Boeing (BA, Financial) announced the finalization of a $16.6 billion agreement with Iran Air for 80 aircraft.
The deal was first announced in June and officially sealed on Sunday. The announcement comes at an interesting time as the Chicago-based aerospace company’s relationship with President-elect Donald Trump was tested last week when he questioned the cost of replacing Air Force One jets.
Trump Tweeted, “Boeing is building a brand-new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”
The Defense Department indicated it could spend nearly $3 billion over five years for the replacement jets. Boeing said in a statement that it was currently under a $170 million contract to determine the capabilities of the aircraft. Boeing stock declined after the Tweet but has since rebounded.
Boeing said it is willing to work with Trump on the cost of the Air Force One deal.
Company representatives declined to comment on whether the incoming administration had been informed about the development of the deal with Iran. However, according to Boeing, the deal will support thousands of U.S. jobs. The agreement includes widebody and single-aisle aircraft and will consist of a mix of 737 MAX 8s, 777-300ERs and 777-9s. The first planes are scheduled for delivery in 2018. Airbus (XPAR:AIR, Financial) has a deal in place with Iran as well, valued at $25 billion for 118 aircraft.
According to Iranian news agency IRNA, Abbas Khoundi, Iran’s transport minister, said the agreement was “the first step for the renovation of the country’s aviation fleet.” Replacing planes is a priority for Iran Air because it operates some of the world’s oldest airliners due to years of sanctions.
For financial reasons and because it involves a state-owned airline, the deal must be approved by the U.S. Treasury, State Department and Congress. The Obama administration has encouraged the Boeing-Iran deal, but with Trump entering the White House new potential roadblocks could arise since he has been openly critical of it.
According to a financial disclosure statement filed in May, Trump held $50,000 to $100,000 worth of company stock. However, a spokesman revealed that Trump sold out in June. Trump’s personal jet is a Boeing 757.
T Rowe Price Equity Income Fund (Trades, Portfolio) holds the largest position in Boeing among the gurus with 0.5% of outstanding shares. This represents 1.95% of its total assets managed. In all, 19 gurus hold a position.
Disclosure: I do not own stock in any companies mentioned in the article.
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