The Center for Asia-Pacific Aviation (CAPA) has scheduled the 'Iran Aviation Finance Summit' to be held in Tehran September 18-19, bringing together key decision-makers and global experts.
According to an announcement posted on CAPA's website, the event has been organized with the aim of providing a forum to identify financing solutions for transactions related to Iran's aircraft acquisition, leasing and the development of airport and airspace infrastructure.
The event has the support of the Ministry of Roads & Urban Development, Imam Khomeini International Airport City Company and the Iran Civil Aviation Organization (CAO).
Confirmed participants in keynotes and panel discussions include Es.haq Jahangiri, first vice president of Iran, Minister of Transport Abbas Akhoundi, Economy Minister Ali Tayebnia, Ali Abedzadeh, the CAO Chief ; Mahmood Navidi, chairman & CEO of Imam Khomeini Airport City and CEOs of most Iranian airlines.
Alex Cruz, chairman & CEO, British Airways; Bertrand Grabowski, member of the board of managing directors, DVB Bank; Firoz Tarapore, CEO, DAE Dubai Aerospace; and Claude Brandes, VP customer financing, at Airbus will also attend.
In light of Iran's pressing need to renew its ageing fleet of passenger airplanes battered by years of sanctions, the country has already placed orders with big names like Airbus and Boeing.
According to Akhoundi, Iran needs 400 mid- and 100 short-range planes in the next 10 years, requiring an investment of about $50 billion.
The Civil Aviation Organization of Iran says Of the 250 planes in Iran, 230 need to be replaced.
A preliminary deal between Iran’s flag-carrier Iran Air and the French company to purchase 118 airplanes worth $25-27 billion, was struck in January soon after the lifting of nuclear sanctions. Iran has also signed a preliminary deal with American jetmaker Boeing to acquire 100 planes worth more than $20 billion.
However, despite lifting of many sanctions, there remain several hurdles and uncertainties. Financing is central to most of these issues and securing a degree of certainty and transparency of process in international financial markets will be essential to stimulating new growth. Aircraft and related orders are ready to be implemented, but much hangs on decisions that must be made at a political level, across a range of disciplines.
Despite the removal of nuclear-related sanctions, the US maintains a set of its own embargoes against the Islamic Republic preventing US national and entities from trading with Iran. Now, Both the Airbus and Boeing orders are awaiting the US Treasury Department’s Office of Foreign Assets Control approval, whose licenses remain necessary for aircraft sales and leasing to Iran. Non-US entities are also required to obtain OFAC approval to sell, lease or transfer aircraft if they include more than 10% US-origin content or technology.
The challenges do not end there. Even with OFAC approval, the use of US dollars in transactions involving Iran is banned, and banks and lessors remain nervous about transactions being deemed to have touched the US financial system and the massive fines and additional scrutiny that would result.
More than 250 aircraft orders, and others in the pipeline, and billions of dollars of investment in airport infrastructure, are being held up as a result of the continued legal and regulatory uncertainty.
The upcoming CAPA summit will discuss key issues, namely:
- What is the status of international commercial banks with respect to sanctions?
- Are Chinese and other Asian banks likely to see an opportunity to finance aircraft transactions at this stage?
- How can restrictions on the use of US dollars for aircraft financing be addressed?
- What solutions and structures can be developed for the Iranian market to minimize risk for airlines and financiers? Can we draw from experience in other markets?
- What is the role and profile of export credit agencies as guarantors?
- Are lessors less sensitive to sanctions?
- What investment will Iran need to make in airport and airspace infrastructure to support projected growth?
- What role will private and foreign capital play?
- Which are the most suitable models and financing structures for airport and terminal upgrades and transactions?
- Which airline business models and aircraft types will be best suited to the Iranian market?
CAPA held its first international aviation summit in Iran after almost 40 years back on January 24 and 25. More than 160 foreign delegates from 35 countries attended, scrambling for the attention of senior officials in the government and Iran’s 16 domestic airlines. Aircraft manufacturers, lessors, financiers, IT specialists, spare parts suppliers, maintenance firms and interior designers were among the myriad companies looking to drum up business.
Established in 1990, CAPA provides independent aviation market intelligence, analyses and data services that support strategic decision-making at many of the world’s most recognized organizations.
