All airlines are making losses and their income from ticket sales is negative (spending more than what it earns), says the head of the Association of Iranian Airlines, Abdolreza Mousavi.
A translation of his remarks made at a recent press conference, as reported by Mehr News Agency, is as follows:
The Association of Ticket Sellers has become the go-to authority for providing statistics while they have almost no relation with civil aviation industry. Members of this association go to the parliament and the government, and hog the limelight.
Domestic airlines are not seeking to feather their own nest, as they are focused on providing services. We have 333 airlines, more than 50% of which are grounded.
We’ll have to compromise on the safety of flights, if we fail to solve their economic problems. In fact, the prices of tickets on the black market will jump stratospherically and exasperate people. As we speak, the time it takes to purchase a ticket is long and that is because airplanes are being grounded.
When it comes to setting ticket prices, we take into account the foreign exchange rates with a slight reduction for the benefit of people. At the beginning of last year, the exchange rate was set at 110,000 rials per US dollar; now the ticket prices are being calculated given the exchange rate of 250,000 rials per US dollar [the market rate is above 300,000 rials per dollar].
Sixty percent of the costs of airplanes, including the price of airplanes, parts, pilot training, publications, engine oil, lubricants and tires, floor carpets and seat covers, have to be paid in foreign currencies. Local engine oil does not meet international aviation standards and cannot be used in the civil aviation industry.
Passenger insurance is among other expenses airlines have to shoulder, which expenses have to be paid in foreign currency. Domestic insurance companies are not capable of providing passenger insurance; we have to avail ourselves of foreign insurance.
Moreover, pilots have to take simulation-based training courses every six months; these expenses also need to be paid in foreign currency.
Not only is the costs of airplanes’ landings and takeoffs in international flights have to be paid in foreign currency but we also have to pay in cash the costs of airport services.
Iran Airports Company also calculates the cost of landings and takeoffs from domestic airports at Forex ETS exchange rate and pays its equivalent in the rial.
Domestic airport costs for Iranian airlines have increased 70-fold in the past 10 years, while the average price of domestic flights is 10 million rials, which is calculated at $34. For example, in the fiscal 2015-16, the total cost of landings and takeoffs of an MBE plane in Tehran’s Mehrabad International Airport were 6.74 million rials (about $21 at the current market rate), but now they are estimated to be 72 million rials [$225].
Airlines’ income from ticket sales is negative; they have accumulated losses. Value added tax and duties account for 11% of the price of each air ticket; the engine repair costs of an Airbus have reached $5 million and the engine repair cost of each landing and takeoff is $5,000.
Under normal conditions, we’ll gain 1,300 million rials [$4,000] if all tickets of a Tehran-Ahvaz flight are sold. This comes as the cost of the same flight amounts to 1,600 million rials [$5,000], indicating revenue deficit of aviation industry in Iran.
A new Airbus 320 is priced at $45-50 million. Sales of $30 per seat-hour would no longer be economical if the airlines buy a new plane.
When the government liberalized air transport, the hourly cost of an airplane seat was $39, which reached $48 in the fiscal 2018-19. Despite the rise in tickets, the number of passengers increased by 20%.
Charterers are one of the major problems of the airlines. Some travel agencies take advantage of the financial problems facing airlines and offer a collateral worth 1,000 billion rials [$3.12 million] for a year and pay for the price of tickets on a weekly basis.
In recent years, we have asked the Ministry of Roads and Urban Development [which is in charge of the Iranian aviation industry] and the Civil Aviation Organization of Iran to restrict the activities of charterers as they throw airlines and people a curve by creating trouble; people rightly deserve to have access to scheduled flights.
All airlines have submitted their financial statements to the Civil Aviation Organization of Iran; the financial balance of all of them is negative.
