Iran May Be Looking to Replace Aging Planes with Airbus Purchase

Iran's acquisition of Airbus jets from an undisclosed vendor may be the first move in a rush to rebuild the Islamic republic's fleet as a thaw in relations with the U.S. begins to weaken the grip of trade sanctions.

The purchase by Mahan Air of nine used Airbus planes could herald a raft of deals extending to national carrier Iran Air and potentially including Boeing Co. planes and new Russian or Chinese models. Iran says it may need as many as 500 aircraft over the next decade, requiring US$2 billion a year of investment.

The Mahan deal centers on eight A340s, a wide-body type which ceased production in 2011 as the price of oil rendered its four engines uneconomic, before the slump in crude made second-hand examples more attractive. While selling new planes to Iran remains outlawed, it can bypass the ban by buying older jets from sources in countries not signed up to sanctions, something becoming easier as talks seem to near a conclusion.

Future used-aircraft purchases could include "some of the earlier Boeing 777s," said Thomas Pellegrin, an analyst at PwC's Aviation Center of Excellence research office in Dubai, adding that an end to sanctions would open the door to the acquisition of new aircraft models from Commercial Aircraft Corp of China Ltd. and Russia's Sukhoi, maker of Superjet 100, assuming curbs on trade with Moscow are also removed.

Greece, Russia

Mahan Air's new fleet will allow it to add flights to Moscow, St. Petersburg and Sochi in Russia, Manama in Bahrain and Athens, Saeed Chalandari, head of Tehran's Imam Khomeini International Airport, was cited as saying by the official Iranian Students News Agency.

Mahan -- blacklisted by the U.S. Treasury in 2011 over claims that it transported weapons and funds on its flights to assist Iran's Revolutionary Guard -- will get an operating license within a month, according to ISNA. The aircraft deal also include a sole single-aisle A321.

"Airbus is compliant with international trade laws on Iran and has not been involved," a spokeswoman for the Toulouse-based manufacturer said by e-mail. "Once the aircraft is in the hands of an airline, it's their property and we cannot keep track or control what they do with the aircraft."

Unlike privately owned Mahan Air, state-controlled Iran Air may opt to wait for a formal lifting of sanctions, allowing it to buy new planes instead of old ones. Should restrictions be fully lifted it will need about 100 planes and is interested in models including re-engined single-aisle Boeing 737s and Airbus A320s, together with the 777 and 787 and A330 and A350.

Strong Demand

The Mahan purchase comes amid negotiations between Iran and powers led by the U.S. on the country's nuclear ambitions, which aim to reach an accord by June 30 under the latest timetable. An interim deal in 2013 eased a ban on safety-related aircraft spares, which Boeing obtained a license to sell last year.

"We've done a pretty good assessment on our side and we think the demand, should things open up, would be very strong," Marty Bentrott, Boeing's vice president of sales for the Middle East, Russia and Central Asia, said in Dubai last week before Mahan Air's jetliner purchases were announced on May 9.

Mahan has "extensive plans" requiring an upgrade and expansion of its fleet, part of which has been achieved through the Airbus acquisition, the airline said on its website. A spokesman for the company declined to comment on further plans.

Used 777s

The A340 is a "great choice" in lifting capacity, though provides less flexibility over frequencies versus a greater number of smaller jets, Pellegrin said. Its inefficiency compared with new models such as the Boeing 787 and Airbus A350 means that there are "a range of potential sellers," and the leaner, two-engine 777 may also become an option for Iran when older examples exit the fleets of top carriers.

"The challenge though is not just in procuring the hulls, it is in maintaining them and getting the spare parts that go along with them," Pellegrin said.

The introduction of the Airbus planes, all less than 15 years old, has cut Iran's average fleet age to 19 years, according to Alireza Jahangirian, head of the country's civil aviation authority. It has also boosted the country's total airline capacity by 4,000 seats to 26,000, said Abbas Akhoundi, the roads and transport minister, according to ISNA.

Negotiations over the planes took months and were kept low-key to avoid a possible backlash, said Hamid Habibi, Jahangirian's deputy, according to the news service.

Bloomberg News

Photo:Ton Jochems - AMS