We note with interest that there is news about doubts Iran will take delivery of those A380s.  The Airbus order has yet to be formally completed.  We have also heard the deal on the A380 is unlikely to be completed.

Iran’s decision on the A380 may have been a deal sweetener for both sides.  But there is a big risk for the airline to acquire an aircraft this size.  Iran has to re-enter the market and attract traffic.  The airline has ambitions to turn Tehran into a regional hub like Dubai, Abu Dhabi and Doha.  For Tehran to reach the same levels as these hubs is a long way off. Almost certainly longer than the five years when the A380s are meant to come on stream.

Iran does have a far larger O&D potential than the three regional hubs because it is a far bigger country.  But it will take a long time to develop sufficient economic activity across a broad swath of the population to require that much seat capacity.  We also expect Iran will take more than five years to develop any competitive hub activity to divert traffic away from the big three in the Gulf.  Moreover, second hand A380s will likely be available at that time if things go as well as the most optimistic expect.  Airbus might even have a larger A350 available when Iran has to consider.

So the Iran deal with Airbus is still evolving.  As it does, one might want to regard the forthcoming Boeing deal with the same amount of skepticism.  Iran remains a great market opportunity. But these deals will take time to settle.

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