Iran Air drops plans to buy Russian aircraft over cost fears

06 June 2008
Iran Air has abandoned plans to update its fleet with new Russian Tupolev aircraft, after deciding that the move is not cost-effective.

The Islamic republic’s national carrier announced plans late last year to buy up to 35 Russian-made planes. However, company officials now say it will be too expensive to alter the airline’s infrastructure to accommodate the aircraft.

Instead, the carrier is reviving plans to buy second-hand Airbus or Boeings worth up to $1bn (MEED 21:11:07).

“Other [Iranian] airlines under the guidance of the government are buying Russian-made aircraft, but not Iran Air,” says Behrooz Raeisi, deputy managing director of commercial planning at the airline. “We would have to change the whole infrastructure, and shifting from US or European planes to Russian is not easy.”

The airline’s efforts to replace its ageing fleet have been hampered by the US embargo on the sale of US-made equipment to the country, which also covers Airbus aircraft as they have parts made in the US. Iran Air says the embargo does not affect planes that are 15 years old or more.

However, buying old aircraft at a time of record oil prices could prove a false economy as older planes are far less fuel-efficient than modern aircraft.

“Iran has been trying to get European or American-made aircraft through intermediaries but it is very slow,” concedes Emir Houshang Safaei, the airline’s manager in Istanbul. “The type of aircraft we are looking for is not in the market much. After 15 years they are not in a good condition.”

Despite the difficulties in finding planes, Safaei says the $1bn budget is “no problem”.

Last year, a bid to buy planes from China fell through following intervention by the US Department of State (MEED 15:6:07).

Tehran is also pushing ahead with a partial privatisation of Iran Air, in a move that Raeisi says will cut the company’s costs by 25 per cent. The sales, catering, flight handling, supply, cabin crew and maintenance divisions are being spun off as separate companies.

Over the coming months, each unit will be floated on the Tehran stock market, with the government retaining a 51 per cent stake.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications