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Recession Shows Cracks in Aviation Industry

Recession Shows Cracks in Aviation IndustryRecession Shows Cracks in Aviation Industry

The row between airliners and state-owned airports operator Iran Airports Company over their overdue debt to the company for providing them airport services for years is raging on.

Gholamhossein Baqerian, IAC’s member of the board, announced that the company moved a court to issue an arrest warrant for Iran Aseman Airline’s chief executive, Hossein Alaei, Fars News Agency reported last week.

The operator requested an arrest warrant after Aseman declined to repay its debt to the company.

Aseman Airline released a statement to Tasnim News Agency on Saturday denying knowledge of an arrest warrant for Alaei. The airline also denied owing any money to IAC. Both companies are government owned.

IAC has not disclosed any details about the sum and the nature of these debts. However, it claims Aseman and other state-owned and private airlines—including flagship carrier Iran Air—owe it 7-8 trillion rials ($199-227 million at market exchange rate).

According to Tasnim citing unknown officials, the debt could rack up to 10 trillion rials ($284 million) once fines for the delay in payments are taken into account.

The court filing against Aseman has led other creditors to the carrier to call in their loans and “some aviation experts say it could damage the company’s foreign contracts,” Tejarat-e Farda weekly reported.

Carriers have declined to pay for airport services for years. Since the government set ticket prices, carriers thought they had the right to free airport services.

The government did not pressure airlines to pay their dues, which accounted for their losses from having to offer flights at government regulated prices. Reality hit all parties, as Iran’s airports operator became unable to cover its own liabilities.

During this time, airlines were buying property—land, hotels, administrative buildings and even houses—with their revenues, while debt accumulated on their balance sheets, which they could not repay.

Economist Ali Dadpay says a resale of the property owned by these airliners would not solve the problem either. Even if they manage to find buyers, they would get less than the price they paid for them due to the prevailing recession.

It’s the story of Iran’s economy and the ending is crystal clear. Executives buy property, which has nothing to do with their line of work. Banks have done the same and are technically bankrupt because of it. They make the investments on the false assumption that property prices will always go up. Recession hits and everybody comes cap in hand to the government.

They get bailed out some way or another without the knowledge of the public. The taxpayer always pays for the mistakes of inept executives.

 

Financialtribune.com