Opinion: Iran New Budget and Aviation Sector

Professor of Economics
Ali Dadpey
Ali Dadpey

President Hassan Rouhani has submitted his administration’s budget for the fiscal 2018-19 to the parliament.

As always, the budget is a mix of short- and long-term goals, with the latter defined by Iran’s Sixth Five-Year Development Plan (2017-22). The budget allocated to Iran’s aviation sector is not an exception.

The administration has set aside 16 trillion rials ($380 million) for this sector for expanding Iran’s airport network, renovating existing ones and adding more terminals to accommodate the rising influx of travelers.

It has set aside funds to construct a new airport in Hamedan Province and complete the construction of the airport in Saqqez, Kurdestan Province.

The Imam Khomeini International Airport will receive 1.14 trillion rials ($27 million) to expand its facilities and terminals. The airport has become Iran’s major point of entry for thousands of foreign travelers and serves only international flights.

The new budget emphasizes the strategic vision for IKIA to become Iran’s international gateway for transit. It is run as an entity independent from Iran Airports Company with plans to construct an airport city and develop its free trade zone. There is little doubt that the current budget aims to improve and expand Iran’s aviation infrastructure.

This is while the budget is silent when it comes to funding this growing infrastructure. Iran already has an impressive airport network with nine international airports, 25 regional airports and 20 domestic ones. However, many of these operate below capacity.

If anything, the recent years have proved that there is increasing demand for air travel in Iran. Iran Air has successfully used its expanding fleet of ATR 72-600 turboprops to start new domestic routes. Surprisingly, the new budget is not offering any incentive to private airlines to change their business model and employ similar aircraft. To this, one must add the centralized administration of Iran’s airports. They are not run based on their respective region’s business ecosystem, but as national holdings. This needs to change.

While the new budget guarantees investment in Iran’s aviation sector and infrastructure, it highlights the need to reevaluate the role of airports in economic development. It reminds us that five-year development plans have resulted in constructing many airports, while the markets for air travels still need expansion.

The moment of decentralization and diversification has arrived for Iran’s aviation sector and it seems that it is up to the private sector to shape the new era. After all, someone must work on software, as the government continues to work on the hardware.

Iranian airlines can rely on their experience and history to formulate a new strategy. It might mean a departure from existing business models and venturing into the unknown. However, it seems that wherever they go, they can find a runway to land safely.

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