The conversation will be held to outline the context, business opportunities and arms

of the aviation industry set for needed development in Iran post-sanction. These
include airlines, airports and regulatory bodies.
CONTEXT
Iran is the second largest economy in the Middle East and North Africa (MENA)
region after Saudi Arabia, having an estimated gross domestic product (GDP) of
USD404 billion in 2014, according to the World Bank. With a population of almost 79
million, Iran is similar in size to Turkey but with an economy characterised by a large
energy sector. Iran ranks second in the world in natural gas reserves and fourth in
proven crude oil reserves. Aggregate GDP and government revenues still depend to
a large extent on oil revenues and are therefore intrinsically volatile especially
given recent falls in oil prices. Iran is a market with enormous potential the lifting of
sanctions will surely produce a flurry of international expansion.

Mahan Air, now larger than flag carrier Iran Air, has been growing in China while
waiting for European opportunities. Mahan and Iran Air currently account for about
35% of seat capacity in Irans international market. Turkish Airlines serves seven
cities and has more favourable geography for connections to Europe and North
America. It is the largest foreign carrier in Iran with about a 12% share of
international seat capacity, followed by Emirates with 9%. Flydubai has a 6% share
but serves nine cities in Iran more than any foreign carrier. Iranian airlines will be

competing primarily with Gulf network carriers Emirates, Flydubai, Etihad and
Qatar Airways as well as Turkish Airlines. These airlines have geographically
convenient hubs, strong local traffic, and are amongst the largest foreign carriers
serving Iran. Turkish Airlines operates four-fifths (80%) of the number of international
seats to/from Iran as Iran Air does. These three Gulf carriers and Turkish have an
average fleet age of under seven years.

After extensive negotiations and discussions between leaders of some of the most
powerful countries, a deal was finally struck earlier this year that could signal the end
of tough sanctions for Iran. Provided Iran complies with the peaceful terms of the
nuclear agreement and satisfies the International Atomic Energy Agency of its future
intentions to meet the terms of the deal, wide-ranging EU and US sanctions currently
in place across various sectors could start to be lifted.
Whilst this is certainly progress for business in Iran, there will undoubtedly follow a
long period of transition before many Western organisations will be free (and

confident) to conduct business there without the need to consider the restrictions.
However, the aviation industry appears to have been granted a slightly easier, and
quicker, route to open trade as a result of a prioritised carve-out in the deal. This has
generally been perceived as a positive step by those in the sector with many
highlighting the acute need for investment in Irans aviation stock and infrastructure
as long overdue.

The prospect of the lifting of US aviation sanctions has sparked a flurry of interest
among investors in the industry who have previously avoided conducting business in
Iran. The difficulty of trading amongst the sanctions has broadly been two-fold.
Firstly, the bars on bringing aircraft parts into Iran has led to an increasingly out-ofdate fleet (the average age being more than 20 years) and operational safety
problems arising from the absence of investment. This also puts the Irans aviation

industry to being unable to have an MRO industry for post-Revolution aircraft types.
Dealings of aircraft trade were also under spotlight pre-lift of sanctions, with Mahan
Air acquiring ex-VS A340-600 aircraft.

An earlier interim nuclear agreement gave Boeing Co. and engine-maker General
Electric Co. the green light to provide some spare parts for U.S.-made planes in
service in Iran since the 1970s. Boeing says it has only sold one spare part along
with some service bulletins and other materials since that deal came into force last
year. The pending agreement upon sanctions being lifted allows for licenses on the
sale of commercial aircraft, and Transportation Minister Abbas Akhoundi has said his
country is prepared to spend about $20 billion to purchase some 400 aircraft over
the coming decade. Boeings Mideast communications head, Fakher Daghestani,
said the company is reviewing the deal but until the U.S. government gives us
further direction, it would be premature to comment. GE, which also has U.S.

licenses to sell some medical equipment in Iran, said it looks forward to reviewing
the details of the agreement and will watch the regulatory landscape that may
unfold. Airlines across the Persian Gulf from Iran are ramping up operations as
interest grows.

Below; Iran Air Fleet Profile (January 2016)

Aircraft Type

Current

Future Historic Avg. Age

Total

Airbus A300

13

30.3 Years

18

Airbus A310

25.9 Years

Airbus A320

20.3 Years

Airbus A340

Boeing 727

Boeing 737

Boeing 747

Douglas DC-8

Fokker F70 / F100

McDonnell Douglas DC-9

16

36.0 Years

16

22

23.3 Years

20

Aircraft Type

Current

McDonnell Douglas MD-80

Total

45

Future Historic Avg. Age

48

Total

25.3 Years

26.8 Years

93

Below; Mahan Air Fleet Profile (January 2016)

Aircraft Type

Current Future Historic Avg. Age

Airbus A300

18

27.6 Years 23

Airbus A310

10

25.6 Years 13

Airbus A320

Airbus A321

Total

Airbus A340

11

15.7 Years 11

Boeing 747

26.9 Years 5

British Aerospace BAe 146/Avro

RJ

17

22.5 Years 18

McDonnell Douglas MD-80

Tupolev Tu-154

Aircraft Type

Current Future Historic Avg. Age

Tupolev Tu-204

Total

Total

61

24

23.6 Years 86

Below; Iran Aseman Airlines fleet Profile (January 2016)

Aircraft Type

Current

ATR 42/72

Airbus A320

Future

Historic

Avg. Age

Total

20.2 Years

22.7 Years

Airbus A340

24.0 Years

Boeing 727

35.7 Years

Boeing 737

23.7 Years

Fokker F70 / F100

18

23.2 Years

21

Total

33

23.8 Years

40

BUSINESS OPPORTUNITY
But all seems behind (for now) with new announcements for infrastructure renewal
and rapid economic growth upon sanctions being lifted. The decreasing dependence

on road-transit in favour of rail and air based transport gives an opportunity for
modernisation technologies to flourish in the Iranian market. But with sanctions
compliance notwithstanding, businesses and entities seeking to do trade in Iran must
understand the commercial risk of doing business in Iran through political, financial,
legal & security contexts. Areas where the Iranian economy predominantly lacks is
development, design, engineering and joint investment for production and export. In
this aspect Western businesses can help to bridge the gap by investing in the above
sectors and assisting in transfer of technology through joint venture collaboration and
partnership with the private sector. However, with the most complex sanctions
regime still in place, companies seeking to do business in Iran must conduct crucial
due diligence before entering the Iranian market. Companies and businesses that
have failed to comply with sanctions have been penalised heavily for sanctions
breeches meaning that due diligence and appropriate market-preparation is critical.
There are also plenty of legal tests which must also be overcome, for foreigninvestments to materialize in a law-abiding manner, as will be discussed as follows.
A Business Opportunity Appendix (inter-industrial) is placed at the end of the article
for reference.

AIRLINES
The big order came through late January, where Iran Air (IR, Tehran Mehrabad) has
signed an agreement with Airbus Industrie (AIB, Toulouse Blagnac) for the
acquisition of 118 aircraft critical to its fleet renewal plans. Announced during
President Hassan Rouhanis ongoing official visit to France, the order entails: twentyone A320ceo family jets; twenty-four A320neo family jets; twenty-seven A330ceo
family jets; eighteen A330neo (-900) jets; sixteen A350-1000s; and twelve A380800s. The order also includes pilot, maintenance training, and support services
critical to the new fleets entry into service. Todays announcement is the start of reestablishing our civil aviation sector into the envy of the region and along with
partners like Airbus well ensure the highest world standards, Farhad Parvaresh,
Iran Air Chairman and CEO, said. Parallel to that agreement, Irans Minister of
Roads and Urban Development, Dr. Abbas Ahmad Akhoundi, signed a

comprehensive co-operation agreement with the Europeans which will see Irans civil
aviation infrastructure and regulatory oversight overhauled and modernized. Among
the areas involved in the deal are Irans air navigation services (ATM), airport and
aircraft operations, regulatory harmonization, technical and academic training, as
well as MRO and industrial cooperation.

There was also a signing an agreement 3 days later with Avions de Transport
Rgional (Toulouse Blagnac) for the acquisition of forty ATR72-600s. Of the aircraft,
twenty are firm orders while the rest are options. The deal was signed in Tehran this
week and follows commercial discussions held in Rome and Paris during Iranian
president Hassan Rouhani and Minister of Transport Abbas Ahmad Akhoundis
official visits to Italy and France late last month. During the negotiations, the Italian
and French governments played an important role through the participation of their
respective export credit agencies Sace and Coface. As previously reported, Iran Air
is considering setting up a domestic air-taxi service to increase connectivity among
the countrys more remote and underserved regions. At present, Iran Aseman
Airlines (EP, Tehran Mehrabad) is the only Iranian operator of ATR equipment with a
fleet of four ATR72-200s and two ATR72-500s.

The signing of 20+20 ATR76s come after Iran Air considered setting up a regional
subsidiary which will focus on the Iranian domestic market. Outlining his airlines tenyear growth plan, Iran Air chairman Farhad Parvaresh told the recently ended CAPA
Iran Aviation Summit 2016 that the proposed unit would likely operate 50- to 100seater aircraft. Iran Air currently serves Abadan, Ahwaz, Ardabil, Bandar Abbas,
Birjand, Bushehr, Chah-Bahar, Gheshm, Gorgan, Isfahan Intl, Kerman,
Kermanshah, Kish, Lar, Mashad, Rasht, Shiraz, Tabriz, Urmieh, Yazd, and Zahedan
locally. The flights operate in conjunction with Bukovyna Airlines (BQ, Chernovtsy)
using MD-82 as well as Fokker 100 equipment.
On the leisure/LCC aspect of things, Irans aviation industry wishes to facilitate the
full spectrum of service variety. This is displayed with intel provided that Meraj Air (JI,
Tehran Mehrabad) vice president Iraj Ronaghi says the airline has drawn up plans to
bolster its domestic operations through the opening of two new bases to supplement

existing ones at Tehran Imam Khomeini and Tehran Mehrabad. Meraj Air intends to
open up more routes to leisure destinations such as the islands of the Persian Gulf,
he told the CAPA Iran Aviation Summit 2016. Though it operates an aged fleet of two
A300-600s, three A320-200s, one A321-200, one A340-300 (VIP), two B707-300s,
and one B737-200Adv, Ronaghi said the airline hoped to acquire an unspecified
number of regional jets in order to add another 2000 seats in the next two to three
years, then another 1000 seats over the next five-year period.

Also on the Airline side;

Discount carrier FlyDubai launched a major expansion to Iranian destinations

from its base in the Mideasts busiest airport of Dubai, announcing five new Iranian
destinations on top of two it already serves

Dubais Emirates, the regions biggest carrier, this month announced flights to
Irans second-largest city of Mashhad, with 5-weekly A330-200 services. It already
flies to Tehran.Etihad made no formal announcement as of yet.

Qatar Airways studies to expand operations of narrowbodies and freighters to

Iran upon refinement of bilateral relationships.

Air France set to resume Tehran on April 18 2016

British Airways set to resume Tehran on 14th July 2016

Lufthansa and Austrian already operates Frankfurt/Vienna to Tehran, while

adding Munich on 15th April 2016

Mahan Air set to start Boryspil and Copenhagen, with more announcements
to come.

Irans AWA Airways adds maiden aircraft, and set to begin commercial
operations.

AIRPORTS

Airports around Iran adopted its airport infrastructure around lower capacities and
capabilities in regards to handling variety of aircraft types. Besides Tehrans Imam
Khomeini International Airport, most airports in Iran are in dire need for development.
An agreement with the Iranian Ministry of Roads & Urban Development and the Iran
Airports Company was signed by during the state visit to France of Irans president,
Hassan Rouhani. Mashhad is the countrys second-largest airport and Isfahan is the
fifth-largest. The agreement is the first step in a process that should result in work to
renovate, extend and operate the two airports. The airport in Mashhad, which
recorded 8.2 million passengers in 2014, is located in the northeast of the country
and serves the countrys second-largest city, a holy city that attracts more than 20
million pilgrims every year. The Isfahan airport, with 2.6 million passengers in 2014,
serves Irans third-largest city, which was the capital of the Persian empire in the
16th and 17th centuries and is known for its cultural and historic heritage. The deal
follows the recent effective lifting of international sanctions. Vinci sees airport activity
as holding major economic potential in Iran, given its large population and territory as
well as increases in tourism, which grew more than 35% in 2014.

Another deal was also struck, with Parsabad airport is set to reopen to all traffic
following the upcoming completion of runway resurfacing and terminal expansion
works. Located in Irans northwest near the border with Azerbaijan, the airfield is
expected to reopen sometime during the second and third quarter of this year.
Tehran has announced an ambitious aviation infrastructure modernization
programme following the recent upliftment of sanctions. During the recently ended
CAPA Iran Aviation Summit 2016, Iranian minister of roads and urban development
Dr Abbas Akhoundi said plans to expand Tehran Imam Khomeini International Airport
were at an advanced stage while noting that only ten of the more than sixty-five
operational airports in Iran, at present, have adequate infrastructure. This, he said,
created tremendous opportunity for foreign investment and partnerships. For his

part, Iran Air (IR, Tehran Mehrabad) chairman Farhad Parvaresh expressed
optimism that the airline would be readmitted to IATAs billing and payment systems
which would tremendously simplify its revenue collection and payments for
overflights, airport fees and other services. Iran was suspended from IATAs clearing
house in 2010 due to financial sanctions.
Akhoundi also said that Iran would invest USD250 million to modernise its air traffic
management infrastructure with the aim of creating the most secure and safe
airspace in the region. This has been of greater investment due to growing traffic
utilizing the Iran and the Persian Gulf geographies as ideal/safe overflight regions in
contrast of Syria and much parts of Iraq. Intel suggests the management systems
were around enroute control spacing and route optimization systems, while tender
productions are being made for terminal approach systems and control tower
refurbishments.

REGULATORY AUTHORITIES
As we know, things are a little raw at the moment, given;
1.

The U.S. government has, by and large, left in place its embargo generally
forbidding U.S. companies, citizens and residents, and others in the United States to
engage in Iran-related activity. European Union authorities, on the other hand, have
rescinded most EU economic sanctions relating to Iran.

2.

The U.S. government has neutralized most so-called secondary sanctions

measures that have provided for sanctions against third country companies that
engage in specified types of activities relating to Iran.

3.

The U.S. government has also, for the most part, eliminated the embargos
application to non-U.S. subsidiaries of U.S. companies acting abroad. Furthermore,
the U.S. government has, in limited respects, authorized U.S. parent companies to
permit and, to some limited extent, enable their non-U.S. subsidiaries to engage in
Iran-related activity. But U.S. parent companies will need to be careful to avoid

support for their non-U.S. subsidiaries Iran-related activity that could expose the
parents to liability for facilitating such activity contrary to sanctions prohibitions
even as to Iran-related activity in which their non-U.S. subsidiaries are permitted to
engage.
4.

The U.S. government has announced that it will license certain other activities
that are subject to embargo prohibitions, including supply of civil aircraft and parts
and components to Iran and imports from Iran of Iranian-origin carpets and
foodstuffs.

5.

As companies evaluate their opportunities under the changed sanctions

regimes, much could depend on how regulatory authorities interpret and administer
the new arrangements. Furthermore, circumstances regarding Iran sanctions remain
fluid and uncertain, particularly given continuing opposition to the Iran nuclear
agreement. Depending on political developments, one or both of U.S. and EU
authorities could expand sanctions against Iran at any time.
Overview of EU changes; all nuclear-related economic and financial EU sanctions
against Iran have been lifted by the EU. The decision was taken by the EU following
the presentation of the report by the Director-General of the IAEA to the IAEA Board
of Governors and the United Nations Security Council confirming that Iran has taken
the nuclear-related measures as agreed under the JCPOA. The EU legislative acts
listed below terminate and amend the provisions of the EU nuclear-related sanctions
legislation against Iran as set out in Council Decision 2010/413/CFSP and Council
Regulation (EU) 267/2012, Council Decision (CFSP) 2015/1863 of 18 October 2015,
Council Regulation (EU) 2015/1861 of 18 October 2015, and Council Implementing
Regulation (EU) 2015/1862 of 18 October 2015. More information can be found here
EEAS Sanction Implementation Notice
Overview of U.S changes; the U.S. government lifted certain sanctions against Iran
in compliance with the Implementation of the JCPOA. The sanctions lifted by the
United States are limited to those set out in Section 17 of Annex V of the JCPOA,
and relate mostly to secondary sanctions, meaning sanctions directed toward nonU.S. persons for specified conduct involving Iran that occurs entirely outside of U.S.
jurisdiction. Most sanctions governing the conduct of U.S. persons remain in place,
with a few exceptions. U.S. policy on transactions regarding aviation has also been
liberalized, as outlined in Section 3 below. A licence from OFAC is still required for
involvement in an Iran-related transaction of any aircraft having 10% (or more) U.S.origin by value. More information can be found here; Treasury; Iran Sanctions

Irans Deputy head of the Civil Aviation Organization of Iran has announced that the
country is planning to grow international flights to nations utilizing growth of bilateral
agreements and diplomatic ties to grow capacity nations operate between Iran and
counterpart nations. A statement released by the Public Relations Department of the
organisation quoted Mohammad Khodakarami as saying that due to vast
international network of airlines, development of aviation cooperation with
predominantly European, Middle Eastern, African and Subcontinental aviation
companies is a priority of the Civil Aviation Organization. He added that Iran is also
trying to update its memorandums of understanding with other countries in order to
increase the number of weekly flights to various destinations and also increase the
number of those destinations. Irans transport ministry has appointed Mohammad
Khodakarami as head of the countrys civil aviation authority. The appointment has
been confirmed by the Civil Aviation Organisation, which oversees air transport in
Iran, following the resignation of the previous chief.
Developments have also been made to air tickets, which is to be liberalized by the
end of the current Iranian year (March 19, 2016) as part of the Fifth Five-Year

Economic Development Plan (2011-16), said the head of Iran Civil Aviation
Organization, Ali Abedzadeh, noting that the move will not necessarily translate into
higher prices. The move is certainly a contributing factor to the development of air
transport by improving services, IRNA quoted the official as saying. The ticket prices
of busy air routes linking Tehran, Mashhad, Isfahan, Shiraz and Tabriz will be the first
to undergo liberalization, he added.

APPENDIX

While it will likely be months before sanctions on Iran ease, business and
political leaders are wasting no time in trying to tap into a large and what they hope
will be a lucrative Iranian market.

Germany is dispatching a large trade delegation to Tehran on Sunday. Spain

has a similar trip planned, and Frances top diplomat is eyeing a visit too. Ads for
European cars and luxury goods are starting to reappear in Tehran. Airlines in Dubai
are fast adding new Iran routes to meet growing demand.

American firms, though, have to be much more cautious. Deal or no deal,

U.S. sanctions not related to the nuclear program will still be in place and bar most
American companies from doing business with Iran.

That means they stand to lose out to European and Asian companies some
that still have business contacts in the country before sanctions were tightened in
recent years. Its easier to say who is at a disadvantage. And that will be U.S. firms,
said Torbjorn Soltvedt, principal Mideast analyst at risk advisory company Verisk
Maplecroft.

On paper, Iran holds plenty of promise. Two and a half times the size of
Texas, it is home to some 80 million people, sits atop the worlds fourth-largest oil
reserves and the second-biggest stores of natural gas, and has well-established
manufacturing and agricultural industries contributing to a $400 billion economy.
London-based Capital Economics estimates the economy could surge ahead by 6-8
percent annually over the next several years as sanctions ease. Everything is in
place for economic growth, said Dominic Bokor-Ingram, portfolio adviser at British
asset management firm Charlemagne Capital. His company earlier this year

announced a plan to launch Iranian investment funds in partnership with an Iranian

company. Iran has infrastructure, it has the institutions, it has the education, he
added. It has a lot of highly educated people who will go back to Iran if sanctions
are lifted.

Tapping the market wont be easy. The elite Revolutionary Guard is deeply
involved in the economy and corruption is such a problem that President Hassan
Rouhani lamented late last year that once-secret bribes are now being handed out
openly. Iran ranks only 130 out of 189 economies on the World Banks ease-ofdoing-business list. Assuming the deal goes ahead as planned it will still take at least
several months until nuclear-related sanctions are lifted. And those sanctions can
quickly be slapped back on if Iran fails to live up to its end of the bargain. That
means many multinationals are unlikely to commit to big investments in the
immediate future, though the staggered sanctions relief also gives companies time to
gear up their operations, analysts say.

The oil industry is one area where Iran could use outside investment. Fitch
Ratings expects it will take years for Iran to get back to the roughly 2.5 million barrels
a day it was exporting before 2012, because investment in the sector has been
limited under sanctions. Chevron Corp. spokesman Kurt Glaubitz said the company
is reviewing the nuclear deal to understand its implications, but for now it remains in
strict compliance with U.S. and international laws. Exxon Mobil Corp. declined to
comment.

Although planned some time ago, Germanys three-day trip led by Economy
Minister Sigmar Gabriel comes less than a week after the nuclear accord was
reached.

Spanish Industry Minister Jose Manuel Soria said he will be joined on a

September trip by Spains foreign and development ministers, and he expects good
prospects for Spanish companies in industry, energy, telecommunications, tourism
and infrastructure.

French Foreign Minister Laurent Fabius said Wednesday he would be paying

a visit to Iran as France looks to explore business opportunities, though he made a
point of saying commercial interests were not what drove the deal. A large French
business delegation, anticipating a resolution to the nuclear issue, traveled to Tehran
last year, rankling U.S. officials.

Switzerland dispatched a business delegation to Iran at the end of April, soon

after Iran and world powers reached a framework deal that paved the way for this
weeks agreement.

There is pent-up enthusiasm to do something said Martin Johnston, directorgeneral of the British Iranian Chamber of Commerce, a network of politicians and
business leaders that hope to promote trade. He said he expected businesses would
go to Tehran to examine the opportunities for the time being. They are waiting for
the structures to be in place to be able to trade, not only the legal arrangements but
the suitable banking arrangements, he said.

AUTOMATIVE; In some ways, loosening sanctions will mark a return to the

way things used to be. French automaker PSA Peugeot Citroen has an early
advantage in Iran thanks to its strong market position in the country a legacy of its
former partnership with domestic automaker Iran Khodro, which assembled Peugeotbranded vehicles from kits. Other European automakers have good brand
recognition in Iran too, as many only officially cut their ties to Iran under pressure
earlier this decade. Sergio Marchionne, the chief executive of Fiat Chrysler
Automobiles, said this week that the Iranian market will be an opportunity for all of
us if it opens up. Fiat only stopped selling cars in Iran in 2012, following similar
moves by Peugeot, South Korean automaker Hyundai and German sports carmaker
Porsche. Ford Motor Co. is taking a more cautious tone, saying it complies with U.S.
sanctions and will monitor changes that come out of the agreement. In the
meantime, its Chinese partner, Changan, has signed a partnership with Irans Saipa
Automotive Group to jointly develop new vehicles.

In May, Brilliance Auto Group became the latest of several Chinese

automakers to begin production in Iran, opening an assembly plant west of Tehran
with a local partner, Pars Khodro, to make sedans and hatchbacks. Chinese stateowned manufacturers of subway equipment have found a way around financial
sanctions, striking a deal in 2013 to trade 315 train cars in exchange for Iranian oil.

South Korean companies have been building market share in Iran, too, after
the two countries agreed to let Korean businesses use South Korean currency for
financial transactions with their Iranian counterparts. South Koreas finance ministry
said this week that expanding economic cooperation with Iran would be an
opportunity for the country, which is a buyer of Iranian crude oil and exported $4.2
billion worth of goods to Iran last year.