President Hassan Rouhani has ordered prompt action to address the issue of exorbitant air ticket prices, the head of Iran’s Cultural Heritage, Handicrafts and Tourism Organization said.
Ali Asghar Mounesan made the statement during a speech in Fars Province, noting that the presidential instruction was communicated to the Ministry of Industries, Mining and Trade on Tuesday.
Airfares increased sharply after the new set of forex policies were enforced early this month as part of which airlines were excluded from the list of the industries eligible for subsidized foreign exchange.
Prices more than doubled for domestic flights and certain foreign airlines began to illegally offer tickets at foreign currencies.
Travel experts warned that the transportation industry and consequently tourism will be severely affected by the hike and air travel will most likely be eliminated from the expenses of low- and middle-income households.
The directive of the Civil Aviation Organization of Iran saying that the airlines’ required forex would be allocated at the rates set by the Central Bank of Iran’s Sana system failed to stem the surge in prices as the Sana rate is only meagerly lower than the free market rate.
Sana rates are the average of exchange rates at which foreign currencies are traded at exchange shops on any given day.
CAO also required foreign airlines to sell their tickets in rials but unofficial reports show that a number of them have refused to fall into line.
Changing Trend
With the decline in demand, operating routes to Iran seems no longer economically justifiable for foreign airlines.
British Airways and Air France were first to announce a halt in their flights to Iran saying that “the operation is currently not commercially viable” or “the connection is not profitable anymore.”
In a letter to First Vice President Es’haq Jahangiri, the ICHHTO head requested the urgent establishment of a joint committee with representatives from ICHHTO, CAO and the CBI to study all the aspects of the problem and work out realistic solutions.
Nevertheless, Roads and Urban Development Minister Abbas Akhoundi maintained in one of his speeches that “protection of the aviation industry against sanctions is more crucial for the country than controlling airfares.”
He suggested that airlines upload their prices on their portals and limit the share of chartered flights.
“Chartered flights have experienced bigger increases than official airline prices,” he said, advising the public to purchase their tickets directly from airlines rather than charterers.
Differing Views
The statement drew widespread reaction from the parliament. Hadi Bahadori, a lawmaker, stressed that “the aviation industry lives off passengers and will collapse once they are sacrificed.”
CAO, meanwhile, is against interference with prices and staunchly backs the free market pricing.
Ali Abedzadeh, president of CAO, said returning to previous conditions—when the government meddled in airfare rates—will spell doom for the aviation industry.
“Air transport is a benchmark of a country’s development and correct policies should not be abandoned,” he said.
Morteza Dehqan, a deputy at the CAO, also noted that half of domestic airlines’ expenses are paid in foreign exchange (so they are directly affected by forex rate fluctuations).
“Sanctions put great pressure on airlines in supplying their needed aircraft and parts,” he said.
Mohammad Moheb-Khodaei, tourism deputy at ICHHTO, said his organization is not calling for rolling back free market pricing, but rather a cap for the prices.
“Travel agents and airlines will incur losses with the growth in prices because the public’s purchasing power has not increased,” he said.
The final fate of air travel is yet to be determined following the presidential order.
