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Iranian aviation industry will witness strong growth post removal of sanctions: Threat of renewed sanctions under Trump presidency nevertheless persist.
After decades of sanctions, the US government under Obama announced in early 2016 that it was lifting sanctions on Iran, due to the latter’s compliance with the IAEA over its nuclear programme. One of the strongest beneficiaries of this removal of US led western sanctions on Iran seems to be the Iranian aviation industry, which in recent months has concluded billion dollar deals with major aircraft producers such as Boeing and Airbus, for the purchase of hundreds of planes.
The deal with Boeing alone is said to go as far up as $17.6bn. Iran has hence expressed a keen desire to expand its aviation sector greatly in the coming years.
In the aftermath of the UN and US imposed sanctions on Iran, the country’s aviation industry suffered strongly as it was unable to purchase new passenger jets from some of its most commonly used sources such as Boeing. The sanctions also prevented Iranian airline companies from purchasing spare parts for planes they already had in possession prior to the imposition of sanctions.
This forced the country to either purchase spare parts for its existent fleet from the black market, or look towards non-western, primarily Russian airplane manufacturers as a substitute to the likes of Boeing. However after a series of consistent aircraft accidents of Russian jets involving jets produced by the likes of Ilyushin and Tupolev, Iran increasingly started looking towards spare parts for its Western origin jets again.
The Iranian aviation industry has been artificially held back these sanctions, and for that reason alone, the recent purchase of 100s of new jets should result in strong growth in the country’s aviation industry. The fact that the country has a relatively large population, ranks as the 17th largest country by landmass and geographically also is located between Europe and the Asia-Pacific, making it a potential transit hub comparable to the likes of Dubai or Istanbul, ensure that the country has all the ingredients available for its aviation industry to expand strongly in the near future.
However the threat of renewed sanctions being imposed by the Trump administration remains for the time being, and it will take some time before the country’s infrastructure is able to meet the increasing demand for air tavel. These reasons act as potential deterrents to strong growth in the Iranian industry. Nevertheless if the Iranian government is able to adopt suitable financial plans to expand the aviation infrastructure in the country and also reach some sort of understanding with international players like Trump politically, then the Iranian aviation industry will certainly witness very strong growth in the coming years.
For further reading please see our analyst insight on Iranian airlines recent airplane acquisitions at https://www.marketline.com