Domestic Economy

Aviation Industry Struggling to Make a Comeback

Aviation Industry Struggling to Make a ComebackAviation Industry Struggling to Make a Comeback

Iran’s aviation industry needs $30 billion investment over the next 10 years toward infrastructure development and fleet modernization, says deputy minister of roads and urban development and president of Civil Aviation Organization, Alireza Jahangirian.

The official made the remarks in a seminar on the development of Iran’s air transport industry, organized by the CAO on Sunday, the ministry’s media center reported.

Jahangirian underlined the important role of the aviation industry in economic development and job creation, noting that more than 58 million people worldwide are employed in the sector.

Annual revenues of Iran’s aviation industry from the sale of airline tickets amount to 90 trillion rials ($2.7 billion at market exchange rate) from Iranian airlines and $3 billion from international airliners, said Jahangirian. “About 20-30% of the revenue are used for aircraft maintenance and repair,” he added.

  Overreliance on Imports

Overreliance on imports and the restrictions on the import of equipment and aircraft as a result of western sanctions against the country over its nuclear energy program were mentioned by the official as the main challenges facing the domestic aviation industry.

Vice president for science and technology, Surena Sattari also emphasized the need to develop domestic production to reduce reliance on imports as well as create employment opportunities for graduates in areas of electronics, information and communications technology.

  $2b Needed

Since 2010, Iran has been trying to renew its air fleet not only through purchase of foreign planes, but also through domestic production.

Deputy minister of roads and urban development Amir Amini recently said that the CAO plans to borrow from the National Development Fund of Iran for the renovation of old planes.

Currently, Iran’s air fleet comprises of 140 airworthy and 155 inactive airplanes. “The number should reach 344, which means 200 new planes need to be purchased,” said Amini. “Our preliminary estimate is that $2 billion is required for this purpose,” he added.

The national carrier Iran Air is developing its own aircraft in collaboration with the Ukrainian company Antonov.

  BMI Forecasts Growth

Air freight has been the hardest hit over the past several years as a result of western sanctions. Not only has the sector suffered indirectly as a result of the economic impact of the sanctions, but it has also been directly targeted, with Iranian carriers unable to offer full services due to bans on entering foreign airports and even on purchasing spare parts.

In 2012, air freight volume declined by a massive 53%, and this was followed by contractions of 1.8% and 0.5% in 2013 and 2014 respectively.

A report by Business Monitor International research group on Iran’s freight transport forecasts that Iran’s air freight will begin a slow recovery in 2015, predicting that the transport mode will record 0.9% growth in volume over the course of the year.

In terms of freight tons-km, BMI forecasts a return to growth this year at 0.4%, following four consecutive years of contractions from 2011 to 2014. Growth is expected to remain around this level over the remainder of the forecast period to 2019.