Much has been made of the opportunities that a post-sanctions Iran can offer to companies and countries around the world. In this issue of Arabian Business, Dubai businessman Khalaf Al Habtoor condemns what he sees as an unseemly rush to Tehran by Western ministers eager to tap the billions on offer.
From a business perspective, though, the 80-million strong Iranian population and its growing middle class represents a market that will be tough to ignore.
Emirates touched down in Mashhad for the first time last week, adding the north-eastern city to its only other Iranian destination, Tehran. However, if removal of sanctions goes ahead — a move that drew one step closer last Wednesday when President Obama secured the final senatorial vote needed to get the agreement past Congress — then it seems likely that Emirates will follow in the footsteps of flydubai.
The low-cost carrier, also based at Dubai International Airport, has steadily wound up its presence in the Islamic Republic in recent years. An announcement in May that the airline would operate a service to Lar now means that flydubai serves nine destinations in Iran. Air Arabia, based in neighboring Sharjah, flies to six airports in the country.
Iranian carriers’ aging fleets are also a potential bonanza in the making for aircraft manufacturers. According to CAPA, the average fleet age of the country’s 215 jets is nearly 25 years, making them some of the oldest in the world. Iran Air operates the world’s longest serving Boeing 747 passenger aircraft, which was manufactured back in 1976 — three years before the revolution.
Until now, Iranian airlines have had to resort to cannibalizing old aircraft for spare parts and finding innovative ways to get around international sanctions. Earlier this year, Mahan Air was alleged to have bought nine aircraft, worth more than $300m, using a complex series of deals using a small Iraqi airline as a front.
In an interview with a state-run news agency two months ago, the deputy head of the Iranian civil aviation authority said local airlines would be needing 80 jets a year, adding up to 400 over five years. Airbus and Boeing are waiting in the wings, eagerly waiting for the billions of dollars worth of contracts that will head their way.
However, those new fleets will take years to build up. And new planes alone won’t solve the many problems associated with the Iranian aviation industry.
The poor safety record is one factor that will encourage many Iranians to fly with other carriers. The thousands of tourists from around the globe who may flock to the country to see its historic and cultural sites are far more likely to use more recognized international airlines than local ones. Another issue lies with the fact that the government fixes the cost of passenger tickets, thus ensuring that airlines are running at significant losses. In Saudi Arabia, another country where the price of flying has been regulated by the government, this practice has also been hugely damaging to privately owned airlines.
To make matters worse, the likes of Iran Air and Mahan Air are competing with some of the world’s best-run and most efficient airlines. Alongside Emirates, flydubai and Air Arabia, Qatar Airways and Turkish Airlines have been steadily ramping up their presence in Iran. With the best will in the world, it will take many, many years until Iranian airlines can compete on a level playing field with their international peers. In the meantime, carriers from the Gulf stand well-placed to benefit.
Original article can be found here: http://www.arabianbusiness.com
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