The secondary market could possibly cater in part or in full to Iran’s demand for up to 90 new aircraft units annually if it could put in place a clear financing framework.

“We are monitoring Iran very closely,” Mounir Kuzbari, managing director at aircraft leasing and financing firm Novus Aviation Capital, tells MEED.

The slowing economy particularly in Asia amid capacity build-up in recent years means there is potentially enough supply of leased aircrafts over the short- to medium term. “Shrinking demand means overcapacity… which could lead some airlines [in Asia] to streamline their fleet to avoid further losses or bankruptcy,” explains Kuzbari. “Those planes might as well be sold to the secondary market… and be made available for lease.”

The Iranian government has indicated earlier this year that they would require up to 90 aircraft units annually for the next five years to overhaul its ageing aviation sector. While the source of funding for this ambitious programme remains the most important issue, delivering 90 aircraft a year is also a major challenge particularly for the two largest manufacturers, Boeing and Airbus, which already have significant order backlogs.

It could take years before either manufacturer could deliver Iran their first aircraft, provided all relevant sanctions are lifted and the overall commercial environment allows the sale of brand new aircrafts to the Islamic republic.

Most analysts have indicated that the secondary market, in addition to smaller aircraft manufacturers with fewer backlog, is the key to address Iran’s immediate need to overhaul its aviation sector, where much of its 250 planes are deemed not air-worthy due to age.

Leasing aircrafts, however, is as much an option for Iran’s cash-strapped airlines as well as for other airlines in the region. Novus’ largest client, for instance, is Dubai’s Emirates Airline.

Globally, airlines aim to have an equal split between owned and leased aircrafts to protect their balance sheet, according to Kuzbari. “It is a common practice even for the most profitable airlines to buy new airplanes, sell them to a leasing company and then lease them back in order to conserve cash and protect themselves during a down cycle,” he explains.

Selling planes to a leasing company is also a lucrative option for airlines that find themselves at the rear end of a long backlog, or wanted access to newer aircraft models.

Lack of credit-worthiness, as is the case for many airlines in Iran and several others in the Gulf, has also made leasing aircrafts a viable option to acquiring new planes.