Freed from sanctions, Iran’s airlines go on a spending spree
Within a fortnight of Implementation Day the flag-carrier signed a tentative order for 118 Airbus jets
In the 1970s, just before the Iranian Revolution, Iran Air was considered one of the fastest growing and safest airlines in the world.
The company operated daily flights to New York with Boeing 747s. It had two supersonic Concordes on order and its marketing department billed Tehran as an ideal stopover for flights between Europe and Southeast Asia.
No one could have predicted what was to come. The founding of the Islamic Republic in 1979 triggered a wave of international sanctions that decimated Iran’s domestic industries – including civil aviation.
Portrayed as a facilitator of a terrorist regime, Iran Air spent more than three decades shut out of the international aviation system. Unable to buy or repair aircraft through the usual channels, the flag-carrier and its 15 domestic rivals were pushed into the black market to keep their fleets airworthy. Safety records suffered, as did market shares. A new breed of Gulf carriers filled the void, funneling traffic through Dubai, Abu Dhabi and Doha while Tehran languished in isolation.
But all that came to an end on 16 January 2016 – Implementation Day for the lifting of nuclear sanctions against Iran – when the skies finally cleared for the airline industry’s forgotten success story.
Flag-carrier back in business
Iran Air is wasting little time showing the world that it is back in business. Within a fortnight of Implementation Day the flag-carrier signed a tentative order for 118 Airbus jets, including 12 A380 superjumbos – a behemoth of an aircraft that only the very largest global carriers operate.
“Today’s announcement is the start of re-establishing our civil aviation sector into the envy of the region,” Farhad Parvaresh, the flag-carrier’s chairman, was quoted as saying on 28 January.
The spending spree continued on 1 February, when Iran Air agreed to buy 20 turboprops from French Italian manufacturer ATR. America’s Boeing has yet to announce any orders, though with Iran’s Transport Ministry estimating that the country needs 500 aircraft over the next decade it is unlikely to stay in the shadows for long.
Meanwhile, as the media focuses on multi-billion-dollar contracts, the less glamorous task of fleet regeneration is also getting underway.
Only about half of the 250 commercial aircraft in Iran are currently operational, with hangars full of planes that were deemed either unsafe or uneconomical to fly during sanctions.
“We have to return our grounded aircraft to service first, to survive,” said Mohammad Gorji, vice-president of executive affairs and fleet development at Iran Aseman Airlines, the country’s largest domestic operator by flight frequencies. “Out of 120 on the ground [nationwide] maybe 60 can come back to service.”
This repair work – facilitated by an influx of western maintenance firms and spare-parts suppliers – will allow Iranian carriers to lift capacity in the immediate short-term. Iran Air alone has 19 aircraft in storage.
But with an average aircraft age of 23 years across the country, repairs will quickly need to give way to replacements.
Iran’s Transport Minister, Abbas Akhoundi, has told local media that the Airbus deal should be finalized by about 20 February, potentially enabling the first new-build aircraft to arrive this month.
According to the delivery schedule provided by his deputy, Asghar Fakhrieh Kashan, Airbus will rapidly deliver all 118 jets between 2016 and 2022. This equates to a quadrupling of Iran Air’s fleet in seven years, presuming the flag-carrier retires all pre-existing aircraft. The ATR deliveries will add further scale, potentially under the umbrella of a new air-taxi subsidiary.
Ambitious delivery schedule
Some analysts, however, are voicing skepticism about the size and speed of the renewal. The 118 figure likely includes options – non-firm commitments held in reserve – while deliveries will also need to be matched to the technical capabilities of Iran’s engineers and pilots.
Cutting-edge aircraft such as the A350 and A380 will be particularly challenging to induct given the country’s lack of experience with the types.
Speaking during the CAPA Iran Aviation Summit in Tehran last week, parliament member Mahdi Hashemi noted that Iran’s maintenance facilities are currently geared towards older aircraft. “New technologies and training is needed to meet the requirements of new-generation aircraft,” he admitted, while stressing that the country has a large pool of graduates and technicians eager to take up the challenge.
For Aseman, this step-change in capabilities has led to a more pragmatic growth trajectory.
“We have to adjust ourselves. Aseman wants to have 100 aircraft in our five-year plan. But if we take 100 aircraft by the first quarter of 2016, do you think we can manage?,” Gorji said. “I would prefer to have an Airbus fleet with maximum [aircraft age of] ten years to move from analogue cockpits to semi-glass cockpits [with some digital features and from semi-glass cockpits to [all-digital] new generations.”
Aseman currently has 21 operational aircraft plus 21 in storage, with an average age of 26 years.
Gorji is realistically aiming to acquire between three and five aircraft per quarter. His tentative target for 2016 is six A320s and six Boeing 737s – all of them second-hand units sourced through third parties or brokers.
“We don’t want just to purchase aircraft,” he stressed. “We want to ask them [the suppliers] to educate us, to empower us.”