The opening of a new air corridor between two neighboring countries rarely captures the attention of the world’s media. But when Emirates Airline launched flights from Dubai to Mashhad on 1 September, everyone knew the UAE flag-carrier was thinking about much more than its own bilateral links with Iran.
Air traffic between the two countries has been rising since long before July’s landmark nuclear agreement – a deal that promises to roll back decades of sanctions isolating the Iranian economy – and it’s not just UAE businesspeople and freight riding the wave.
Together with low-cost affiliate FlyDubai and Abu Dhabi flag-carrier Etihad Airways, Emirates has positioned its intercontinental network as an ideal springboard for the global passengers and cargo now descending on the former pariah state. The airline’s first-mover advantage was cemented in September 2014, when its Dubai-Tehran route gained a fourth daily frequency.
FlyDubai has followed suit by expanding its Iranian network from two to nine destinations this year, while Etihad has more than doubled frequencies on its Abu Dhabi-Tehran route.
Much the same script is being followed across the water in Doha, where flag-carrier Qatar Airways has grown seat capacity on its three Iranian routes by 30% since last summer. Even some European airlines – mostly from Turkey and Germany – are getting in on the act: more than 100 additional flights a week are operating between Europe and Iran this summer, when compared with 2014.
The reason for surging demand is easy enough to pinpoint: foreign companies, long prohibited from business dealings in Iran, are scrambling to ingratiate themselves before the embargo is legally dissolved and the gates to a once-forbidden land swing open. The Iranian economy can expect a two percentage-point boost from sanctions relief in 2016, according to the World Bank, with foreign direct investment likely doubling to $3 billion.
Emirates, the world’s largest international airline by traffic, is well-placed to facilitate this reintegration into the global community – partly because of the unrivalled scale of its hub-and-spoke Gulf network; and partly because of Dubai’s historic role as a go-between for Iranian trade, illicit or otherwise.
Sheikh Majid al-Mualla, a senior vice-president at the airline, says “other points” in Iran are already under evaluation.
Dubai’s crucial role in the gold-rush is even being supported by Iranian carriers. Flag-carrier Iran Air and privately-owned Mahan Air both deploy more capacity to Dubai than any other point in their overseas networks. (Mahan Air’s second-busiest foreign destination, Istanbul, is allocated half as many seats.)
Longer-term, however, presuming sanctions are confined to the history books, Tehran will be keen to develop its own, self-sufficient trade corridors with emerging global partners. That will be no mean feat following years of sanctions that have stymied the growth of Iranian airlines and airports.
The average age of an aircraft in Iran’s commercial fleet is a whopping 23 years, rendering local carriers grossly uncompetitive with regional rivals. Tehran’s Imam Khomeini International Airport, the capital’s main international gateway, has capacity for just 6.5 million passengers a year – less than one-tenth the processing power of Dubai’s mega-hub.
Yet renewal is not an impossible task.
This summer’s nuclear deal included a special clause permitting the sale of western-made aircraft to the Islamic Republic – transactions with Boeing and Airbus that have been prohibited since the 1979 revolution. Mohammad Khodakarami, the deputy head of Iran’s Civil Aviation Organization, sees a need for 80 new aircraft a year during the initial re-fleeting. His estimated requirement of 400-500 planes would put Iran on-track to rival Turkey – a country with a similar population, but a vastly more mature civil aviation sector.
Conflict of interest
If Iran’s airborne ambitions present a conflict of interest for the UAE and its flag-carriers, the emirates are hiding it well. In March 2016, Dubai will host Aviation Iran, an industry conference bringing together global stakeholders who are keen to work with – and profit from – a resurgent Iranian sector.
“The UAE will be a vital hub for the opening of Iran,” predicts Alan Peaford, chairman of the Aviation Iran summit. “Of course there have been – and continue to be – political differences between the Gulf and Iran, but there are also strong commercial links. This event will give Gulf companies, particularly in the UAE, the opportunity to strengthen those links and benefit from the lifting of sanctions.”
While leaning on foreign carriers today, Iran is thus laying down the foundations for an eventual repatriation of traffic flows through its own intercontinental gateway – one that merges Tehran’s two existing airports into the fourth Gulf mega-hub.
“Tehran would be a much better hub than Dubai or Doha for cargo and for passengers,” Farhad Parvaresh, Iran Air’s chairman, said in 2013, extolling the capital’s geographical advantage.
He now has a chance to turn that vision into reality, and Dubai is hedging its bets by assisting and collaborating with its future regional rival.SHOW MORE