Economy, Business And Markets

Lender Accepts Planes as Collateral

Lender Accepts Planes as Collateral Lender Accepts Planes as Collateral

In a measure unheard of in recent Iranian economic developments, Bank Day has decided to accept aircraft as collateral from domestic carriers wanting loans to purchase new planes. The move is the latest bid to expedite renovation of the ageing air fleet, FNA reported on Saturday quoting the managing director of the private lender.

“Since last year, several aircraft have been purchased through the new initiative and three to five Airbus will join the national air fleet this year using the facilities made available by Day Bank,” Ahmad Shafizadeh said.

Bank Day is one of several local private banks and the only commercial lender so far to accept aircraft as collateral. The bank’s CEO, however, did not provide details of the purchase, nor gave the name(s) of airlines that had made the new purchases by borrowing from his bank.    

Tehran has been unable to upgrade its commercial fleet for more than three decades because of US and western sanctions imposed on the country soon after the 1979 Islamic Revolution.  

The two main manufacturers Airbus and Boeing simply refused to deal with Tehran because of the sanctions (and US pressure) that were further tightened over the past 12 years over the protracted nuclear dispute.

Some private companies were able, albeit with immense difficulty, to lease second-hand planes and also procure spare parts from neighboring countries, especially Russia. However the deals with Moscow fell apart due to the poor safety record of Russian- made aircraft and several fatal accidents.

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However, last month news reports quoted a civil aviation official as saying that Iran plans to buy 80 to 90 Airbus and Boeing passenger planes per year until 300 are in place to replace its aging fleet.

Civil Aviation Organisation (CAO) deputy chief Mohammad Khodakarami said the July 14 nuclear deal struck with western powers lifts a ban preventing Iran from purchasing new planes and spare parts.

“We must add 80 to 90 planes to our fleet each year in order to have 300 new and operational ones,” Khodakarami was quoted as saying. He said the CAO would renovate the national fleet by purchasing an equal number of Airbus and Boeing planes at an estimated cost of $20 billion (18.2 billion euros).

The restrictions, which have been blamed for crippling the industry, were partially lifted by an interim agreement on Iran’s nuclear program that came into force in January 2014.

This allowed for the sale of spare parts, though direct sales of planes remained banned.

Khodakarami said the historic deal struck in July “stipulates clearly that the ban on buying or leasing planes as well as the transfer of engines or spare parts has been lifted”.

In May, Transport Minister Abbas Akhoundi said that Iranian airlines had obtained 15 used planes since February as part of efforts to renovate the country’s aging fleet.