Last updated: 07:00 AM ET, Tue August 16 2016

Are Iran’s Big Aircraft Orders Too Ambitious?

Airlines & Airports | Paul Thompson | August 16, 2016

Are Iran’s Big Aircraft Orders Too Ambitious?

Photo by Paul Thompson

In January, the United States lifted an economic embargo against former foe Iran, allowing the country to finally purchase planes and aircraft parts by freeing up huge reserves of cash. But is their buying spree of 258 brand new planes too much too soon?

Shortly after the lift of the embargo, Iran’s national carrier Iran Air inked a purchasing agreement with Airbus for 118 aircraft. The “a little bit of everything” deal samples the whole Airbus catalogue and includes 45 narrowbodies (21 A320ceo, 24 A320neo) and 73 widebody jets (27 A330ceo, 18 A330-900, 16 A350-1000 and 12 A380-800). The cumulative order is worth $25 Billion, at list prices.

In February, Iran Air and ATR signed an order for up to 40 ATR 72-600s (20 firm plus 20 options) valued at $1.1 billion at list prices. ATR-72s are short-range, propeller-driven aircraft, holding about 70 people.

Iran is also said to be placing a large order from Boeing, for 80 additional jets (40 737 MAXs, 6 737 NGs, 15 777-300ERs, 15 777-9Xs, and four 747-8s) though the order has not been finalized.

READ MORE: Travel to Iran: Is It the Next Cuba?

And this month, Iran announced plans to buy 20 jets from Japan’s Mitsubishi Heavy Industries. The Mitsubishi Regional Jet (MRJ) is Japan’s first new airliner to be produced in five decades, and their first jet ever.

The diverse collection of these planes will allow Iran Air anywhere in a range from a couple hundred miles, to over 9,500 miles — but is there really a market for it? Iran isn’t exactly known as a tourist hotspot these days. But twenty years ago, places like Dubai and Croatia weren’t really on the radar for people looking to vacation either. A lot can happen in a short amount of time, especially with the release of $100 Billion resulting from the lifted sanctions. Apart from Oil, Iran would be smart to develop a tourism industry to protect itself from the volatility of its natural resources.

I picture Iran giving the U.S. very little if any attention as they grow. They might eventually fly a couple flights a week to JFK or LAX, but for a long time, there won’t be enough demand to make service profitable. The State Department continues to caution those who want to travel to Iran, saying “Iran has continued to harass, arrest, and detain U.S. citizens, in particular dual nationals.”

For the time being, Iran Air has more potential for success in the Eastern Hemisphere. They will use the ATRs and MRJs to fly to closer destinations like Dubai, Baghdad and Lebanon. The medium-range A320s and 737s will go to Europe and northern Africa. Finally, the longer range wide-body jets will go all the way to Australia, Japan, South Africa, South America, and possibly the U.S. These routes are of course hypothetical, as the airline has not yet announced expansion routes.

READ MORE: Iran Preparing For Major Tourist Influx

It’s important to remember that airlines place orders many years in advance, so if they're smart about it, they will pace their growth. Iran Air only has 42 planes in their fleet right now, and almost all of their new orders are for types they do not currently fly — which means the airline will have to hire and train hundreds of pilots, flight attendants, and mechanics to operate and maintain these new planes.

As a country, Iran could also copy what Qatar and Dubai have done, by positioning themselves as a major transfer hub and not necessarily a final destination. Right now, Tehran’s Imam Khomeini International Airport only serves about 850 flights per week. Air France was the first big international carrier to return to Tehran following the lift of sanctions in January, followed by Air Asia X and Lufthansa. British Airways will also be returning to Tehran, in September. 

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