LearnBonds.com

Boeing Co (BA) Reaches Historic $25 Billion Deal With Iran

boeing

Boeing Co (NYSE:BA) finalized a historic deal with Iran to sell new passenger planes to modernize the country’s outdated fleet, The New York Times reported. Details of the deal will be released in the coming days. Iran needs at least 400 new planes in coming years to replace its commercial fleet, according to state-run Iranian news media.

Speaking to media, Abbas Akhoundi, Iran’s minister of roads and urban development, said that they have reached a deal with the aircraft maker and details would be “announced within the next few days.” Iran is planning to invest about $50 billion to buy 400 mid and long-range jetliners and 100 short-haul planes.

boeing

The Boeing deal, which could be valued at about $25 billion, will need an approval from the U.S. government. Iran has been banned by from buying aircraft from the U.S. companies for almost 40 years, Reuters reported.

Commenting on the deal, a the aircraft maker’s spokesman said: “We have been engaged in discussions with Iranian airlines approved by the U.S. government about potential purchases of Boeing commercial passenger airplanes and services. We do not discuss details of ongoing conversations we are having with customers, and our standard practice is to let customers announce any agreements that are reached. Any agreements reached will be contingent on U.S. government approval.”

Furthermore, the chairman of Iran Air told Reuters that the company wants the U.S. aircraft maker to also provide support for its elderly fleet.

Hurdles

Last year, two senior Iranian officials said that Iran was expected to acquire 100 jets from Boeing once sanctions were lifted.

Earlier this year, Airbus announced a deal with to sell 118 jets worth $27 billion to Iran. Both Airbus and Boeing Co (NYSE:BA) would need U.S. export licenses because they use significant U.S. technology in all modern jetliners.

The Boeing deal could face some political backlash. Additionally, industry sources are saying that both Airbus and Boeing deals could take some time to implement due to uncertainty over financing. It is important to note that the U.S. financial system still closed to Iran.

“The Airbus deal is priced in euros instead of dollars, but many banks remain reluctant to finance it because they fear losing their claim to the underlying assets if sanctions are re-introduced,” Reuters reported.

Boeing Stock

The aircraft maker appears to be recovering nicely from its decline in February. This, in addition to the Iran Air contract, means the firm will soon prove itself to be great investment. As it stands, in terms of demand, the firm is doing better than Airbus, its largest competitor across the water. Analysts insist that investors seeking to place their eggs in Boeing’s baskets should not hesitate on the company’s stock. Set to make history, the air company will soon be signing a deal with Iran Air. If precedent is anything to go by, the agreement could see Boeing rake in several billions from the Middle Eastern airline.

Last week, Russian firm Irkut Corp. launched a new medium-range passenger aircraft to compete with Boeing and Airbus. The plane, called MC-21, was hailed by state media as superior to western-made counterparts in many ways.

Shares of Boeing Co (NYSE:BA) have lost 10.87% year-to-date.

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
Avatar

Muhammad Nadeem

HTML Snippets Powered By : XYZScripts.com