Important Deal for Boeing Stock
During the month of May, Boeing Co (NYSE:BA) received orders for 268 new airplanes. As of the end of April, the company delivered 230 planes. This puts it ahead of its rival Airbus. However, while Boeing stock has recovered nicely since its February dip, it’s still down 8.34% year-to-date. Having said that, now is not the time to be holding back on Boeing stock.
In fact, a potentially historic deal with Iran Air is in the works, suggesting Boeing stock could surge sometime before the end of 2016. Investors interested in Boeing should take advantage of this deal before the big shots sign it. You may not like Iran, but you should want Boeing—one of America’s top exporters and a real symbol of U.S. knowhow—to succeed.
The last time Iran Air made a deal of this size, the airplane manufacturer involved surged. That manufacturer was Airbus.
In November of 2015, Airbus shares hit an all-time record. The European consortium signed a deal for more than 100 planes—wide- and narrow-body—with Iran Air for some $25.0 billion. Iran Air is starving for new equipment after three decades of sanctions.
I believe Boeing stock can expect a greater jump than Airbus. Certainly, given the political baggage and the enormity of the dollar amount involved this time, Boeing and Iran will want to move quickly before the U.S. presidential election concludes.
Meanwhile, Boeing gained 2.2% on June 6 on the rumors of a deal with Iran Air. Imagine how high the stock will hit when the deal is signed. (Source: “Why Boeing (BA) Stock is Gaining Today,” The Street, June 6, 2016.)
Now, Boeing is in talks with Iran Air to conclude a historic aircraft purchase. If the deal goes through, the order will likely match the Airbus one, meaning more than 100 jets.
In February, the United States authorized Boeing to discuss deals with Iranian airlines. But Boeing and Airbus—which make many spare parts in the United States—need additional waivers because of U.S. restrictions on exports to Iran. These restrictions date back to the Islamic Revolution.
Furthermore, Iran’s financial system still does not have access to dollar markets. Should it not get a blank check from the U.S. Treasury, though, Boeing can still take the deal in euros to overcome this obstacle.
There are some political obstacles, but it’s safe to say few authorities will get in the way of American jobs and anywhere from $25.0 billion to $30.0 billion in orders for one of the most recognizable symbols of American technology.
As for the Iranian buyers, Boeing has already overcome any remaining obstacles. The talks between Boeing—once Iran Air’s main supplier in the good old days of the Shah—are continuing. The airline wants an agreement. Farhad Parvaresh, the president of the Iranian company, said the Boeing order would be very similar to the Airbus one, even if there is no indication of which model(s) Iran Air proposes to acquire. (Source: “Iran Air eyeing ‘historic’ deal with Boeing,” PressTV, June 6, 2016.)
As mentioned earlier, the international financial press has hailed the probability of a Boeing/Iran Air deal as historic. It would be the first concrete demonstration that both the Islamic Republic of Iran and the United States have much to gain—not just words and polite niceties—from the progressive lifting of sanctions because of its nuclear program.
Iran Air, as it happens, also wants to secure a secondary contract with Boeing to provide technical assistance to the company’s fleet, whose aircraft have, according to AirFleet.Net, an average age of 27 years.
And there’s more…
According to Boeing, Iran Air requires at least 300 airliners to match its needs over the next decade—and that’s just one airline. There are others in the country as well.
So far, the various Iranian airlines have a combined fleet of approximately 250 planes, but at least 90 of them spend most of their time in hangars and parking lots on the sidelines of Tehran’s Khomeini airport. The economic sanctions that the United Nations has imposed for three decades and the special bans enforced by the U.S. against companies selling aircraft parts to Iran have prevented maintenance and fleet upgrades until now.
U.S. Secretary of State John Kerry recently said Washington was not opposed to international financial institutions to do business with Iran, following the agreement between the Islamic Republic and the group known as “Five Plus One.” Iran and Boeing need to hurry before the next occupant of the White House changes his or her mind, preventing Boeing stock from surging to a new all-time high of $158.00 per share or more.