A Commercial Aviation Consultancy

Iran has been under sanctions on commercial aviation since 1995.  Its airlines fly old aircraft and safety has been compromised frequently.  The national fleet averages 22 years old.  One report suggests that 100 grounded aircraft could come back into service once parts can be bought.

For the fleet still operational, Iran has had to suffer service disruptions of all sorts. In the EU, fuel supply has been a frequent problem.  During sanctions an estimated 1,700 people have died in Iranian aircraft crashes.

Take a look at this 727 doing an emergency landing in 2011 without an operational nose wheel. It is a remarkable flying skill that nobody got hurt – there were 94 passengers and 19 crew on this flight.

The recent rapprochement between Western nations and Iran has come about quite suddenly.  The surprise is a surprise in itself.  The Economist had a story in July which asked why the Iranians were talking about flying the US.  It appears the US officials and Iranians have been talking for months.

Iranians developed all sorts of ways to get around sanctions.  Iran is no different than any other nation suffering sanctions.  Beating the limits are a source of national pride.

Looking forward what might come next?  Iran will almost certainly devote a sizable chunk of released blocked funds to allow its airlines to get new equipment.  Many of the older aircraft simply do not warrant repair.  We expect the OEMs are excited by the chance to sell new aircraft and engines.

Given the current market situation, options are tight. The latest aircraft will take years to become available to Iran’s airlines.  This means the “new” aircraft Iran can acquire would be second hand.  We expect to see a number of A340s, for example, finding homes in Iran. Better airline economics creates a series of positives for Iran’s airlines. Firstly much improved safety ensures the airlines can charge more for seats.  Next, maintenance costs will drop and fuel burn will improve.  For example, Iran’s airlines will not have to give up precious seats to maintenance personnel on flights.  Overall, newer aircraft would be a big win for Iranian airlines.

We expect to see Iran’s airlines give priority to Airbus over Boeing.   Flag carrier, Iran Air, has 23 Airbus aircraft out of its fleet of 51.  Moreover, disdain for the United States will not dissipate for a while.

OEMs are right to be excited, Iran could require between 250 and 400 newer aircraft.  Relaxation of sanctions is not yet in full swing.  However, one  expects that there is pent up demand for this on both sides in commercial aviation.

© 2013, Addison Schonland. All rights reserved.

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