France’s Airbus Group SE decided to sell 118 aircraft to Iran Thursday, intensifying Canadian firms’ frustration their competitors are already notching big orders while they sit and watch for sanctions to lift.
Bombardier falls to penny stock the very first time in 25 years, threatening TSX listing: 'A disaster'
In response, Bombardier Inc.’s shares slid deeper into penny-stock territory, closing down 10 per cent at 89 cents – the stock’s minimum since 1991.
Bombardier desperately needs to locate new clients for its CSeries jetliner, which hasn’t recorded a firm order since September 2014, and Iran presents an enormous opportunity.
According to analyze firm OAG Aviation Worldwide Ltd., Iran will require approximately 400 new aircraft over the next Ten years to replace its aging fleet, that is twice as old as the international average.
A significant part of that demand is expected to be for single-aisle aircraft, a category which includes the CSeries. Iran Air’s order on Thursday included 45 A320s, single-aisle jets that compete with the CSeries.
Although Bombardier has been ending up in Iranian officials – the organization were built with a representative at an aviation summit in Tehran now, according to a person familiar with the problem – it is restricted in what it can do until it receives a green light from Ottawa.
This week, Foreign Affairs Minister Stphane Dion promised to lift Canada’s nuclear-related sanctions against Iran, but it is unclear when which will happen and whether some restrictions will remain in position.
This poses an issue for Canadian companies that wish to act but don’t know how, said John Boscariol, head of the international trade and investment law group at McCarthy Ttrault LLP.
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“Right now, the EU has revised its sanctions, the U.S. needs to a degree relaxed its sanctions, Australia has done the same and so has Japan,” Boscariol said within an interview.
“The frustration we’re hearing from the Canadian world of business is, ‘While we’re sitting on our hands, our competitors in other countries are visiting Iran, they’re receiving visits from Iran, they’re in contact with Iranian businesses and starting in the future having a clear indication of what is allowed.'”
By contrast, Canadian executives are facing a confusing “patchwork” of regulations, Boscariol said.
What we have been saying to many Canadian companies about this is that they shouldn’t be scared of going into Iran, but they should be wary.
For example, Fred Cromer, Bombardier’s president of business aircraft, can’t even participate in discussions about Iran because he’s an American citizen and most U.S. sanctions are still in position. American aerospace companies can apply for exemptions that will permit them to conduct business in Iran, but Canadian companies do not have that leeway yet.
“I can’t be active in the planning,” Cromer said inside a recent interview.
In his place, Colin Bole, Bombardier’s head of sales for commercial aircraft along with a British citizen, has been laying the groundwork.
“He’s got it under control because certainly there’s opportunities there if sanctions are lifted, and that we want to be a part of that,” Cromer said.
It’s not just a question of the citizenship from the executive under consideration, Boscariol said.
When Canada lifted its sanctions on Myanmar this year it kept some restrictions in place, together with a blacklist of people with whom Canadian information mill prohibited to do business. Boscariol said it’s likely that will be repeated with Iran, where there are more than 600 companies and people currently blacklisted.
“What we have been telling many Canadian companies about this is they really should not be scared of entering Iran, however they ought to be wary,” he explained.
“There are going to be some measures they need to put in place to ensure that they stay onside, however they can still take advantage of this emerging market in the centre East.”
kowram@nationalpost.com
Twitter.com/KristineOwram
