What Future Awaits Iran Air?

Iran's national airline, Iran Air, faced numerous challenges prior to the lifting of sanctions, which escalated into a new phase of difficulties starting in 2011, leading to the company's near closure. However, following the sanctions' removal, the airline is now purchasing and receiving new aircraft and has begun restructuring under a new CEO. Recently, Farhad Parvaresh, the former CEO of Iran Air, handed over his position to Farzaneh Sharafbafi, the first female CEO of the airline. Sharafbafi holds a PhD in aerospace from Sharif University of Technology, and many hope that her expertise will transform Iran Air. Parvaresh has detailed the sanctions' impact on Iran Air, including issues like fuel supply disruptions. He stated that during the sanctions, Iran Air faced significant challenges, including the inability to secure fuel for its aircraft, which led to extensive planning to maintain over 4,500 flight schedules to keep international routes operational. The cost of each flight was estimated at around $20,000, totaling approximately $90 million over the years. With intensified sanctions in 2011, most companies worldwide refrained from selling fuel to Iran Air. Parvaresh explained that they had to deal in cash with the few remaining airports, as the Central Bank could not procure euros, forcing Iran Air to source cash from various locations to continue its European flights. In October 2010, the IATA director suddenly informed him that all of Iran Air's accounts would be closed globally, and despite requests for a grace period to withdraw funds, this was denied. As banking sanctions increased, 60 of Iran Air's accounts were closed, and many airports ceased fuel supply to the airline. They required euros for refueling in Europe, but the Central Bank could not provide euros and suggested receiving Omani rials to convert to euros in global markets. Many airports announced they would stop supplying fuel, and for a time, only one airport in Prague provided fuel to Iran Air. The pressure was so intense that even the U.S. ambassador warned a Thai company that they would withdraw their shares if fuel supply to Iran continued. During this period, Iran Air needed $20,000 to fill each aircraft's tank and conduct flights, while many airports limited them to carrying no more than $15,000 in cash. They were forced to operate only a small portion of their wide-body aircraft, incurring high costs. Following the initial nuclear agreement, Boeing was willing to supply some spare parts to Iran Air and repair certain aircraft and engines that had severe safety issues at its facilities outside the U.S. Parvaresh mentioned that during the nuclear negotiations, he was appointed as a representative for the transportation sector to work alongside Foreign Minister Zarif and other officials. After the JCPOA, two years of continuous work led to final contracts, with one contract alone comprising 900 pages, reflecting the extensive work done over the months. Months before the nuclear agreement, Iran Air began negotiations with Airbus and Boeing at the Paris Air Show for aircraft purchases, ultimately reaching the largest agreements in the aviation industry, surpassing even the glory days of Iran Air. Currently, Iran Air has finalized contracts to purchase 80 aircraft from Boeing, 100 from Airbus, and 20 from ATR. The ATR aircraft are short-range, while 50 of the Boeing models (737) are narrow-body and medium-range. Of the Airbus contract, 46 aircraft are narrow-body series 320. This indicates that in the new purchases, which total 200 aircraft, 116 are narrow-body (58%) and 42% are wide-body. Evaluations suggest that as Iran's national airline, Iran Air should consider a purchase ratio of 40% wide-body and 60% narrow-body based on Iran's needs. The company is also in extensive negotiations with Mitsubishi for regional jets seating 80 to 100 passengers. With the Airbus A350 and Boeing 777, Iran Air can cover all routes globally. With these new purchases, Iran Air seems to be aiming for a mixed fleet of various models from different companies to achieve the best coverage for its multi-mission objectives. Beyond the weaknesses in its fleet, which could be rectified with current contracts (assuming no new sanctions or reinstatement of previous ones), Iran Air faces other serious challenges. One of its strengths is its skilled pilots and suitable catering, but with the arrival of new aircraft, the company will require a large number of new flight crews. Additionally, its service methods have become outdated, with sales and marketing strategies dating back 40 years. The operational body of Iran Air operates at low efficiency, leading to significant debts to many domestic and foreign companies due to low productivity. The change in the CEO is part of this restructuring. Farzaneh Sharafbafi has currently been appointed as the head of Iran Air. She is the first woman in Iran to achieve such a position in the aviation industry. Beyond her gender, her relevant education and work experience in Iran's aviation sector are significant advantages. She holds a PhD in aerospace and has served on the board of directors of Iran Air, with responsibilities including director of research and human resources development, head of the training and human resources development center, senior quality assurance in engineering and maintenance, and secretary of the scientific association of air transport in the country. Nevertheless, if she is confirmed as CEO, she will face a challenging path ahead. With the acquisition of new aircraft, Iran Air has the potential for a complete transformation, potentially generating substantial revenues like airlines in neighboring countries such as Emirates and Turkish Airlines. Currently, Iranians spend over $3 billion annually on purchasing tickets from foreign airlines, and with the expansion of transit and tourism to Iran, the company could achieve several billion dollars in annual sales. The biggest obstacle to achieving this goal, aside from structural weaknesses in Iranian airports or strict regulations for travelers, is the issue of online ticket sales and the use of international cards. Another major weakness is in marketing and sales. A significant problem for Iran Air stems from imposed management or outdated managerial thinking within the company. Abbas Akhoundi, the Minister of Roads and Urban Development, told the new CEO Farzaneh Sharafbafi: 'Iran Air's goal should be customer satisfaction. Although fleet renewal will occur over time, Iran Air must adhere to passenger rights guidelines and make every effort to minimize delays and provide the best services to customers. Ultimately, the top success indicator for Iran Air is customer satisfaction.'