Reopened Iranian market has potential for Pratt, analyst says

Reopened Iranian market has potential for Pratt, analyst says ... 18/04/2017 Auto

Keywords:#2015, #ATR, #Airbus, #American, #Associated_Press, #Boeing, #Canada, #Chicago, #European, #France, #French,, #Iran, #Iran_Air, #Iranian, #Islamic, #Islamic_Revolution, #Italy, #Middle_East, #President, #Ray, #Revolution, #Trump, #U.S._Embassy

Howard French | Journal Inquirer
Pratt & Whitney engines will power passenger airplanes sold by European airplane manufacturer ATR to Iran Air, the latest deal following Iran's nuclear accord with world powers that ended sanctions barring such sales.
ATR spokesman David Vargas told the Associated Press the deal is for the 20 ATR 72-600s, a twin-propeller aircraft, and said Iran Air had an option to purchase another 20.
The lifting of economic sanctions in 2015 came after Iran agreed to limit its enrichment of uranium. That opened a promising market for products made by Pratt, Boeing, and others in the West, an aerospace industry analyst said Thursday.
The ATR 72-600 planes are made by Avions de Transport Regional, a France-based partnership of Airbus Industrie and Italy's Leonardo S.p.A. Two PW127M engines, built by Pratt & Whitney Canada, power each planes.
A Pratt official Thursday declined comment on the deal, which by its standards is relatively modest.
Vargas declined to offer a value for the deal with Iran Air. The confirmed portion of the deal is worth $536 million at list prices, though buyers typically negotiate discounts on bulk orders. Iranian state TV described the deal as being worth about $400 million.
Engines typically make up a quarter of the cost of an aircraft.
But it's the potential for more sales — and much larger orders — that makes the deal significant, Ray Jaworowski, a senior aerospace analyst with Newtown-based Forecast International, said.
"The potential of Iran as a civil aviation market is considerable," Jaworowski said.
In the mid- to late 1970s, prior to the imposition of economic sanctions on Iran, Iran Air was profitable and was one of the fastest-growing airlines in the world, he said.
Since the economic sanctions were imposed, Iran Air has been prevented from modernizing its fleet, which has left it with a mix of older Airbus, Boeing, and other companies' planes, Jaworowski said, with an average age of more than 20 years.
"Iran has the second-largest economy in the Middle East, with a large and growing middle class, so prospects are bright for substantial air traffic growth on both domestic and international routes," he said.
Still, Jaworowski said, there are risks that the Iranian market could dry up again. The political situation is still fragile, he said, and the "potential for some disruption in relations down the road is real."
Boeing Co. has already made a $16.6 billion sale already to Iran Air, while its European rival Airbus signed one estimated to be worth some $25 billion. The Treasury has signed off on both those deals.
Chicago-based Boeing also signed a $3 billion deal this month to sell 30 737 MAX aircraft to Iran's Aseman Airlines, a firm owned by Iran's civil service pension foundation. The Boeing sales represent the first major deals for an American company in Iran since the 1979 Islamic Revolution and U.S. Embassy takeover.
The financing side of the equation — whether from banks, leasing companies, other financial institutions, or even the aircraft manufacturers themselves — also is something of an unknown at this point, Jaworowski said.
"The possibility of financial restrictions being imposed in the future, such as on fund transfers, could disrupt aircraft deals," he said.
Jaworowski also noted that President Trump has repeatedly denounced the lifting of the nuclear sanctions, raising the question of whether the sanctions could be reimposed. But that seems less likely when Trump's penchant for promoting U.S. manufacturing is considered, he said.
"The President has shown that he can be a bit of pragmatist when it comes to protecting American manufacturing jobs and, barring a major provocation of some sort, may be unwilling to disrupt aviation deals that benefit U.S. companies," Jaworowski said.
He summed up the prospects for major aerospace sales to Iran by saying that the path forward "could be filled with bumps along the way, some minor and some major, before that potential is fully realized."
This story includes Associated Press reporting.

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