Iran Seeks To Privatize Iran Air to Skirt U.S. Sanctions

Iran’s national flag carrier Iran Air has masterfully skirted U.S. economic sanctions since they were first implemented in 1979.

 

Since 1979, when the United States implemented its first economic sanctions against Iran, in response to the Iranian Revolution overthrowing the Shah of Iran, Iran Air has operated significant American made Boeing fleet. Currently Iran Air regularly flies two Boeing 727s and ten variants of the 747, along with 13 recently acquired Boeing MD-80s for Iran Air Tours.

 

Under President Clinton’s 1995 Total Embargo on U.S. Dealings With Iran aerospace manufacturers and equipment vendors are prohibited from selling aircraft and maintenance parts to any of Iran’s airlines.

 

In 2005 the United Nation’s International Civil Aviation Organization (ICAO) reported on the impact of U.S. sanctions on Iran’s airlines. The findings of the ICAO report unequivocally state that U.S. sanctions on Iran endanger the safety of civil aviation Iran, due to the prevention of the nation’s airlines from acquiring essential support and parts. The ICAO’s report further states that the U.S. sanctions against Iran’s airlines are contrary to Article 44 of the 1944 Convention on International Civil Aviation, which the United States was party to signing.  Further more, the ICAO report states that the U.S. sanction impact on Iranian airlines ignores the international laws that place the impact of aviation safety on human lives and human rights above political interests.

 

 

So where does this leave Iran Air and its subsidiaries? In the position of seeking to privatize the national flag carrier airline.  The Iranian government intends to sell Iran Air in excess of US$1,600,000,000 to a domestic buyer.   While Tehran had originally intended to divest itself of Iran Air in 2007 under a national plan to cede the majority of wholly owned government companies to the private sector, Iran Air was retained as a prized possession of the government.

 

Presently Farhad Parvaresh, Iran Air’s Chairman & CEO, is unsure exactly who may purchase Iran Air, however it is possible that the airline may be purchased by a quasi-government owned corporation on the 20th of September.  The sale of the airline is expected to be a loss maker for whoever purchases Iran Air, with the understanding that the company and its subsidiaries need to be independent of the government to move forward and be financially successful.

 

Iran Air’s financial situation has been exacerbated over the past year as the airline has dealt with European fuel providers canceling contracts to avoid negative ramifications from the U.S. European fuel providers refusing to fuel Iran Air flights at various European airports has since required Iran Air to alter their schedule, reduce fleet utilization and incur additional landing fees to pick up fuel en route.

 

Along with Iran Air’s refueling problems, on the 24th of June 2010 the U.S. House and Senate passed the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010, which was signed into law on the 1st of July by President Obama, further tightening the noose on finical dealings with Iran and government owned corporations.

 

Tehran sees the privatization of Iran Air as a step in a more neutral direction for the airline.  The shifting of Iran Air from state a owned entity to a privately owned corporation allows for greater flexibility in navigating around the current sanctions, allowing the airline to update its aging fleet of aircraft and have access to consistent and open stream of maintenance, repair and overhaul supplies.  Presently Iran Air must use back channels to acquire parts and new aircraft, frequently brokering deals through the UAE, Turkey and the Ukraine.

 

The immediate benefit of Iran Air being privatized would be the airline being able to lease new non-U.S. manufactured aircraft, such a Airbus and Sukhoi Superjet International airplanes.

 

The present cost of the sanctions restricting U.S. corporations doing business with Iran Air, and commercial airlines in Iran, is potentially costing Boeing an estimated US$10-billon to US$15-billion in revenue, in both aircraft sales and post sales support and services. With Iran Air’s average fleet age hovering around nearly 22 years of age, with a number of aircraft predating the original 1979 sanctions, the airline is actively looking to modernize its fleet. With the privatization of the airline, Iran Air intends to reduce the average age of its fleet to 15 years old in less than five years, and potentially purchase more than 50 new aircraft over the five years for future deliveries.

 

Happy Flying!

@flyingwithfish