Earlier in the week, the United States removed a final hurdle for Western aircraft manufacturers to sell planes to Iran. The Treasury Department on Wednesday, announced that Airbus and Boeing�( BA ) will be granted licenses to deliver planes to the middle-eastern country effective immediately. In an initial statement, a spokesperson for Boeing confirmed that the license covers the sale of 80 planes to Iran's national carrier, Iran Air, while Airbus has confirmed that it has received a license for an initial sale of 17 airplanes (part of a larger sale of 118 planes decided on earlier in the year).

Iran has been plagued by problems related to an ageing fleet of aircraft that, over the past decades, have led to the deaths of hundreds of Iranians in air crashes related to malfunctioning or poorly maintained aircraft. As of February 2016, the combined fleet size of all Iranian carries totalled about 160 planes, with Iran Air's fleet size coming in at 45. The average age of an Iran Air plane was 26.9 years, with the youngest being six Airbus A320s that are just�over�20 years old. Not surprisingly, the 747s are the oldest planes in the airline's fleet. Hence, it should come as no surprise that Iran would jump at the opportunity to renew its�fleet.

As stated above, Airbus has a license to sell almost 50% more planes to Iran than Boeing. This is mostly because the French aircraft manufacturer had submitted its application earlier this year, beating Boeing in the race. Additionally, the�U.S. Treasury Department's Office of Foreign Assets Control (OFAC) operates on a "first come, first-served" basis, which greatly benefited Airbus. This move can detrimentally affect the Chicago based aircraft manufacturer in Iran.

Furthermore, Airbus has been beating Boeing this year in terms of orders. That said, the European manufacturer has suffered a more significant fall in sales year over year. Both aerospace giants have faced problems in keeping orders up in terms of historical levels so far in 2016. Reasons for the slow down are further discussed here .



Despite the large number of orders, there seems to be no assurance that all the orders will eventually materialize. Iran, a country that has been struggling with economic sanctions for the past four decades have little to no money to show. Furthermore, there are quite a few opponents to the deal in the U.S. Congress. Their main argument is that in 2011, the Treasury imposed sanctions on Iran Air in 2011 for using passenger and cargo planes to transport rockets and missiles to places like Syria, disguising them as medicine or spare parts.

Thus, it remains to be seen if the aircraft manufacturers will actually see a turn in their fortunes on the back of the deal struck with Iran.

 

This article was written by Trefis Team for Nasdaq on September 26,2016.