Command pricing of air transportation services has led to the gradual grounding of Iranian air fleet. The continuation of this policy does not allow the existing planes to be replaced and denies us the supply of parts and new investments, Mohammad-Sadeq Rasoulpour, a member of the Board of Directors of the Association of Iranian Airlines, said.
“According to Article 161 of the Fifth Five-Year Development Plan [March 2011-16), the government was obliged to diversify the rates of cargo and passenger air transportation services by the end of the first year of the plan [March 2012] and fully liberalize airfares as of the beginning of the third year of the plan [March 2013]. Notably, the government was also tasked with making rates real as per Article 53 of the Sixth Five-Year Development Plan [March 2017-22],” he was quoted as saying by the news portal of Tehran Chamber of Commerce.
The official added that air transportation at best accounts for 1% of all modes of transportation in Iran, noting that with the enforcement of the rate liberalization law from the fiscal 2015-16 to 2019-20, flight rates on domestic routes were determined based on market conditions and exchange rates, and passenger transportation increased by more than 20% annually.
Referring to the sudden increase in the exchange rate in the fiscal 2019-20, Rasoulpour said, “Granted that over 60% of the costs of each hour of flight depend on the exchange rate, airlines were forced to change the ceiling of their flight rates; the Consumers and Producers Protection Organization opposed this move and some of the airlines were referred to Tazirat [a judiciary-affiliated organization dealing with trade violations] and were fined enormously. The outbreak of Covid-19 and the imposition of new airfare ceilings inflicted huge losses on airlines. As airlines’ income solely came from domestic flights, over the past three years, they were gradually grounded.”
According to the official, the number of planes registered by the Civil Aviation Organization stands at 150, of which 80 are currently airworthy.
“If command pricing continues in the next year and a half, up to 30 more planes will be grounded,” he said.
“The age of Iran’s air fleet has reached 27 years, while that of the UAE and Turkey are 5 and 6.5 years, respectively.”
According to Rasoulpour, the government’s failure to comply with the fifth and sixth development plans has had a direct impact on the airlines; state-owned companies now face accumulated losses and private ones are also affected by this policy, as they have been forced to downsize or compromise safety issues.
“For example, if an airplane tire needs to be replaced after 30 takeoffs and landings, it will be replaced after 50 takeoffs and landings due to command pricing and the lack of funding, which might lead to accidents,” he said.
“Despite the increase in wages and inflation, as well as the recent increase in foreign exchange rates against the rial, the Association of Iranian Airlines’ efforts to convince the government to allow an increase in airfares have yet to produce the desired result.”
Airlines on Brink of Bankruptcy
The operation of small airlines is becoming less and less economically feasible, pushing some of them to the brink of bankruptcy. They are renting or selling their old aircraft to other larger airlines.
“Supplying parts is very expensive. Purchasing aircraft parts under sanctions at times imposes a 30% higher cost on airlines. Some aircraft parts dealers take advantage of sanctions and sell substandard parts to Iranian airlines, which raise the risks of air transportation in the country,” Hamid Ghavabesh, the former head of the Association of Iranian Airlines has been quoted as saying.
All airlines are loss making and their income from sales of ticket is negative [it costs more than what it earns], the head of the Association of Iranian Airlines, Abdolreza Mousavi, said last year.
“We’ll have to compromise on the safety of flights if we fail to solve the economic problems,” he was quoted as saying by Mehr News Agency at a press conference in July.
Noting that 60% 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, he said the depreciation of the national currency means an astronomical rise in ticket prices.
“Value added tax and duties account for 11% of the price of each 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," he said.
The official said 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, so we have to avail ourselves of foreign insurance. Moreover, pilots have to take simulation-based training courses every six months, which also have to be paid in foreign currency. Moreover, not only is the cost of airplanes’ landings and takeoffs in international airports paid in foreign currency, but they also have to pay in cash the cost of airport services,” he said.
Mousavi stressed that domestic airport costs for Iranian airlines have increased 70-fold in the past 10 years.
Severe Shortage of Passenger Planes
Iran needs 550 passenger planes in its air fleet in order to be able to adequately meet domestic demand, the head of the Civil Aviation Organization of Iran, Mohammad Mohammadi-Bakhsh, said in a recent meeting of government officials about the state of the country’s air transportation.
“A full-blown war is being waged by world powers against the Islamic Republic in the aviation industry. We are pursuing our goals in four areas of manufacturing, repair and buying secondhand and new aircraft,” he was quoted as saying by Fars News Agency.
Iran’s aviation sector has for years been facing US sanctions that prevented it from procuring vital spare parts for repair, leaving many planes grounded and causing technical problems every now and then that result in incidents.
Ghavabesh earlier told the Persian economic daily Donya-e-Eqtesad that even the operational planes in Iran have their own limitations when it comes to flying.
“Note that operational planes are not capable of flying for a long time; many of these planes fly only twice, the total efficiency of Iranian planes is between three and four hours; sometimes they are incapable of flying after one roundtrip flight,” he has been quoted as saying.
“This is while the young planes of Iran's neighboring airlines, such as the airlines of Arab countries and Turkey, are able to fly for a full day.”
The former head of the Iranian Airlines Association noted that the average age of planes in the Arab countries and Turkey is five to six years whereas the average age of Iranian aircraft is estimated to be 28 years; some older aircraft are also among Iran’s air fleet.
“Except for the limited number of planes purchased after the conclusion of the Joint Comprehensive Plan of Action [Iran nuclear deal], there is no new aircraft in the Iranian air fleet,” he added.
Fifteen planes were purchased after JCPOA, 13 of which were small ones manufactured by ATR Aircraft. In other words, only 4.5% of Iranian aircraft are new.
Even the newly purchased ATR planes have run into technical problems now.
“Almost all of these planes have been grounded, but we plan to get them back to flying over time,” he said.
According to Mohammadi-Bakhsh, the Franco-Italian aircraft manufacturer failed to live up to its commitment after selling the ATR planes to Iran.
“They even failed to provide us with technical publications and maintenance manuals, let alone parts,” he added.
Iran was also delivered two Airbus after the nuclear deal’s revival: one A321 and two A330s.
According to the CAO chief, the European multinational aerospace corporation has also failed to provide the needed support and after-sales services.
Domestic Repair, Maintenance to Keep Aircraft Flying
Mohammadi-Bakhsh pointed out that no aircraft is sent abroad for repairs and that all the work is undertaken by local engineers.
“We are facing a severe shortage of expert manpower for repair, maintenance, design and manufacturing,” he said.
Ramin Hamzeh, a member of the association’s Board of Directors, recently announced that local technicians successfully overhauled an A320-200 Airbus, which took more than six months and more than 2,200 parts, Mehr News Agency reported.
Noting that the overhauled aircraft will soon join Iran’s operating fleet, Hamzeh, who is also the CEO of Iranian airline Qeshm Air, said the plane will be used to operate international flights.
Marziyeh Afardoust, spokeswoman of Taban Airlines, also announced on Dec. 20 that a 168-seater McDonnell Douglas (later Boeing) MD-88 has returned to service to transport passengers on domestic and international routes.
