TBY talks to Farhad Parvaresh, Chairman and Managing Director of Iran Air, on the growth of the airline, privatization, and establishing an airline industry in Iran.
THE BUSINESS YEAR How did Iran Air become one of the leading airlines in the region?
FARHAD PARVARESH Iran Air is Iran’s national air carrier. The airline was created by a merger of two companies before the revolution, and our experience goes back to about 70 years. We provide a benchmark and an exclusive model for air carriers domestically, regionally, and internationally. Iran Air was the first airline in Iran to operate jet aircraft. We were also the first to fly to the US with the 747-SB, from Tehran to New York via London, and we have now expanded to approximately 32 destinations internationally. We are the first airline in the region to provide our own training services for our personnel, including but not limited to operations, maintenance, and customer service. Iran Air has a well-organized human resource and training center, and we offer programs in two languages: Farsi and English. In 2011, Iran Air’s training center was selected as one of the top 10 training centers in the region by IATA. In terms of safety and passenger loyalty and satisfaction, Iran Air is also a leading airline in the region according to IATA audits. Iran Air has a well-planned integrated network and has done its best under difficult conditions to expand. Today we have 52 aircraft, up from just a dozen or so at the time of the revolution.
Iran Air is part of the divestment project run by the government. What opportunities do you see emerging from the privatization project?
Iran Air had two subsidiaries: Iran Airtour and Homa Hotel Group, which includes five hotels in Tehran, Shiraz, Mashhad, and Bandar Abbas. Iran Airtour carries 2.5 million passengers a year, about 20% of which is on international routes. Iran Airtour previously operated Tupolevs, which are now grounded. It now operates Boeing MD-83 aircraft. Iran Airtour was 100% privatized and separated from Iran Air, and it is doing very well. The Homa Hotel Group will also be privatized. About 90% of the revenue from the hotels comes to Iran Air, which owns the company. Iran Air itself will probably remain about 15% in government hands and be 80% held by private investors. The remaining 5% will go to company employees. Foreign companies are legally prohibited from becoming shareholders of Iran Air unless they are approved by the government.
How have you expanded your destinations over the last few years?
New destinations depend on demand and company policy. In the past two years, we expanded our routes mostly to our neighbors, such as Iraq, where a lot of our citizens want to go to on holy pilgrimages. We fly to Baghdad and Najaf, two very important cities. There is good demand for those destinations. Sometimes we add destinations based on the government demands as well.
How many passengers do you carry annually?
We carry 6 million passengers per year, or about 8.7 million including Iran Airtour, which is now a separate company. About 6.2 million passengers are domestic and the rest are international. We have about 100 domestic flights a day to some 28 destinations. Internationally, we have 32 destinations. The highest demand these days is on the Kuala Lumpur, Malaysia, route, for which we have five or six flights a week with Boeing 747s. It is one of our longest routes: an eight-hour flight time. One reason for such a high demand is that Iranian nationals do not need visas to go there. Domestically, Tehran-Mashhad is important, since it’s a holy city. Flights between Tehran and Bandar Abbas, as well as Tabriz, Shiraz, Ahvaz, Rasht, and Isfahan see large passenger volumes. Domestic fares are regulated by the government, but this isn’t the case with the international fares. Due to strong competition among foreign and domestic airlines, supply and demand controls the international fares. We believe most of our international passengers prefer to fly with Iranian carriers because they get a chance to communicate in their own native tongue during their flight and have Iranian cuisine. When given a choice, I think Iranians, including Iranians living abroad, prefer to travel overseas with their own national carrier.
Which innovations would you like to see in the aviation infrastructure in Iran in the future?
We want to expand the company, add new routes, and provide better service domestically and internationally. Until 10 years ago, we sent our aircraft abroad for maintenance and overhaul; however, we are now more self sufficient and perform 100% of our maintenance and overhaul in Iran in our own hangars, from light checks to heavy checks. The company is not 100% self-reliant when it comes to aircraft components, but we are working to improve our proficiency in this area. We are able to lease aircraft from abroad and operate them here, but I believe we should buy and have our own aircraft and train our own pilots and technicians as well. Leasing aircraft takes care of short-term business needs, but I think this isn’t enough for Iran. We need to transfer technology to Iran and build up the airline industry here. Our objective should be to invest as much in the technical side as in the commercial side. Iran Air provides services to 85% of the airlines that fly to Iran. In Mashhad, there are six or seven foreign airlines operating, and they are efficiently serviced by Iran Air. Also, when you look at other smaller airline companies in Iran, you’ll find that they are mostly staffed by retired and former Iran Air personnel. This is a source of pride for us, and it is a consequential result of nearly 70 years of field experience.
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© The Business Year - September 2012