Blog Coverage Boeing Bags an Order for 80 Jetliners from Iran Air

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LONDON, UK / ACCESSWIRE / December 13, 2016 / Active Wall St. blog coverage looks at the headline from airplane manufacturer The Boeing Co. (NYSE: BA) as the Company announced on December 11, 2016, that it has entered into an agreement with Iran Air to sell the latter 80 jetliners. The deal is valued at $16.6 billion and is one of the biggest transactions with Iran since the lifting of international sanctions in January 2016. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of Boeing’s competitors within the Aerospace/Defense Products & Services space, TransDigm Group Inc. (NYSE: TDG), reported on November 14, 2016, results for its fourth quarter and fiscal year ended September 30, 2016. AWS will be initiating a research report on TransDigm Group in the coming days.

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Terms of the Agreement

Boeing and IranAir had signed a Memorandum of Agreement (MoA) in June 2016, wherein Boeing would sell 100 jetliners to Iran Air. The MoA was put in place under authorization from the US Government, who had issued a license to Boeing to the effect in September 2016. The total value of the deal is $16.6 billion based on list prices.

As per the agreed terms Boeing will manufacture and deliver a total of 80 aircrafts. The aircrafts include 50 units of 737 MAX 8s, 15 units of 777-300ERs and 15 units of 777-9s. The first installment of the aircrafts is scheduled for delivery in 2018. The entire delivery of aircrafts will be done over a 10-year period.

The order and its impact on the US aviation industry

Boeing is confident that the agreement is very positive for the US aviation sector as it will create over 100,000 jobs in the US in the next few years as a direct result of order for production and delivery of the 777s. The benefits will also filter down to Boeing’s 13,600 US based vendors and suppliers who are spread across 50 states. Boeing has stated that its supply chain currently supports more than 1.5 million US jobs. The order has the potential to put the US aviation sector in the forefront by creating numerous employment opportunities.

Why this deal is important for Iran?

The aviation industry in Iran has been bearing the brunt of the economic sanctions imposed on the country. Iran is trying to emerge from the economic shadow of the nuclear sanctions and renew its flagging economy. Iran’s aviation sector is being run with a fleet of approximately 250 aircrafts, all of which were purchased before 1979. Many of these aircrafts are grounded due to unavailability of spare parts. Iran Air, which has signed the MoA with Boeing has a fleet of 43 aircrafts and offers direct flights to more than 30 international locations.

Political hurdles for the deal

The US and other countries agreed to lift crippling sanctions on Iran in January 2016 in exchange for it curbing its nuclear activities. The US has not completely lifted the sanctions and it still maintains extensive sanctions on Iran even for activities unrelated to its nuclear program. The Obama Administration recently approved legislation in the House of Representatives in November 2016, prohibiting any US financial institution from supporting the sale of commercial passenger aircraft to the Islamic Republic of Iran. This legislation could prove to be a major dampener for this deal.

The decision would ultimately fall on President-elect Donald Trump and his administration who are not supporters of decisions taken by the Obama Administration. Trump and his Administration have so far been staunch critics and are against any closer links between US and Iran.

Boeing and Trump were in the news recently with regards to the manufacture of next Air Force One planes. Boeing has a deal to manufacture the next presidential planes, but Trump called for the cancellation of this deal citing cost over runs of $4 billion.

Boeing has commented that it is working closely with the government during the entire process of the sale agreement and fulfills the conditions of the license issued to it. The deal is also important for Boeing as its rival Airbus Group is also in talks with IranAir. According to news agency Reuters, IranAir is in the final stages of finalizing a deal with Airbus to purchase 118 aircrafts including 50-60 jets.

Stock Performance

At the closing bell, on Monday, December 12, 2016, Boeing’s stock rose slightly by 0.43%, ending the trading session at $157.16. A total volume of 4.22 million shares were traded at the end of the day, which was higher than the 3-month average volume of 3.52 million shares. In the last month and previous three months, shares of the company have advanced 6.41% and 22.99%, respectively. Moreover, the stock gained 12.37% since the start of the year. The company’s shares are trading at a PE ratio of 23.91 and have a dividend yield of 2.77%. The stock has a market capital of $99.44 billion.

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