Why is Airbus Happy About Boeing's Entry into Iran's Skies?

About two weeks after signing a contract for the sale of eighty American Boeing aircraft to Iran, the European consortium Airbus announced on December 23 that it had signed a final agreement for the delivery of one hundred passenger aircraft to Iran Air. Thus, the two aviation giants of the world have jointly taken on the task of modernizing Iran's civilian air fleet with two contracts worth a total of approximately thirty-seven billion dollars (at catalog prices). The simultaneous entry of these two fierce competitors into a large market like Iranian airspace, without the usual disputes seen in such transactions, is an exceptional case in international trade. Of course, the European Airbus did not achieve what it had reached about eleven months ago when a preliminary agreement was signed during Hassan Rouhani's visit to France, which was supposed to involve Iran purchasing 118 aircraft from the European consortium, including 12 wide-body A-380 aircraft that the consortium has faced many challenges in selling. Due to the unpreparedness of Iranian airports for landing such aircraft, along with potential financing difficulties, the purchase of these twelve aircraft along with six others was eliminated, and the 25 billion euro agreement with Airbus was reduced to a 20 billion euro contract. Despite this setback, the Airbus contract with Iran is among the ten largest contracts that this consortium has signed in its history. After about four decades, almost all of Iran's very outdated air fleet will be retired. Asghar Fakhrieh Kashan, the Deputy Minister of Roads and Urban Development of the Islamic Republic, relying on assessments from Iranian sources (Iran Air, Sharif University) as well as IATA and Airbus, states that Iran will need to purchase about five hundred aircraft in the next ten years. Given this outlook, officials of the Airbus consortium are naturally pleased with the signing of the contract with Iran. However, Airbus's happiness has another reason: the almost simultaneous entry of American Boeing into Iranian airspace. Why should Airbus, the European aviation giant, be happy that the gates of Iranian airspace have opened to its long-time rival Boeing? The answer to this question must be sought in the specific state of the Iranian market and the political and strategic tensions that weigh upon it. There is no doubt that Airbus and Boeing, the two major aircraft manufacturers in the world, are fierce competitors. In fact, Europeans established the Airbus consortium from the outset to counter Boeing's dominance. The struggle between these two companies began in the early 1970s when the first Airbus aircraft, the A-300, took flight. Since then, Americans have accused the rival aircraft of violating international competition rules by receiving subsidies from the governments of Airbus consortium member states. Europeans have responded that Boeing, for its part, benefits freely from U.S. military aviation technologies, part of whose costs are covered by the federal government. In other words, from the Europeans' perspective, Boeing also indirectly uses U.S. government subsidies, which is also inconsistent with legal competition principles. This struggle has been raised several times in dispute resolution bodies within the World Trade Organization and continues to this day. Over the past four decades, Boeing and Airbus have fiercely competed for a larger share of the global market. Now, why is Airbus happy that Boeing has entered the Iranian market despite this competition? Simply because with Boeing's confirmed entry into Iran, many of the obstacles to Airbus's cooperation with Iran can be removed. We know that the JCPOA relates to lifting the sanctions that the U.S. imposed against Iran regarding the nuclear issue. However, the so-called 'primary' sanctions remain in place, especially those related to American goods and technologies. Non-American companies that want to sell goods to Iran must obtain permission from the Office of Foreign Assets Control of the U.S. Treasury (OFAC) if more than ten percent of the components and technology of their goods have American origins. The European Airbus is subject to these same restrictions and needs to obtain permission from the U.S. These permits have been granted so far, but with the headaches that officials of the Airbus consortium complain about in private circles. Now that Boeing has signed a contract to sell eighty aircraft to Iran, Airbus is more at ease and knows that in the future, for further cooperation with Iran, it can obtain permits from OFAC under better conditions. The European Airbus's welcome of Boeing's entry into Iranian airspace has another reason: the fear of a hostile approach that Donald Trump, the elected President of the United States, might take regarding the JCPOA. There are many questions raised in this regard, and no one knows for sure how far the future leadership of the U.S. will go in opposing the JCPOA. We know that the elected President of the United States spoke during his election campaign about 'tearing up the JCPOA,' but afterward, only the need for changes to the JCPOA's provisions has been mentioned. In such an ambiguous situation, the cancellation of Boeing's contract with Iran is not impossible, and if this happens, the implementation of the contract concluded between Airbus and Iran could also face various problems. It even seems that the scenario of Boeing's contract being canceled by the future occupant of the White House is taken seriously by Iranian officials. Based on what has been reported in Tehran's media quoting senior government officials, out of the 80 Boeing aircraft covered by the contract, only permits for fifteen of them have been issued by OFAC, and Iran's advance payments are only related to these fifteen aircraft. In this context, Tehran's media quotes Asghar Fakhrieh Kashan, the Deputy Minister of Roads and Urban Development, stating that if sanctions are reimposed and contracts with Boeing and Airbus are disrupted, 'we will reclaim all the payments made along with their interest.' If we consider the quotes published in the media, it seems that Iranian officials do not consider the cancellation of contracts related to aircraft purchases from the U.S. or U.S. pressure on Airbus to be impossible. Given these pessimistic scenarios, Airbus views Boeing's entry into Iranian airspace as beneficial to its own interests. In fact, the European consortium hopes to work hand in hand with its American counterpart to organize extensive lobbying in the United States and prevent the JCPOA and its consequences, especially in the area of rebuilding Iran's civilian air fleet, from being questioned by the future U.S. leadership. Boeing's managers will emphasize that their contract with Iran for the sale of eighty aircraft equates to creating ten thousand jobs in the U.S. Furthermore, the future prospects of the Iranian air market offer even more potential economic opportunities to the U.S.