Issue 9 - A Sneak Peek into Iran's Aviation Market

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A SNEAK PEEK INTO IRAN’S AVIATION MARKET IRAN: A READY MARKET WITH HUGE POTENTIAL A Large Population And Strong Economy, Ready To Take Off Iran, officially known as the Islamic Republic of Iran, is home to one of the world’s oldest civilizations. Formerly known as Persia, Iran currently houses a population of 80 million, which is similar in size to Germany. Iran is the second largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia, with an estimated Gross Domestic Product (GDP) in 2014 of US$406.3 billion. It is also the second largest population of the region after Egypt. Tehran is the country's capital and largest city, as well as its leading cultural and economic center. Iran is a major regional and middle power, with considerable influence in international energy security and the world economy through its large reserves of fossil fuels. It has the second largest natural gas supply in the world and the fourth-largest proven oil reserves. Iran’s economy is characterized by a large hydrocarbon sector, small scale agriculture and services sectors, and a noticeable state presence in manufacturing and financial services. Economic activity and government revenues still depend to a large extent on oil revenues. Lifting of Nuclear-Related Sanctions Presents Business Opportunities As a result of Iran’s nuclear programs, various sanctions have been imposed on Iran over the past decade which resulted in the country being isolated from the world politically and economically. When Iran demonstrated a peaceful nuclear project that met IAEA standards, a reconciliatory tone began to rise which resulted in United Nations (UN) nuclear-related sanctions being lifted on 16 January 2016. The lifting of the international trade sanctions against Iran opened up fresh trade and investment opportunities. Iran will be able to access about US$100 billion in frozen funds. It will also allow the country to increase its oil revenue exponentially to the tune of between US$3 billion and US$4 billion dollars a month by the end of the year even at the current low crude oil prices. The injection of funds will unleash a strong demand internally and offer numerous business opportunities for countries that trade and do businesses with the Islamic Republic such as Airbus and Boeing. However, a “snap-back mechanism” is in place to impose the sanction should Iran violate its side of the agreement - if, for example, it failed to keep its nuclear programs under the agreed strict limits. Meanwhile, terrorism-related sanctions still remains in place, which impacts entities such as Mahan Air from engaging in international business as it is still listed as an alleged sponsor of terrorism. These restrictions, which apply to companies located within the US and international companies located abroad, continue to present issues for companies seeking to deal with Iranian entities. For instance, in spite of Airbus inking a US$27 billion agreement with Iran shortly after the lifting of sanctions, the deal remains unclear as big banks still refuse to finance Iranian payments due to concerns over existing US sanctions. Similarly, Boeing is close to concluding a deal with Iran but the politically delicate agreement would still be subjected to US government scrutiny and approval. 2
A SNEAK PEEK INTO IRAN’S AVIATION MARKET OVERVIEW OF IRAN’S INTERNATIONAL AVIATION LANDSCAPE A Fast Growing Aviation Market With Potential For More Traffic And Connectivity Despite the sanctions being in place, OD traffic between Iran and the world has been progressing at a compound annual growth rate (CAGR) of 3% over the past five years. More noticeably, traffic recovered strongly in 2015, registering high of 6.8 million, which represents a 11% growth year-on-year (YOY). 5 Year CAGR: +3% OD Traffic between Iran and the World 6,841,495 5,997,665 5,526,583 5,267,087 6,142,220 +11% YoY 2011 2012 2013 2014 2015 In terms of the top international destinations, the United Arab Emirates, Turkey and Germany remains the top three international air routes for Iran due to the close business and tourism ties between the various countries. With direct connectivity to Iran, regional hubs such as Malaysia and Thailand are amongst the top 20 aviation markets for Iran. Top 20 International Aviation Markets for Iran in 2015 United Arab Emirates 1,436,751 Turkey 1,177,236 Germany 465,775 Saudi Arabia 409,949 Iraq 389,269 China 260,100 India 218,882 Kuwait 176,327 Bahrain 174,664 Qatar 156,880 Afghanistan 156,657 Italy 118,081 Sweden 107,898 United Kingdom 102,857 Pakistan 95,460 Malaysia 92,097 Armenia 79,309 Thailand 77,385 Oman 72,726 Japan 67,863 Sources: IATA Airport-IS 3
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Issue 9 - A Sneak Peek into Iran&#039;s Aviation Market

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Issue 9 - A Sneak Peek into Iran's Aviation Market