76080
Ali Dadpay

Commercial Aviation: Economics Outweighs Politics

As the future of the Joint Comprehensive Plan of Action seems to be threatened by a hawkish administration in Washington DC, one has to take into account the simple economic facts.
Despite the political outbursts, the market reality will continue to drive the economic openings initiated by JCPOA. Iran’s aviation is a case in point.
Following the implementation of JCPOA, Iranian airlines began efforts to renew their air fleet. These efforts have resulted in signing a variety of agreements and memorandums with aircraft manufacturers, totaling 313 aircraft. These orders also include a total of 120 Boeing aircraft. The orders have been placed not just by Iran’s flag carrier, Iran Air, but also by Qeshm Air, Iran Air Tours, Aseman, Zagros and Kish Air. Some of these companies are private businesses owned by public entities and some are private enterprises owned by investors and businessmen.        

So far, Iran Air has received a total of nine airplanes from its orders, including six ATR 72–600, one Airbus 321 and two Airbus 330 airplanes. It has been announced that it will receive four more units of Airbus 321 before the end of 2017.
The delivery process has been lengthy, requiring both sides to iron out financial transactions, establishing credit lines and training the crews. However, it does not skip any observer that both sides have remained committed and persistent in following through their obligations.

  Important Part of Iran’s Economy
Commercial aviation is an important part of Iran’s economy. It looms large in government plans to expand tourism and create employment.
It has provided Iranian cities with a steadily increasing number of visitors through connections to the international hubs in Dubai, Doha, Frankfurt and Istanbul. The sector has been improving its performance while expanding its service network.
Iranian airlines have increased their regional presence by adding more international destinations to their networks. Kish Air, a private airline owned by Kish Free Zone Organization, has begun air travel services on several routes by connecting Tehran, Mashhad, Shiraz, Kermanshah and Bushehr to Yerevan (Armenia), Tbilisi (Georgia), Istanbul, Izmir, Denizli (Turkey) and Kiev (Ukraine).
Qeshm Air has initiated its Brussels air route and begun operating on the Tabriz-Hamburg route. Mahan Air, another private airline, has added Barcelona (Spain) and Baku (Azerbaijan) to its international network.
These efforts have resulted in increasing the number of air travelers, particularly international air travelers.
Ranking first in terms of air passenger volume, Mahan Air transported 1.86 million international air travelers from April 2016 to March 2017, while Iran Air has served 1.48 million international air travelers in the same period.
Spring 2017 registered an increase of 17% in air travel volume compared to the previous spring for an average increase of 11% in landing and takeoff numbers across Iranian airports.
Mashhad International Airport recorded a 22% increase in passenger volume for a 17% increase in landing and takeoff operations.
Imam Khomeini International Airport, the main gate of entry for foreign visitors, reported a 21% increase in the volume of passengers for the same period.
Most recently, Kish Airlines released its data for summer 2017, reporting an increase of 37% in the air passenger volume and a 25% increase in the number of flights.
   Driven by Market Realities
Iranian airlines are expanding despite their politics. They are aided and driven by the market realities and the economic conditions of the region.
Their initial market includes a population of 80 million living in a landmass of 1.64 million square km. This is the largest domestic market for air travel in the Middle East and North Africa region.
The increasing demand for visiting Iran means they can rely on increasing foreign demand for air travel to the country.
Their challenge is to find a way to translate their comparative economic advantages, market potential and sustainable market demand into a business model attractive for foreign investors. These investors have good reasons to be optimistic.
Iranian airlines have proved again and again that politics does not hinder their expansion, even when the sanctions compromised the quality of their services.
In commercial aviation, one does not often step into such a strong market, so there is little doubt that the economic realities of commercial aviation in Iran can, and should, outweigh political bickering.
For the time being, politics aside, the economics has been winning in this sector. And aircraft manufacturers have been taking notice of this fact.

 

 

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