Iran’s aviation industry: Back in business?

CNN  — 

In the 1970s, Iran’s airlines were the pride of the region.

The national carrier, Iran Air, boasted a fleet of the latest Boeings and was pursuing the purchase of Concorde jets.

But following the 1979 revolution that transformed Iran into an Islamic republic increasingly at odds with the West, decades of sanctions and isolation plunged the industry into disrepair.

The average age of the fleet is now more than 22 years old, much of it comprised of cheaper Russian aircraft. Iran’s inability to import vital parts has contributed to one of the worst safety records in the world.

Now, Iran’s deal with world powers to limit its nuclear program in exchange for sanctions relief could revitalize its aviation industry.

International investment

International investors from industries spanning energy, finance and software are clamoring to enter the region’s second largest economy, worth around $400 billion even under sanctions.

Tehran has become a hot destination for foreign delegations, jockeying for position ahead of the lucrative new market opening for business.

But while many industries still face a tough task navigating sanctions, civil aviation has been given a fast track.

The nuclear agreement explicitly prioritizes “the sale of commercial passenger aircraft and related parts and services to Iran.”

400 new planes

Iran has signaled its intentions to make up for lost time.

Transport Minister Abbas Akhoundi estimates that 400 new planes could be needed, with Airbus and Boeing poised to rebuild the fleet and secure an enormous payday.

Negotiations with the manufacturing giants are under way.

“We have an active fleet of only 150 and the average age is very high,” says Mohammad Khodakarami, director of Iran’s Civil Aviation Organization.

“Many of the planes are grounded because they need repairs. We need to bring the average down below 15 years, and we need 150-passenger capacity aircraft for international flights.”

Once at the forefront of aviation, in  1972 Iran Air ordered two Concorde supersonic jets.

Huge potential for growth

Khodakarami says that talks are ongoing with leading manufacturers, including over leases for short-term cover.

He stresses that the market is healthy now – new airlines such as Mahan Air now compete with Iran Air – with huge potential for growth.

“We have more than 20 million domestic passengers a year and six million international passengers on Iranian carriers. We have growth of 6% despite sanctions and if they are lifted we think the increase will be more than 10% for 10 years.”

Rob Morris, head of consultancy at aviation analysts Flightglobal expects Iran to acquire “as many as 300 new commercial jet aircraft, with an estimated value of around $18 billion” over the next 10 years.

Such an overhaul would bring Iran’s fleet closer to international standards.

“If Iran’s airlines are able to replace these older aircraft with newer examples they [can] benefit from reduced operating costs from both a fuel and maintenance perspective. This will drive increased operational efficiencies,” says Morris.

Western markets

Iran will likely pivot to Western markets to serve its expansion, believes Leon Manoucherians, editor of Iranian Aviation magazine.

“During the Shah’s era, (Iran) had always been a western customer, purchasing mostly Boeing, Lockheed and MDD aircraft,” says Manoucherians, adding that confidence in Russian aircraft has been dented by several crashes.

“All Iranian airlines, as finances permit, will switch to their beloved western aircraft.”

The first Aviation Iran trade show in March 2016 is another indication of the new era, to be hosted in Dubai.

“We’re getting a phenomenal response from airlines – including the Saudis, Dubai and the West,” says Alan Peaford, editor-in-chief of Arabian Aerospace magazine and chairman of the conference.

“The Iranians are desperate to get back in the game and the world (businesses) needs new markets.”

In addition to fleet upgrades, Iran’s infrastructure will also see massive investment. Peaford highlights radar, air traffic management, the 300 domestic airports and passenger experience as key opportunity areas for international firms.

The nuclear talks could still disrupt momentum. But as the international business elite set their sights on Iran, the new player is determined to welcome them with a world-class travel network.

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