Boeing: Will The Iran Deal Be Successful?

Boeing (NYSE:BA) has had a difficult year thus far, with orders falling year over year and expenses mounting on certain programs. Furthermore, recent news reports suggest that the company’s deal with Iran to supply over a 200 jets is in doubt, caught up in the political opposition Obama’s dealings with Iran. This could mean a loss in sales of close to $25 billion in revenues. Here’s what we know so far:

• Earlier in September, the United States removed a final hurdle for Western aircraft manufacturers to sell planes to Iran. The Treasury Department had announced that Airbus and Boeing (NYSE:BA) will be granted licenses to deliver planes to the middle-eastern country effective immediately.
• Airbus received a license to sell almost 50% more planes to Iran than Boeing. This was mostly because the French aircraft manufacturer had submitted its application earlier this year, beating Boeing in the race. Additionally, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) operates on a “first come, first-served” basis, which greatly benefited Airbus. This move detrimentally affected the Chicago based aircraft manufacturer’s chances in Iran. At that moment, Airbus had already been beating Boeing in terms of orders.
• Furthermore, in his campaigns, the newly elected President, Donald Trump, had publicly ridiculed the deal and had called for a complete renegotiation, were he to win the election. That said, Boeing stayed mum trying to finalise the deal before Trump could take office.
• However, it was announced last week that the Republican-led House has acted to block the deal with Iran. By a 243-174 vote last Thursday, lawmakers introduced legislation that would prohibit the Treasury Department from issuing any licenses U.S. banks would need to complete the transactions.
• The Republican Party says that the sale of aircraft to a country that they believe to be the leading state sponsor of terrorism goes against everything the U.S. stands for.
• That said, there is still a glimmer of hope for the Chicago based aerospace giant. The bill is yet to clear the Senate, where it will face stiff opposition from the Democrats. Further, if the bill were to reach his desk, President Obama is sure to veto the bill.

What does this means for Boeing?

As mentioned previously, Boeing has had quite a rough year so far. Orders have been down year over year, while profits have taken quite a hit in the first two quarters. That said, the company is positioned strongly to bare the brunt of this fallback and flourish in the quarters to come. For further analysis on this, please refer to our article “What Lies Ahead For Boeing?”

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