While Iran Air has brilliantly maneuvered around sanctions, since they went into place in 1979, the airline has been placed in an extremely tough situation since the 1995 implementation of Total Embargo on U.S. Dealings With Iran by U.S. President Bill Clinton. Although the International Civil Aviation Organization (ICAO) repotted that the Total Embargo on U.S. Dealings With Iran violates Article 44 of the 1944 Convention on International Civil Aviation in 2005, which the United States signed, the sanctions impacting Iranian airlines are still enforced, leaving the Iran Air to seek other options for ensuring its future.
The option Iran Air has decided on selling half of its shares, plus one additional share, to private shareholders, making the government a minority share holder. On the 19th of March the shares will be placed on the market. The shares being placed on the market are currently valued at US1,200,000,000.
By selling the majority of Iran Air to private share holders, making the government a minority share holder, the airline should be able to skirt the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010, which was passed on the 24th of June 2010 by the U.S. House and Senate, then signed in to law on the 1st of July 2010 by President Barack Obama.
Iran Air’s transition from a government owned airline, to a publicly traded airline, owned by private share holders, should allow the airline to normalize relations with fuel providers in Europe and begin building new relationships with Boeing and Airbus for OEM support of their aircraft and the purchase of new aircraft. With the average aircraft in Iran Air’s fleet pushing 22 year of age, the airline intends to reduce the average age of its fleet to 15 years or younger by 2015, then purchase 50 new aircraft over the following five years, with an additional 100 aircraft to be leased.
Iran Air, with loans from the Iranian National Development Fund, is taking a radical new step in its financial future, in addition to selling off more then 50% of the company’s shares, by reevaluating its domestic routes and terminating non-profitable routes. This change in internal management, route network and ownership is a big change for the company, but likely the only change that will allow the airline to survive long into the future.
Iran Air has had an incredible aviation history; especially given the hardships they have endured and conquered, in the face of sanctions and embargoes severing their ties to aerospace industry manufacturers. It will be interesting to see what the future holds for them as they make dramatic transitions and make a bold move towards securing their future.