Iran signs $27 billion Airbus deal

By Gregory Viscusi, Andrea Rothman

Francois Hollande, France's president welcomes Hassan Rouhani, Iran's president, in the courtyard of Elysee Palace in Paris, France. Photo / Bloomberg
Francois Hollande, France's president welcomes Hassan Rouhani, Iran's president, in the courtyard of Elysee Palace in Paris, France. Photo / Bloomberg

Iran placed an outline order for 118 Airbus Group jetliners, including 12 A380 superjumbos, and secured an accord with PSA Peugeot Citroen for the modernization of a Tehran auto plant as President Hassan Rouhani's post-sanctions European shopping trip reached Paris.

The aircraft to be bought from Toulouse-based Airbus are worth almost $27 billion at list prices, according to Bloomberg calculations. Assuming all the planes are delivered, Rouhani signed off on deals valued at about 30 billion euros (US$33 billion) in a ceremony at the Elysee Palace, the official residence of his French counterpart Francois Hollande, a French official said.

Rouhani is in Europe after a landmark nuclear deal signed with world powers entered force this month, lifting sanctions that have starved Iran's $400 billion economy of investment and consumer goods. Iran's central bank Governor Valiollah Seif said in an interview last week that the accord may trigger $50 billion a year in foreign investment.

The Paris accords are comparable in value to transactions announced earlier this week in Italy at the start of Rouhani's first major foreign visit since the lifting of trade barriers.

Among other deals announced in the French capital, Aeroports de Paris and Bouygues will assist in the construction of a new terminal at Tehran's main Imam Khomeini hub and Vinci signed an outline agreement to run and renovate airports at Mashhad and Ispahan.

The Airbus accord covers 45 single-aisle planes comprising 21 from the current-generation A320 family and 24 re-engined A320neos, the company said. The 73 wide-body aircraft ordered include 27 A330s, 18 A330neos, 16 of Airbus's latest A350s -- in the stretched -1000 variant -- plus the A380s.

The purchase will allow Iran to retire planes that it has kept in service because of the bar on it acquiring new ones, contributing to one of the world's poorest air-safety records. The country's passenger fleet averages 26.8 years of age, according to website Planespotters.net.

Peugeot and long-time local ally Iran Khodro will invest 400 million euros over five years upgrading their auto plant near Tehran in what the French carmaker said is the first industrial accord signed by a Western company since sanctions were removed.

The venture will produce 100,000 vehicles a year starting in late 2017, with output eventually doubling. The revamped factory, which opened about 50 years ago, will make Peugeot's 208 hatchback, 301 sedan and 2008 crossover.

French container line CMA CGM also agreed to cooperate on shipping and terminal development. Suez Environnement Co. will work on water-treatment measures in Tehran, Sanofi signed an accord on health products and Total inked a purchase accord for Iranian crude oil.

It is "not surprising" that Italy and France have been first-movers in drumming up business with Iran after the lifting of sanctions, given that prior to 2011 some 20 per cent of the Middle Eastern country's trade was with Europe, Florence Eid- Oakden, chief executive officer at Arabia Monitor, said in a Bloomberg Television interview.

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