Star Alliance members, Lufthansa and Austrian Airlines have moved quickly to take advantage of an expected growth in demand for flights into Iran following the relaxation of international sanctions with a notable growth of their services for summer 2016.
Lufthansa is to launch a new three times weekly link between its Munich hub and Tehran from April 14, 2016 using an Airbus A330-300, while also boosting capacity on its existing Frankfurt – Tehran service by switching from an A340-600 to a Boeing 747-400. Meanwhile, Austrian Airlines is to introduce a second daily rotation on its Vienna – Tehran route from March 11, 2016 with a new day flight complementing its existing night operation.
“We are receiving clear signals of a revival in economic relations between Austria and Iran from the business community and political decision makers”, said Andreas Otto, Chief Commercial Officer, Austrian Airlines. “Here we wanted to react quickly.”
The 'new' Lufthansa flight actually represents the resumption of a route that was offered for a short period in the last decade with flights between April 2004 and the summer of 2006. “Following the reduction of sanctions and the re-activation of economic ties related to these, we expect a strong increase in demand for business travel. For cultural travellers Iran will become increasingly interesting as well,” said Thomas Klühr, Member of the Lufthansa German Airlines Board, Finances & Hub Munich.
Many industry observers believe that Iran will be the next boom market for the industryand other airlines are likely to add new capacity into the country. Aircraft manufacturers, lessors and brokers are already looking to place large amounts of new and second-hand equipment into the market to renew the ageing fleets of Iran’s airlines after “the sale of commercial passenger aircraft and related parts and services to Iran” was put among the priorities after the lifting of sanctions.
This is a market potentially valued at around $20 billion, according to economic analysts and could amount to around 300 aircraft. "We have an active fleet of only 150 and the average age is very high," said Mohammad Khodakarami, Director of Iran's Civil Aviation Organization. "Many of the planes are grounded because they need repairs. We need to bring the average down below 15 years, and we need 150-passenger capacity aircraft for international flights."
Iran itself has revealed plans build seven new international airports in the next ten years to meet pent up demand for passenger air travel as well as grow its existing airport infrastructure. Last month the Iran Airports & Aviation Development Forum said it would build additional terminals at 27 airports, and was planning $8 billion of new construction work in the Araz, Qom and the Ikia regions.
Speaking at the first Iran Transportation and Urban Development Summit, in Tehran earlier this month, Abbas Akhoundi, Minister of Roads and Urban Development, said a second terminal at Imam Khomeini International Airport in Tehran will be opened next year, almost doubling capacity and supporting an expected growth in international flights.
It is still early days in the development of new markets to and from Iran but there is certainly the beginning of some momentum, according to John Grant, a consultant at MIDAS Aviation.
“Data from OAG shows that the regional Gulf carriers are already moving into secondary markets with notable activity from the likes of Etihad Airways, flydubai and Qatar Airways. In the case of flydubai alone they have added some seven destinations (Tehran and Mashhad in August 2014 and flights to Ahwaz, Esfahan, Hamadan, Shiraz and Tabriz followed in March 2015) with a capacity increase of some 20,000 seats versus last year,” he told Routesonline this week.
“That initial momentum will inevitably lead to more services from a range of carriers across both the legacy and low-cost sectors and it wouldn’t be unreasonable to see growth of perhaps 10-15 per cent in capacity over the next few years as the market responds to greater trade opportunities and the chance to re-connect with diaspora populations around the globe,” he added.
Flight schedule data from OAG shows that the Iranian domestic market hit a high of just under 16 million network seats in 2011, but has since seen a notable fall in levels. This year, based on published schedules, overall domestic seats are forecasted to fall below the ten million figure for the first time in more than ten years, due to ongoing domestic capacity cuts at IranAir, reductions at Caspian Airlines, Faraz Qeshm Airline, Iran Air Tours, Iran Aseman Airlines and Kish Air and the end of domestic scheduled flights by Iranian Naft Airlines.
The domestic decline has been balanced by a continued rise in international connectivity with departure seats forecasted to exceed the five million milestone for the first time in 2015, based on published schedules. This is a rise of 10.2 per cent versus last year and a ten year growth of 76.7 per cent.
Following the Iranian Revolution of 1979, the United States has imposed sanctions against Iran and expanded them in 1995 to include firms dealing with the Iranian government. Numerous governments and multinational entities also impose sanctions against Iran and this has taken a significant toll on Iran’s economy and aviation industry, blocking the import of new aircraft and parts.
The issues have been related to a number of factors, but notably including Iran's uranium enrichment programme, which Western governments fear is intended for developing the capability to produce nuclear weapons – Iran argues it is for civilian purposes, including generating electricity and for medical purposes.
However, a meeting between the P5+1 (China, France, Russia, the United Kingdom, and the United States; plus Germany) and Iran, in Lausanne, Switzerland this April reached a provisional agreement on a framework that, once finalised and implemented, would lift most of the sanctions in exchange for limits on Iran's nuclear programmes extending for at least ten years. An agreement was signed by the nations in Vienna, Austria in July and endorsed by the United Nations Security Council.
In the last week ‘Adoption day’ of the agreement took place, and although preparations to suspend nuclear-related sanctions on Iran have begun, punitive economic measures will not be lifted until Tehran complies with every agreed measure to limit its nuclear programme, a process that could take months, according to state officials.