By now most people know that when The Boeing Co. (NYSE: BA) or Airbus or any other commercial plane manufacturer announces a firm contract, the total value of the contract is reported at the full list price of the planes in the order. But nobody pays list prices.
And especially nobody who orders 80 planes pays list price. Iran’s deputy transport minister made that clear on Sunday.
According to a report at Iran’s state news agency, Asghar Fakhrieh-Kashan said:
Boeing has announced that its IranAir contract is worth $16.6 billion. However, considering the nature of our order and its choice possibilities, the purchase contract for 80 Boeing aircraft is worth about 50 percent of that amount.
The order, which was first revealed in June, is made up of 50 737 MAX 8s, 15 777-300ERs and 15 777-9s. In September Boeing received a license from the Treasury Department to sell up to 109 new airplanes to Iran, the 80 referred to here plus 29 others that Boeing will acquire from leasing companies.
Iran’s purchase of 100 planes from Airbus was valued at around $18 to $20 billion at list prices, but Iran Air’s CEO said the value of the contract would not exceed $10 billion.
Because the headline numbers on these orders are so large, the Iranian government was facing some criticism from its opponents on the massive costs of upgrading the country’s airlines according to a report from Reuters. Announcing the approximate value of the contracts was intended to deflect some of that criticism.
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