Airline Industry in Iran Primed for Expansion

By Kevin Belanger,
International Business Writer

Following the 1979 revolution, Iran has had a rocky relationship with the west. However, since the major deal between western powers and Iran was struck in the summer of 2015, relations appear to be thawing. For the first time since 2008, Air France began flying between Tehran and Paris, according to Business Insider. The flight will be flown by Airbus A330 aircraft. KLM Royal Dutch also plans to begin offering direct flights to Iran after many years of isolation. reports that Iran is even considering offering flights directly to the United States.

A persistent problem among Iranian airlines is ageing fleets. The problem is of such a concern that the European Union and the United States have banned its planes from flying to most airports in their jurisdictions, citing airworthiness concerns. According to the New York Times, about a dozen cities in Europe are currently served by Iran Air. The fleet consists mostly of A300’s and A310’s which are over 20 years old. However, the fleet could be getting some serious upgrades in the next few years. According to Iran’s transport minister, the country will need hundreds of new planes to accommodate new long, short and medium length flights. In 2016, Iran hosted the Aviation 2016 Summit which drew representatives of Airbus, Bombardier, the Canadian aircraft manufacturer, and Embraer, the Brazilian aircraft manufacturer, according to Reuters.

According to Press TV Iran, Iran recently agreed to a deal worth $27 billion to purchase new Airbus aircraft. This purchase includes jets from all of Airbus’s current offerings, including the A380 and new A350. Recently, Iran has also started discussions with American aircraft giant, Boeing to purchase its planes.

It appears that Iran wishes to purchase about 100 new aircraft from Boeing.  For short domestic routes, Iran would like to purchase 737s. The 737 is Boeing’s best-selling aircraft and one of the most popular planes for short to medium haul routes. For longer routes, Iran Air plans to purchase Boeing 777s and 787s.

These purchases will upgrade ageing fleets and allow Iran to more easily meet airworthiness requirements in many countries, which certainly will help it to be more competitive in the world market. In addition to safety improvements, the new planes will be more fuel efficient than many of the planes in its current fleet, allowing it to compete better with western airlines in terms of profitability and has the potential to attract foreign capital to Iran. Being cut off from foreign capital markets before the nuclear deal last summer, successful foreign investments in Iran will increase investor’s sentiment towards directing capital to Iran.

The European Union’s transport commissioner, Violeta Bulc, stated that allowing Iran Air to begin service to Europe would be advantageous for Europe, especially as European airlines attempts to move into the potentially lucrative Iran market. However, according to the New York Times, the United States is not quite as interested in reaching a deal immediately. The United States has accused Iran Air of assisting embattled Syrian president Bashar Assad by transporting weapons and soldiers to Syria on its planes. This could represent a possible roadblock to direct flights between Iran and the United States in the near future.

A version of this article appeared in the Tuesday, April 26th print edition.

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