Sunday, 15 January 2017
USA's sanctions on Iran good for EU business
Over the past two decades, planemakers Airbus (AIR.PA) and Boeing (BA.N) have traded the crown in the annual orders race, and it was usually clear who had bragging rights in the fiercely competitive $120 billion annual jet market.
On Wednesday, Airbus retained the top spot when it said it had recorded a total of 731 net orders for 2016, beating Boeing’s tally of 668 for the year released a week ago.
Standing out as the unusual kingmaker between the two Western giants is Iran, emerging from decades of sanctions to place billions of dollars of new orders. Because of fragile demand elsewhere, its comeback carries unusual weight.
While Airbus included all but two of the 100 aircraft it sold to Iran last year, its American arch-rival did not include the 80 aircraft it sold to the country.
It is unclear why Airbus formally reported Iranian orders while Boeing did not, and what criteria were used by each company in making their decisions.
Airbus is further ahead in the sales process; Iran took delivery of its first Airbus jet on Wednesday, while Boeing’s planes will be delivered from 2018.
Neither planemaker gave any immediate comment when contacted by Reuters.
A source close to Boeing said there was some bemusement at the U.S. planemaker as to why Airbus was able to book all of their Iranian orders. Airbus sources, who declined to be named, said the company’s year-end numbers had been strictly audited.
Analysts say decisions on whether to formally report such orders in annual tallies would depend partly on the status of the U.S. export licenses needed by both companies due to their heavy reliance on U.S. parts.
People close to the deals say that while both big jetmakers have received U.S. export licenses for sales to Iran, only some of them cover the whole delivery period running until 2028. Both companies must apply for extensions for part of their orders. Industry sources say the same contractual conditions applied to both companies.
Even though Boeing lost the headline order battle, analysts say it may ultimately benefit from lagging Airbus in the Iranian sales process if it can use its rival’s presence in the country to make the case for its own deal to go through, in the face of U.S. Republican political opposition.
During his election campaign, President-elect Donald Trump was critical of the international nuclear deal that led to the lifting of sanctions on Iran.
The Iranian orders offer valuable respite from a slowdown in demand for both planemakers, with their combined new orders falling below deliveries for the first time since 2009.
Boeing posted a book-to-bill ratio of 0.89 for 2016. This would be at exactly 1 if the Iranian deal were included, with 748 orders and just as many deliveries, company data shows. Airbus would fall below that threshold without the Iran order.
Analysts said such margins show how relatively thin orders have become after a decade of mostly rampant growth, coinciding with growing indicators that the aerospace cycle is weakening.
Airbus sales chief John Leahy warned this week orders would stay weak in 2017, but said deliveries which drive profits would continue to grow for some time on the back of older sales.
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