Last updated: 12:30 PM ET, Thu January 21 2016

Iran's Airlines To Make Huge Orders For New Planes

Airlines & Airports | Josh Lew | January 21, 2016

Iran's Airlines To Make Huge Orders For New Planes

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The sanctions against Iran have been lifted, and the former pariah is now ready to jump-start its economy. The country’s oil industry will bring in some much-needed revenue, and other sectors will also be able to grow. Iran’s air travel industry already has big plans that could lead to a huge windfall for the world’s top airplane manufacturers. 

Over the past weekend, Iranian Transport Minister Abbas Akhoundi told reporters that his country planned to buy 114 commercial airplanes from Airbus. The rules set out by international sanctions previously did not allow the country or its carriers to purchase new aircraft from any of the world's best plane makers. 

A boon for manufacturers

This huge purchase will cost Iran more than $10 billion if it buys the planes at their listed prices. Airbus will be responding to the order rather quickly. It plans to deliver the first planes by July of this year. According to Airbus, the planes will be flown by national carrier Iran Air. Most will be smaller craft such as the Airbus A320. These will be used to help bolster domestic and regional services. Experts also expect the 114-plane order to include a few larger Airbus A340s, which will be put work on mid-range and long-haul routes. 

READ MORE: Iran Preparing For Major Tourist Influx

Airbus CEO Tom Enders has said that he thinks the initial hundred-plus order may only be the beginning. He hypothesized that Iranian carriers could order as many as 500 aircraft in the coming decade. The country’s three major brands, Iran Air, Mahan and ATA, all have fleets with planes that average more than 20 years of age. Some of the sanctions involving the purchase of commercial craft were actually a response to the 1979 Iranian Revolution, not to the country’s nuclear program.

Even the “little guys” can benefit

Some of the world’s second tier aircraft manufacturers are also closely watching Iran’s air industry. Because they have been enjoying record profits in recent months, major carriers from around the world have been making orders and buying purchase options from manufacturing giants Airbus and Boeing. The most popular models from these two companies are basically “sold out” for years to come. That means that Iranian airlines could eventually look to Brazilian maker Embraer or Canada’s Bombardier to meet their need for new jets. 

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Embraer executive Paulo César de Souza e Silva told the Wall Street Journal that his company was closely studying potential opportunities in Iran, saying “there is a huge opportunity for us there.”  Many of the aging planes in the country’s commercial fleets are smaller craft similar to the ones that Embraer is adept at producing. 

Major airlines to begin service to Iran

Meanwhile, major airlines, especially those based in Europe, are eyeing the Iranian market. AirFrance/KLM has announced that it will begin service to Tehran this spring, while British Airways is also hinting at the possibility of resuming flights to Iran’s capital. 

Everyone is moving cautiously at this early date. Iran is the biggest economy to open up to the world since the end of the Soviet Union. However, there is no guarantee that sanctions will not be reinstated if Iran fails to hold up its end of the bargain. It has a history of testing how far it can push before the West reacts. This kind of brinksmanship could cause a snap return of sanctions, leaving airlines and manufactures with orders and services that have suddenly become illegal under international law again. 

For now though, airline manufacturers can reap the rewards as Iranian airlines update their aged fleets. 

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