BA Boeing Co

By Robert Wall 

LONDON -- Boeing Co. Tuesday said it had signed a tentative agreement to sell jetliners to Iran, in what would be one of the Islamic Republic's biggest deals with a U.S. manufacturer since trade sanctions on Tehran were eased.

The proposed agreement, which drew swift opposition from those concerned about business dealings with Iran, comes after months of talks between Boeing and Iran Air.

"Boeing confirms the signing of a Memorandum of Agreement (MOA) with Iran Air, expressing the airline's intent to purchase Boeing commercial passenger airplanes," said the world's largest plane maker.

Iran's airlines have indicated a dire need for both medium-haul jets such as Boeing's single-aisle 737 and long-haul aircraft like its 777 and 787 Dreamliners.

State-owned Iran Air on Monday said it planned to introduce 737 and 777 planes pending approval from its government and the U.S. The planes, at least partly acquired through finance leases, would include Boeing's newest long-haul plane, the 777-9, an airline official said. The model isn't due to enter service until the turn of the decade.

Iranian Transport Minister Abbas Akhoundi told state television on Tuesday that the pact could have a value of up to $25 billion, according to the Associated Press, roughly on par with a similar deal Boeing-rival Airbus Group SE struck with the country in January.

Completing an agreement with Iran Air could take months amid uncertainty from lenders about financing deals with Iran and the need for the U.S. government to sign off on any sale.

The transaction also would include Boeing 777-300ER long-range jets, a plane Boeing has been struggling to sell to sustain production until the replacement 777-9 is ready toward the end of the decade.

The potential plane sale isn't without critics.

Lawmakers in the House of Representatives Tuesday moved quickly to raise the cost of any Boeing deal with Iran. One bill, sponsored by Charles W. Boustany, Jr., (R., La.), would double taxes companies owe on a deal in which the end user is based in a country designated by the U.S. as a state sponsor of terrorism, such as Iran. The proposed legislation also would eliminate the White House's ability to waive on national security or similar grounds these provisions.

A second bill, introduced by House Chairman of the Ways & Means Subcommittee on Oversight Peter Roskam (R., Ill.), would make it more difficult to raise financing for a sale. "If Boeing goes through with this deal, the company will forever be associated with Iran's chief export: radical Islamic terrorism," Mr. Roskam said, adding that "this bill seeks to prevent Iran from accessing U.S. dollars in any manner by imposing a 100% excise tax on any transactions which directly or indirectly enable the Islamic Republic to make financial transactions in American currency."

The Chicago-based plane maker said, "Boeing will continue to follow the lead of the U.S. Government with regards to working with Iran's airlines, and any and all contracts with Iran's airlines will be contingent upon U.S. Government approval."

John Smith, acting director of the U.S. Treasury Department's Office of Foreign Assets Control, last week said at the Atlantic Council in Washington, D.C., that "it is possible for authorized deals to get financing."

The U.S. Export-Import Bank, which often provides financial backing to Boeing deals, has told Congress it wouldn't finance transactions to Iran because the country has been designated by Washington a state sponsor of terrorism.

In Washington, the U.S. State Department said Boeing's announcement was representative of the permissible business activity envisioned in the nuclear deal between six world powers and Iran reached last year that took effect in January. State Department spokesman John Kirby said the tentative agreement to sell jetliners to Iran is "good for both the economy and public safety."

An administration official said the U.S. won't stand in the way of permissible business allowed under the accord and will continue to meet its commitments so long as Iran meets its nuclear-related pledges.

Iran's airlines beyond the flag carrier have indicated a dire need for both medium-haul jets such as Boeing's single-aisle 737 and long-haul aircraft like its 777 and 787 Dreamliners.

The U.S. has maintained sanctions over the sale of planes to some Iranian carriers due to concerns they are involved in supporting terrorism. The Iranians deny the charge.

Iran represents an attractive market given the country's large middle class and hundreds of aging and under-utilized jets operating there, Randy Tinseth, Boeing Commercial Airplanes vice president of marketing said in an interview Tuesday. He declined to discuss specifics of the deal.

Iran still faces challenges introducing new planes, he said, including neglected infrastructure after years of sanctions. Iranian officials have acknowledged the country's airports and ability to repair planes need upgrading. Iran, in recent months, signed agreements with western companies to help improve its aviation infrastructure.

Airbus's agreement with Iran for 118 new jets, which has a list price value of about $27 billion, hasn't been completed because of worries in the financial community about doing deals in Iran. Airbus also is waiting for an export license from the U.S. government for the planes.

Airbus commercial airplane boss Fabrice Brégier recently said the company was making progress securing the export license, but more work was needed. He remained optimistic the agreement, which would include Iran's purchase of 12 A380 superjumbos, could be completed this year.

Franco-Italian turboprop maker ATR is putting together a mix of banks and lessors to help finance the euro-denominated sale of 40 of its planes to Iran, the company's Chief Executive Patrick de Castelbajac said this month. ATR hopes to deliver the first of its regional planes by the end of the year.

Canadian plane maker Bombardier Inc. also said it is eyeing the Iranian market. The initial focus would be on selling regional planes, Fred Cromer, president of Bombardier Commercial Aircraft, said this month.

Iran is considered one of the most promising growth markets for plane makers because decades of sanctions have left the country with some of the world's oldest airliner fleets.

The European Union last week eased restrictions on Iran Air flights. The carrier since 2010 was limited to using a small number of specified planes to serve destinations in the EU because of safety concerns with some of the other aircraft. Those restrictions were lifted following an inspection this year for all but some of the carrier's oldest planes.

Aresu Eqbali in Tehran, Jay Solomon and Felicia Schwartz in Washington, and Jon Ostrower in Chicago contributed to this article.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

June 21, 2016 18:08 ET (22:08 GMT)

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