Iran to buy 114 Airbus planes as country eyes European business deals

Iran will sign a contract this week to buy 114 planes from France-based manufacturer Airbus during a visit to Paris by Iranian President Hassan Rouhani, the country's transport minister said on Sunday.

The deal, which will come during Rouhani's first official European visit, marks the clearest indication yet of the economic impact of the lifting of sanctions against Tehran earlier this month following Iran's signing of an international agreement to curb its nuclear programme.

Abbas Akhoundi, Iran's transport minister, said the deal would be signed on Wednesday between Iran Air and Airbus, with the national carrier desperately needing to modernise an ageing passenger fleet which has only 150 planes operational out of more than 250.

Due to years of sanctions, the planes suffer from a lack of maintenance and badly need to be updated.

"We have been negotiating for 10 months" for the purchase of planes, but "there was no way to pay for them because of banking sanctions," Iranian state media quoted Akhoundi as saying.

"We need 400 long- and mid-range and 100 short-range planes," he added.

Akhnoudi did not reveal the cost details of the planes to be purchased, which will likely total billions of dollars.

The first batch of new planes will arrive in the country by 19 March, he said.

According to parliament member Mahdi Hashemi, Iran's requirements could increase to more than 500 aircraft in the medium term, or about three years, as its aviation sector emerges from isolation.

Bloomberg Business last week cited an anonymous Iranian source as saying that Iran is keen on purchashing Airbus wide-body planes such as the A350 and the A380 double-decker, in order to add destinations in the US, Canada, Australia and Europe to directly serve Iranian populations there, rather than requiring them to connect through Dubai or Istanbul hubs.

Iran, with a population of 79 million, has a good road network but still needs major transport upgrades that Tehran hopes will aid tourism.

Rouhani, the first Iranian president to visit Paris in 17 years, will also visit Italy during the 25-27 January trip aimed at boosting Iran's economic ties with Europe.

Iran currently has no deals in place with American manufacturer Boeing "because of problems with negotiating with the US," according to Akhoundi.

State television said the US Treasury had not yet permitted Boeing to enter talks with Iran, "but we will definitely negotiate with this company too," the minister added.

Apart from new planes, Iran's airports also need upgrades costing $250m, he said.

Only nine of Iran's 67 airports are currently operational.

News of the Airbus deal came as aviation representatives from 85 companies met in Tehran on Sunday to assess ways to do business wth the country now that sanctions have been removed.

The CAPA 2016 Iran Aviation Summit was attended by 160 officials from the aerospace and travel industries, conference secretary Ahmad Reza Bayati told the official IRNA news agency.

International flights to and from Iran have already increased by 10 percent since March, the start of the Iranian calendar, as the country is well-positioned on many transcontinental air routes, Bayati said.

While new planes will be bought by state-owned Iran Air, the country hopes private airlines can rent serviceable planes from major companies in Europe.

Akhoundi said the government would support any company willing to buy new planes.

Iran has also stopped controlling ticket prices to allow more competition in the private sector.

On Saturday, Iran also signed a $2bn contract with China to electrify the railway line linking Tehran with second city Mashhad, Akhoundi said.