The recently signed nuclear deal between Iran and six world powers enabled lifting the most cumbersome economic sanctions imposed on this nation. This document raised prospects for the country to benefit from its geographical location and large internal market while creating a strong aviation industry. Iran would like to emulate the success achieved in that field by other Gulf nations like the United Arab Emirates or Qatar and use the air transport to strengthen its economy, commerce, and trade. Does the country have a chance to achieve such ambitious goals? Will Teheran Imam Khomeini International Airport (IKA) be the next Dubai International Airport (DXB)? Will Iran Air (IR) be ever able to run against Emirates (EK), Qatar Airways (QR) or Etihad Airways (EY), convincing European or Asians customers to choose its services over much more acclaimed rivals? Finally, what could be the timeframe for such very uncertain events? All the above matters and questions I would like to discuss and try to answer or explain in my article.
The good starting point of the future deliberation could be to focus for a while on the small Emirate of Dubai, a part of the UAE, and its flag carrier Emirates, which started the aviation revolution in the region. What are the pillars of the EK success? Why does this carrier become a biggest international airline and how DXB grew to be the busiest international airport? Such analysis may further help to assess the prospect of Iran to accomplish similar goals, mainly because high government officials from that country indicated that would like to follow Emirates model to stimulate its growth.
Emirates was created around 30 years ago, once Gulf Air (then mutually owned by various countries in the region) denied increasing the number flights from and to Dubai. The current ruler of this small emirate Sheikh Mohammed bin Rashid al-Maktoum (then responsible for transport) had a plan which envisages the air travel to become an important part of city’s growth. That is why he needed own airline. The rapid EK expansion was possible due to various reasons which I will describe below.
Geographical location and demography
Dubai lies in the southeastern part of Persian Gulf at the intersection of transport routes from Europe to Southeast Asia and Africa to Central Asia. The Emirate is just between Asia, Africa, and Europe. Dubai authorities, due to fast ending oil reserves, decided the only way to guarantee the bright future and wealth of the emirate is to decrease its dependence on this raw material. The tough decision was made to transform the city into the leading regional hub for travel, tourism, and trade. Emirates started to connect the various places in the world with one stop in Dubai, using only wide-body airplanes. The carrier makes use of DXB unique location to revolutionize the long-haul air transport working 24 hours a day, seven days per week. Nearly 2/3 of the world population lives within 9 hours from Dubai, which additionally makes it an ideal hub for transit. The United Arab Emirates, which is a federation of seven emirates has a joint population of 6 million. Dubai is one of the emirates and due to its small size ( only 4 thousand square kilometers) and inhospitable environment (desserts) with high temperatures has to make use of the money from oil to reduce its dependence on it. It doesn’t have a big internal market that is why needed to turn abroad becoming a trade hub and the free economic zone. The development of aviation sector was the necessary way to achieve it.
Because Emirates was a part of the much bigger master plan, it got great support from its government. Dubai bounds its future with aviation creating a state of the art facilities and infrastructure. DXB handled 78,5 million passengers in 2015 as well as almost 2,4 million tons of cargo. It has become a 3rd busiest airport in the world, continually investing in improving its services. Additionally, new Dubai World Central (DWC) airport also known as Al Maktoum International Airport, was opened in 2010 for cargo and 2013 for passenger traffic. Currently, it has a capacity of 5-7 million travelers, but ultimately it should be capable of handling around 160 million passengers and 12 million tons of cargo. Dubai is also a home for many human-made wonders, iconic buildings or attractions, which capture people’s imagination and are tempting millions of tourist to visit Dubai each year.
Emirates built its network on only wide-body planes. The backbone of its fleet are Boeing 777-300ER (77W) and Airbus A380-800 (388). EK has 113 – (77W) and 74 – (388). Together both types constitute 187 out of 234 passenger planes in Emirates fleet. These are a very large and ultra large jets capable of carrying from 364 to 615 passengers. Location of Dubai Airport and airline strategy enable wide-body to wide-body transfers which significantly improve efficiency coming from the economy of scale.
The airline’s fleet is nothing without the pilots who fly the airplanes, the crews who serve the customers, the mechanics or the management team. Emirates owe its impressive growth especially to 3 exceptional people who were able to steer it capably from the inception to becoming the world’s leading airline. First of this gentleman, current Emir of Dubai, Sheikh Mohammed bin Rashid Al Maktoum created a vision of Dubai, which we know now. He was determined to build the diversified and healthy economy, where aviation plays the lead role. It helped to source the most capable and skillful managers as well as energetic, young and educated people to help Emirates to grow and develop. This unique environment and Dubai label of the most desirable place to live and earn, attract many specialists. Among them were Sir Maurice Flanagan the first CEO of the company and Sir Tim Clark. The latter is still the current director of the enterprise. Those three-man together with the great multinational team were able to build a whole new type of airline which becomes profitable, efficient and cherished in the industry.
The air carrier, since the beginning focused on high-quality service, onboard product and constant innovation to win the customer who had been using European and Asian legacy carriers before. Emirates was a pioneer in many aspects, introducing in-flight entertainment systems in all seats and classes, in-flight mobile calls, becoming a launch customer for A380 and Boeing 777X projects and much more. What’s even more remarkable, to meet envisioned tasks, it adopted more liberal approach towards serving alcohol onboard which encouraged hesitant potential customers to travel through Dubai. Additionally, Dubai liberalized the air service agreements and signed open skies arrangements with many other countries, helping the Emirates to conquer new markets and gain more customers.
Will to succeed
Dubai didn’t have other choice but plan a life after oil and gas run out. It has to risk a lot, becoming innovator and pioneer. The country had to stay active on multiple levels to make the whole “Dubai Inc.” to work. A Strong vision of the Emir, as well as the iron will of the entire nation, while executing bold plan caused the dream to come true.
All those factors do not exhaust the subject but give a general idea of what caused the tremendous success of Dubai International Airport and Emirates Airlines. What are the chances of Iran to follow that model and match the leading Gulf carriers and airports? To find it out let’s look at Iran.
There are not many countries with longer and finer history than Iran. The history of Persian people is interesting and complicated but is durably inscribed in its inhabitants’ souls and DNA. Despite many difficult moments, they are still proud of their origins and achievements. In 1979 the country turned into the path of isolationism and witnessed the Islamic Revolution which closed it for many decades. Now the chances are high that the political situation will change and Iran would become the full member of international community. The another wave of sanctions introduced in 2010 by the western world seems to deliver finally. Since the election of Mr. Hassan Rouhani in 2013, Iran took more moderate, liberal and pro-western course. The culmination point of new president’s policy was to roll back the sanctions. He was able to sign the nuclear deal in January 2016 and since then the country may have a brighter future ahead. However, he needs to act fast, and the nation has to see the benefits of new situation as soon as possible. Otherwise, they may give a vote of confidence for more radical and religious fraction again in the upcoming election. The opponents of Iran’s openness strategy are very strong and ready to use every chance to keep their pulling power in the state. That is why more progressive candidates have been recently removed from slate. Some analyst cools down the enthusiasm about positive changes in Iran, stating that the sustainable shift is not possible in a peaceful, gentle revolution. However, promising is the fact that well-educated people of Iran are willing to participate more actively in international trade and culture, continuing its heritage and traditions. They especially look forward to better quality products which could come from the West to compete with currently used mainly Chinese ones. Another significant threats for the country are growing instability in the middle east region or danger of military conflict with Saudi Arabia.
Because the current moves of the Iranian government suggest that Iran Air (IR) and Teheran Airport will be the flag carrier and main airport I will use them as a reference point for my article. Currently the airline flies to 13 European destinations as well as only a few points in Asia. This network is not sufficient to become the transfer airline and needs vast improvements, so as the plenty of other elements. How well is the country prepared to become the key aviation player in region? How does the carrier stack up against its Dubai based rival then?
Geographical location and demography
Iran lies southeast of Turkey, between the Caspian Sea, on the North and Persian Gulf, on the South. Teheran Imam Khomeini International Airport (IKA) is located around 2000 kilometers from Istanbul Ataturk Airport (IST) and 1200 kilometers from DXB. Which of these Middle Eastern hubs are best positioned to handle the passengers from Europe on their way to Asia and Australia or opposite?
Europe – Southeast Asia
Passengers traveling from London Heathrow (LHR) to Bangkok (BKK) have to cover a distance of 9600 kilometers on the direct flight. Theoretically using the hub in Teheran would increases the journey by only 350 kilometers (3,6%), Istanbul by 450 kilometers (4,6%), while transfer through Dubai by more than 800 kilometers (8,6%). After checking additional possible routes to Southeast Asia in terms of the distance the most convenient option would be Teheran, followed by Istanbul and Dubai.
Europe – South-Central Asia
The direct route between Frankfurt (FRA) and Delhi (DEL) is around 6100 kilometers long. Through IKA it is 200 kilometers longer (3,4%), through IST 300 kilometers (4,9%) and through Dubai 904 kilometers (14,7%). The hubs in Teheran and Istanbul are almost equally well located to operate to India. Again however IKA is slightly better. If you like to travel through DXB you have to spend one more hour in the air.
Europe – East Asia
East Asia is the region where Istanbul shows its advantage over more southern located hub in Teheran and Dubai. The direct route from Paris (CDG) to Shanghai (PVG) is 9300 kilometers long. Traveling through IST would extend the journey by 1000 kilometers (10,8%). Making a stop in IKA would require traveling additional 1350 kilometers (14,8%) while layover in Dubai 2400 kilometers (26%). If the distance is the only parameter, Istanbul would be the best airport to make a stop on the way to East Asia. Teheran is not much further but Dubai is even more distant.
Europe – Northeast Asia
In the unlikely event you travel from Europe to for example Japan you should certainly think about Istanbul in the first place. Analysis of the route from Milan (MXP) to Tokyo (NRT) which is 9800 kilometers long finds that IST serves the best (among above three) as an intermediary hub for this flight. The distance to NRT through IST is 900 kilometers (9,7%) longer while the one with a stop in IKA 1700 kilometers (17,5%). Dubai is definitely the furthest and extends the route by 2900 kilometers which is really a lot. Middle Eastern hubs are not the most convenient when it comes to flight to Northeast Asia.
Europe – Australia
The flights from Europe to Australia requires at least one stop during the way. Direct London to Sydney (SYD) route has 17000 kilometers and it is not possible for the modern planes to cover that distance efficiently and without heavy losses. Each of the Middle Eastern hubs are perfectly located to operate between those two continents. Journey through Teheran extend the route by 350 kilometers (1,9%), through Istanbul by 500 kilometers (2,7%) and through Dubai by 550 kilometers (3,1%). It is important to add that Dubai has the best balanced legs. The second leg from DXB to SYD is only 12000 kilometers long, while IKA-SYD is 13000 kilometers and IST-SYD 15000 kilometers. This makes IST-SYD connection really long, tiring, barely feasible and definitely less competitive.
Thinking about the location it important to take into the account also the traffic from and to Africa. Istanbul makes the most sense on the one stop routes from Europe to Africa, limiting the backtracking. IKA is slightly better positioned than DXB in that matter. Everything changes when we analyze Africa to Asia routes. In the most cases the DXB has the best location while IST is in the worst position. IKA is somewhere in between.
I believe the location of IKA between DXB and IST makes it most versatile and has the best geographical position to be the transfer hub for the traffic flows on the Middle East fractionally outperforming the current regional leaders in that category.
With the population of nearly 80 million and the territory of 1,6 million square kilometers, Iran may build its airlines growth around internal as well as the international traffic. The new, more open and liberal course may encourage foreign tourist to come to this beautiful and historic country to discover Persian culture. Currently domestic market is highly fragmented which could be a chance for Iran Air to consolidate it and give it a fresh impulse. As only IR has heathy financing source it may dominate the domestic market and in the same time start biting regional competitors. On the other hand, crawling Iranian airlines may be completely incapacitated by Turkish, Emirates or Qatar Airways.
The airport in Teheran is chronically underfunded and underdeveloped. It has handled 6,4 million passengers in 2014. Now, Iranian government would like to use around 55 billion USD of unfrozen assets on foreign bank accounts to finance its infrastructural needs. The funds were released due to lifting of sanctions. It will be used, among others, to upgrade IKA which is the primary airport in the country. During recent Mr. Rouhani’s visit in France, Iran signed the agreement with Airport de Paris to oversee the renovation and expansion of aging terminals. Currently the airport has capacity of 6,5 million passengers. The new plan envisages to increase it to 34 million by 2020. The needs of the country are much higher than that and all the airports, most of roads and railway lines needs modernization. It will take years to make this upgrades. The dramatic fall of oil prices are the additional problem for the dynamic president. Constructions have to be fueled by real money from oil sales and the stream could be much narrower than it could have been before. Iran has the fourth larges reserves of this natural resource. Additionally, there are many political uncertainties. In that point it is to early judge if Iran will be successful. The current leader has a lot of good will and energy but it is hard to predict if it would be enough.
It is estimated by specialists that around 500 will be ordered by carriers from Iran in the next five years. The fleets of the Iranian airlines are among the oldest in the world. Mahan Air, now the largest international carrier in this country owns the planes with the average age of almost 24 years. What is crucial, this airline is still under special umbrella of sanctions which don’t allow it to renew its fleet soon. ATA Airlines (I3) average fleet age is 22,5 years, Zagros Airlines (no IATA code) 24,5 years, Kish Airlines (Y9) 23,3 years and the rest is not better. Finally, a flag carrier, Iran Air (IR) has a fleet of 46 airplanes with the average age of 27 years. Some of its 747’s are 40 years old. The safety record of Iranian airlines is terrible and the only hope for the change is fleet renewal plus better maintenance and procedures. Only airline which may count on new aircrafts soon is Iran Air as their finances are guaranteed by the government. Airbus secured a preliminary agreement with Iran Air for 118 jets. The deal comprises of 73 wide-body long-haul aircrafts (12 A380-800s, 16 A350-1000s, 27 A330ceos and 18 A330neos) and 45 Airbus A320 family planes (21 A320ceos and 24 A320neos). The deliveries should start this year and end in 2023. In separate document ordered 40 ATR72-600 from ATR with the deliveries beginning in the end of 2016. Not all of the planes will go to Iran Air but the national carrier will receive a priority. Such ambitious fleet update program is definitely a big step forward. It will be surely extended by the similar agreement with Boeing in the close future.
Many months or years will pass until Iran will be a place to work for best international aviation manager. Without them it would be extremely difficult to create an answer for mighty Emirates, Turkish, Qatar or Etihad. All of those airlines created a great environment for specialist to find itself in different culture. United Arab Emirates in the first place and Qatar, opened up for the world and this gave the capability to absorb highly skilled workforce. There are surely many, very well educated and wise managers in Iran but I am afraid it won’t be enough. The exchange of knowledge and foreign influences are necessary to built the success of Iran Air and airport in Teheran. The example of Emirates may be a great illustration of this. New airplanes are nothing without the crews which could fly them. The enormous work should be done also in that field before Iran Air will be ready to compete with the regional and global.
Iran Air requires a massive upgrade in service level, onboard product, catering, fleet maintenance and repair, training as well as many more to be competitive. Finally, many of its strict religious customs should be loosen. If Iran Air would like to transport transfer passengers from more liberal countries is should for example allow to serve alcohol on board, which is very important for many of passengers. Additionally, foreign women should be released from the custom of covering heads and bodies when entering Iranian airspace on board of local airlines. The country is a very promising market but it could be domesticated by its regional rivals, if the quality of Iran Air is not comparable and attractive enough. That means the carrier doesn’t have much time to perform necessary changes as various competitors will won’t to take a share in this market. Teheran is reachable from Europe with both narrow-bodies and wide-bodies which makes it flexible for airlines. Additionally, the distance is large enough for making the long range planes service reasonable. Iran is different from UAE and Qatar because it has a big internal market. This could lead to different business model and strategy as well as less dependence on transfer passengers. It has almost identical population to Turkey and very large diaspora in foreign countries which could be linked with fatherland. Will it model its aviation sector growth after its western neighbor? Those questions are open and only time can tell what will happen.
Will to succeed
The current president of Iran knows that the time is running fast and he needs to make a rapid, precise and wise decisions to transform the both the country and the aviation sector. Opposite to Dubai, however, he doesn’t have an absolute power and is under the pressure of Ayatollahs and Revolutionary Guards. Even if he has a vision and determination it may not be enough as the country may go in the very different direction. Situation is too complicated to be able to predict it precisely.
Moreover, when Middle Easter carriers like Emirates or Qatar were created, along with taking some of the passengers from legacy Asian and European carrier they stimulated the demand by low prices and great onboard experience. They additionally make use of permanently growing world economy and people wiling to fly. They had no competition in the region. Iran, on the other hand is entering the market saturated by many different airlines and it would be much harder for it to find interesting place for itself.
My provisional analysis showed that Iranian aviation may have a future. It is however to early to draw a compelling picture of how it will change the region or world. There are too many unknowns and question marks but it is definitely a country worth intensive attention and it may have its another successful moment in history in 10 or 20 years.