Iran`s evolution flies in the face of adversity

AIR TRANSPORT
Even for the notoriously demanding airline industry, the
challenges faced by Iran Air on a daily basis are truly exceptional.
Chairman Farhad Parvaresh explains to Martin Rivers how the
flag-carrier is slowly but surely expanding its 50-aircraft fleet
and flying in the face of US sanctions as it does so.
Iran’s evolution
flies in the face
of adversity
A
lthough all flag-carriers are, to some extent,
entwined with the vagaries and fortunes of
their home government, few will have their
course through history as profoundly and irrevocably
altered as Iran Air.
From its founding as Iranian Airways in 1946 up until
its rapid expansion in the 1970s, the airline was
considered an early success story for Gulf aviation.
It became one of the first carriers to operate the
Boeing 747SP – deploying it on daily non-stop flights
from Tehran to New York – and had even placed an
order for two supersonic Concordes.
But, halfway through its history, the 1979 Islamic
Revolution completely reconfigured Iran’s standing on
the international stage. Iran Air came to be seen as a
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dangerous wing of a hostile government by America,
and its route network began contracting in tandem
with its list of overseas partners.
The shooting down of Iran Air Flight 655 by a US
warship in 1988 – which claimed the lives of 290
civilians – epitomised the level of suspicion between
the two sides. American officials claimed that they
misidentified the airliner as an attacking military jet,
though no formal apology was ever issued.
In the years that followed, international sanctions
blocked Iran Air from acquiring aircraft, spare parts and
even maintenance contracts. But the airline
hit back by developing complex and
Continued
secretive procurement channels that
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continue to source units from the
IRAN AIR
‘We have such a
variety because of
the sanctions, which
do not give us the
opportunity to
expand the fleet as
we would like.’
FARHAD PARVARESH
19
AIR TRANSPORT
IRAN AIR
CONTINUED FROM PAGE 18
‘We don’t see
a good future
with Boeing,
but Iranian
airlines have
been Airbus
operators for
a long time.’
secondary market.
“Today we have a fleet of 50 aircraft,” said
chairman Farhad Parvaresh, listing 16 Fokker
100s; “about nine” Boeing 747s, including four
SPs; six Airbus A320-200s; “three or four” cargo
aircraft; and an unspecified number of A310300s, A300-600s and A300B2Ks.
“It has always been our policy to purchase
aircraft, not to lease,” said Parvaresh. “We have
such a variety because of the sanctions, which do
not give us the opportunity to expand the fleet as
we would like.
“But there are lots of aircraft available now and
we have a lot of approaches. Of course, it’s not
easy to handle. You have to find ways. There are
always ways.”
The US Government is not shy about disrupting
these efforts. In May, the US Office of Foreign
Assets Control (OFAC) added three European and
central Asian carriers to its sanctions list, accusing
them of serving as intermediaries for dozens of
aircraft transactions with Iran Air and private
Iranian carrier Mahan Air.
Last year, US criminal proceedings were
launched against a Texas aircraft mechanic, who
allegedly conspired to broker a $136.5 million
deal for seven Airbus jets destined for Iran Air.
The allegations levied by OFAC could hardly be
more serious. It claims that Iran Air’s
Government owner uses such aircraft “to move
illicit cargo to Syria for the [President Bashar]
Assad regime’s violent crackdown against its own
citizens”. Previous allegations have centred on
munitions smuggling to militias in Iraq and
Afghanistan.
On-going transactions
But news of on-going transactions is not hard to
come by. Iranian carrier Aban Air briefly
hoodwinked Qantas into selling it a 747-300 in
March 2012, hiding behind a trail of paperwork
that saw the aircraft shuffled from Sydney to
Arizona to the United Arab Emirates to Gambia
and finally Tehran. The US got wind of the deal and
the aircraft has since been returned to the UAE.
Although many deals are thwarted, Flightglobal’s
Ascend database shows that Iran Air’s fleet includes
aircraft previously owned by the likes of Emirates
Airline, Turkish Airlines, All Nippon Airways, Iberia
and Finnair. There are even reports that Mahan Air
– working with Ukrainian intermediaries in 2011 –
acquired an A310 once used by German Chancellor
Angela Merkel.
Predictably, Parvaresh was unwilling to talk
about plans for specific transactions in the near
future. But he made no bones about discussing
the flag-carrier’s broader fleet requirements.
“This is not a secret for us, or for Boeing or
Airbus,” he began. “We have said that we need
more than 100 aircraft and they know this. We
don’t see a good future with Boeing, but Iranian
airlines have been Airbus operators for a long
time. The A320 family is a good fleet, and
specifically A320s and A321 would be a good fleet
for Iran, because Iran is a big country.”
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Fokker 100s are currently the workhorse of
Iran Air’s domestic fleet. About 95% of flights
operated by the 100-seater aircraft are to internal
destinations, Parvaresh said, linking up 30 of the
country’s roughly 75 airports.
It is a popular aircraft nationwide, with a total
of 45 units deployed by domestic carriers. But the
addition of Iran Air’s A320s has altered the
economics of some longer domestic routes.
“Five years ago we didn’t have any A320s. Now
we have a fleet of six and we plan to add to it,” he
continued. “We have some domestic flights which
are 2hrs 40mins in Iran. There are not many
countries in the world where you can fly for this
long domestically.”
The A330 and A340 are also potential targets
for the overseas network, while Parvaresh said he
will “wait and see” what the A350 is like.
Although Iran Air does not talk formally with
Boeing, he added that the two sides still run into
each other at air shows. “We are losing, and they
are losing as well,” he sighed.
The final straw
Russian-made aircraft are now largely shunned
by the flag-carrier. Although Tupolevs were once
commonplace in Iran, the fatal crash of a Caspian
Airlines Tu-154 near Tehran in July 2009 was the
final straw for the Iranian Civil Aviation
Organization (CAO).
Since 1993, three crashes involving subsidiary
Iran Air Tour’s Tu-154s had already claimed
more than 250 lives. Following comments by
Russian officials that blamed lax maintenance
standards for the latest incident, Tehran angrily
grounded the fleet in February 2011.
“We used to have Tupolevs in Iran but they are
all gone based on the CAO decision,” Parvaresh
confirmed. With the Government also cancelling
talks to buy up to 35 Tu-204s, he added: “There are
no more Tupolevs flying in Iran at all. Not even one.
“The Sukhoi Superjet 100 is the only [Russianmade] possibility for the future, in my opinion,” the
chairman said. “There are some discussions.
They’re not finalised yet.” However, he pointed out
that a high proportion of components in the type are
western-built. That means sanctions would almost
certainly come into play, as they do for Europeanmade Airbus jets that incorporate US parts.
Further down the road, Chinese aircraft like the
Comac C919 may have appeal. “For sure if Iranian
airlines are not able to expand their fleets with Boeing
or Airbus, they will automatically buy from China,”
Parvaresh said. “The future market is in China.”
It is easy to see why Iran’s appetite for new aircraft
continues growing year-on-year. The country is
home to more than 77 million people spread across
1.65 million square kilometres of territory.
The five-million strong Persian diaspora
maintains close relations with its homeland, and
this cumulatively creates “huge demand” for air
travel both inside and outside Iran’s borders.
There are now 16 domestic carriers, ranging in
size from two to 50 aircraft.
Indeed, were international relations not as they
are, Parvaresh dared to speculate on the country’s
true potential within the global aviation scene.
“Tehran would be a much better hub than Dubai
or Doha, for cargo and for passengers,” he said,
referring to its geographical location at the
crossroads between east and west. “Of course, if
we had the capability we would
Continued
expand like them, even more than
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them. But our expansion is still
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happening, just slowly.”
One impediment to growth is the need to
replace the country’s oldest aircraft, which are
fuel-inefficient and costly to maintain. Iran Air
withdrew its last 727 at the end of last year,
Parvaresh confirmed, with the oldest unit
reaching 37 years of age.
“I think the next [to be phased out] will be the
747SPs, one by one, and maybe the very old
A300s,” he said. Withdrawals will be made with
or without replacements lined up, he insisted,
adding: “If we think an aircraft is not economical,
if the overhauls cost too much, then it will be
phased out.”
Although the challenges of operating under
international sanctions are immense, the
restrictions only appear to have strengthened
Iran’s domestic aviation facilities.
Home-made aircraft such as the HESA IrAn140 – a variant of the Antonov An-140 – are not
popular with operators. But across the broader
civil aviation spectrum, the country has made
strides in growing its capabilities.
In December 2011, the CAO claimed that 98%
of MRO work on Iran’s Airbus, Boeing and
Fokker aircraft is now conducted inside the
country. It is a development which Parvaresh
welcomes.
“If you go back 20 years we were not able to do
C-checks or D-checks [domestically],” he
recalled. “Of course it has not been easy for us, but
we are able to do this now. We don’t send aircraft
outside of Iran for D-checks any more. As well as
building good facilities for overhauling aircraft, we
have our own pilots, we have our own technicians.”
Government subsidies
Other aspects of Iran Air’s business are showing
resilience, too. Parvaresh said that domestic load
factors remain above 85%, albeit with air fares
benefitting from continued Government
subsidies. The two-year-old privatisation process
is also nearing completion, with “more than 55%”
of the company expected to be sold to “two or
three parties” as soon as this autumn.
“Instead of being controlled by the
Government we will soon be able to rule the
company independently,” he said, though
privatisation will not end the sanctions. “This is
the Government’s goal as well as ours.”
And yet every step forward is accompanied by a
firm push back. OFAC’s enforcement action
targets the entire supply chain, including fuel
providers. Restrictions on supplying Iran Air with
fuel at London Heathrow briefly saw its 747s stop
over at Manston Airport in Kent on the return
journey to Tehran. But even though the tiny
airport had no US trade links, it bowed to intense
pressure from Washington and axed the
arrangement.
Although other suppliers have held firm,
disruptive stop-overs and above-average fuel
charges are the norm.
Other sanctions-related difficulties have
included a “considerable delay” – in the words of
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Rome boost to Iran Air network
Despite the best efforts of the US Government to ground Iran Air, the flag-carrier continues to operate a
network of around 60 destinations.
Roughly half of its routes are domestic but it maintains links with key regional partners such as Lebanon,
Qatar and the United Arab Emirates.
Further afield, while Iran Air has only a modest presence in Asia, it serves around a dozen major European
cities.
The airline recently restored Rome to its network, Parvaresh said, though he admitted that overseas
expansion is problematic. “We have a lot of competition on international flights,” the chairman explained. “If
Iran Air flies to Frankfurt, then Lufthansa wants to fly to Tehran. And you cannot compare our problems with
theirs.”
Sanctions affect the commercial viability of Iran Air’s international routes in a variety of ways. As well as
driving up the carrier’s operating costs – by blocking its ability to purchase modern aircraft, or even to sign
fuel contracts at airports – they have a deeper impact on Iran’s currency.
The Rial lost two-thirds of its value against the dollar last year, as America and Europe tightened
restrictions on Iran’s oil exports and blocked it from the global banking system. This, in turn, pushed Iran Air’s
foreign ticket prices up by as much as 90%.
“The competition is very hard and the price is not controlled by the Government,” Parvaresh said, drawing
a distinction between heavily-subsidised domestic routes and free-market international routes. “But we are
surviving. We are still in the market.”
The myriad of difficulties has forced all Iranian carriers to focus on their strengths. While Iran Air
consolidates its presence in Europe, Mahan Air is seeking to grow in the Far East. The private carrier
launched a new service to Guangzhou in China last May, complementing its existing services to Shanghai,
Bangkok, Kuala Lumpur and Delhi.
Other airlines are turning to markets that have shown solidarity with Iran in the long-running sanctions
battle. Istanbul, for example, is now served by about 10 of Iran’s 16 airlines.
In the domestic market, reports that Qatar Airways was looking to begin cabotage services in Iran quietly
fizzled out in 2011. Parvaresh confirmed that talks reached an advanced stage, but he said some Iranian
carriers raised objections, citing the lack of a level playing field. “They were right I think,” he concluded. “It
may be discussed again in the future, but not now.”
Swedish investigation commission SHK – into
the probe of a January 2010 engine failure that
struck an Iran Air A300 in Stockholm. The airline
was even suspended from IATA’s clearing house
payment system due to sanctions.
“We are used to having problems,” Parvaresh
said with a wry smile. “But we have been able to
solve them so far. As I said, there are always ways.”
Though he fastidiously avoided politics
throughout the interview – focusing on the
challenges at hand, rather than their geopolitical
causes – Parvaresh’s true feelings came to light
when he was asked about his country’s air safety
record. More than 700 Iranian passengers have
been killed in 13 aircraft crashes since 2005.
OFAC’s sweeping sanctions cover maintenance
contracts, spare parts and documentation such as
operating manuals.
“As a person who has been working in aviation
for a long time, I really don’t understand this,” he
said. “This is a safety issue. This has nothing to do
with politics. We are not only carrying Iranian
civilians, we are carrying foreign civilians too. The
only effects of these sanctions will be on innocent
people, not on the Government. The people don’t
understand it.”
Those words carry a chilling significance when
set against the comments of US Congressman
Brad Sherman, who wrote in 2011: “Critics [of
tougher sanctions] argued that these measures
will hurt the Iranian people. Quite frankly, we
need to do just that.”
Nonetheless, Parvaresh quickly restored his
optimistic demeanour. “We are always hopeful,”
he insisted. “For all the people in my company,
and even for the politicians if you talk to them, it is
a safety issue… I hope the US will consider it as a
separate issue. This is not the right way.”