran since the completion of a 2015 nuclear pact between the world powers, including the U.S., and Tehran. In exchange for Iran putting curbs on its nuclear program, the powers agreed to lift many sanctions on the Islamic Republic.

Critics of the nuclear pact in the U.S. have tried to block the aircraft sales from proceeding, introducing measures in Congress to bar financing the purchases.

Those efforts so far have failed to stop the deals. The U.S. government last year granted Boeing and Airbus, the world’s No. 2 plane maker, the required licenses to sell the planes from the U.S. Office of Foreign Assets Control, an arm of the Treasury Department.

The election of Donald Trump, a critic of the Iran nuclear deal during his presidential campaign, could introduce a new note of uncertainty. The president-elect hasn’t said whether he will try to undo the deals after he takes office on Jan. 20.

The plane purchases are seen by some as a litmus test for how the Trump administration will handle business dealings with Iran.

German conglomerate Siemens AG, French oil giant Total SA, French telecommunications firm Orange SA and British telecom giant Vodafone Group PLC are among the other big Western companies pursuing their own deals, with varying degrees of investment commitments.

Iranian officials have said that if the U.S. government were to halt the plane deals, they would demand repayments plus interest.

“Both sides are committed, and there are scenarios in the contracts for violation of commitments or in case of force majeure to deal with those cases,” Mr. Parvaresh said in December. He said Airbus would deliver seven or eight planes this year.

Any future U.S. action to block plane sales to Iran would likely affect only pending deliveries, not planes already transferred to Iran Air.

While Iran signed its deal with Boeing before the Airbus pact, deliveries from the U.S. plane maker aren’t set to start until 2018. That leaves more time for politicians who oppose the deal to block the transfer of those jets, even as Airbus sales move forward.

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