Iran: Persian potential

Boeing B777-9

Will there be a fourth major Gulf airline? With Iran now removed from the sanctions list, it seems national carrier Iran Air is looking to join the ranks of Emirates, Etihad and Qatar Airways.

As soon as the restrictions were lifted on January 16, Iran Air agreed to receive a large fleet of aircraft worth US$27 billion. Until now, the flag carrier had been flying with ageing planes, some of which were 35 years old.

The initial deal was for no fewer than 118 aircraft from European manufacturer Airbus. A future order may go to Boeing. This was followed soon after by an agreement to purchase 72 ATR commuter planes from French-Italian manufacturer ATR. Twenty of these are firm orders and are expected to be in service later this year. Now a further contract has been signed to acquire 50 aircraft from Brazilian manufacturer Embraer.

Airbus won the lion’s share of potential business. Provided everything goes according to plan, Iran Air will be taking delivery of 73 long-haul and 45 short-haul aircraft. These comprise 12 A380s, 16 A350s and 45 A330s. Short-haul planes are all sourced from the A320 family. Deliveries are not likely to be completed until 2023.

GLORY DAYS

Whether or not Iran Air might become a major Gulf carrier is up for debate. On the plus side, Iran has a large population of almost 80 million, and a good number will wish to travel.

Iran Air also has history on its side. Back in the 1970s, in the era of the Shah, it was a small version of Emirates beginning to expand its global reach thanks to some mentoring from US carrier Pan Am. An IATA (International Air Transport Association) member, at the time it was the most glamorous and most Westernised of the Middle Eastern airlines. Unlike the others, it had an attractive livery and fashionable uniforms (especially for female cabin staff). Onboard food and drink and in-flight service were to Western standards.

In 1972, I managed to fly the former Iran Air from London Heathrow to Tehran on a B727. There were no nonstop flights in those days. It was a US pilot (on secondment from Pan Am) and stops were made en route at Paris Orly (Charles de Gaulle had yet to be built) and Istanbul.

In the early 1970s, Bahrain-based Gulf Air was primarily a regional carrier, controlled by our state-owned BOAC until the middle of that decade, while the likes of Dubai-based Emirates, Abu Dhabi’s Etihad and Doha-based Qatar Airways simply didn’t exist. Emirates – the first of today’s large Gulf carriers – did not appear until 1985. In fact, it could be claimed that the rise of the Gulf carriers came about through the absence of Iran Air and, to a lesser extent, Iraqi Airways, which was also developing a long-haul network.

When Iran Air does return, it will face a totally different market. In the 1970s, fares and competition were controlled by IATA. The idea was for members to have a level playing field. It didn’t always happen, but it did lead to an orderly, albeit expensive, marketplace for the traveller. IATA controlled onboard service standards to the nth degree. Member airlines were allowed to serve free drinks only in first class, while economy passengers had to pay. IATA even prescribed an “IATA sandwich”, which had to be of a certain size and composition. And it would not agree to members having business class, so Iran Air, like its rivals, operated two-class flights.

WORK TO DO

Today’s Iran Air will have a state-of-the-art fleet but that’s no guarantee for success. It is true that many Iranians will prefer their national carrier, but the younger members of society will want a taste of the West. In this case, the airline will be entering a dog-eat-dog marketplace – especially in the Gulf, where standards are high.

For a number of years, the Gulf carriers have been the unofficial “national airlines” of Iran. With Iran Air restricted to using 35-year-old aircraft and limited in where it could fly (Iran still has no aviation treaty with the US), the Gulf airlines have been free to syphon off huge numbers of passengers from Tehran and regional Iranian cities. Emirates has already operated an A380 into Tehran to prove it could handle the superjumbo. Iran will have to invest in huge infrastructure projects to stand any chance of competing. Many thousands of flight crew, engineers and onboard staff will need to be trained to handle modern, sophisticated planes.

If the country’s national airline wants to succeed globally in today’s conditions, it will need to recruit top-class expatriates to share best practice and develop up-to-date products. To compete with foreign carriers, Iran Air must meet the needs of global travellers. Whether the government likes it or not, that means free drinks in all classes, along with attractive, modern in-flight entertainment and fully-flat seating in the premium cabins. Otherwise, it will end up as a niche airline rather than a global player.

It is safe to assume that commuter planes will be used to develop domestic and regional routes. Long-haul aircraft will service Europe and Asia. Its A380s will be rostered on US and busy European routes, assuming that the traffic rights can be obtained.

THE COMPETITION

Iran boasts several other airlines, large and small. Privately owned Mahan Air is the nearest rival to state-owned Iran Air. But unlike the latter, Mahan Air circumvented sanctions by obtaining eight ex-Virgin Atlantic A340s from third parties, which angered the US government. Although US sanctions remain in place, Mahan Air is slowly expanding its long-haul network and has begun flying to Europe and Asia.

No North American or Asian airline has yet announced definite plans for Tehran, so it’s left to the Europeans to lead the way. Most foreign carriers (except those from the Gulf) withdrew from Tehran during the period of sanctions. Only Lufthansa and Austrian Airlines retained a limited service.

In March, Austrian added extra flights, while Air France will restart services from Paris CDG this month. British Airways will launch six flights a week from Heathrow in July using a four-class B777-200. Last month, Iran and the UK signed an aviation treaty allowing up to 21 weekly flights between the two nations. Lufthansa was due to launch Munich-Tehran flights last month but this has been pushed back to July, while its budget subsidiary, Eurowings, has put its planned Cologne-Tehran route on hold.

If Iran Air succeeds in developing a competitive product, it will have to hone its marketing skills, as the region’s airlines are not sitting still. Most of them (including Turkish Airlines, with Istanbul New airport on the way) intend to boost capacity imminently.


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