READY FOR TAKEOFF?

Iran 2017 | TRANSPORT | FOCUS: AIRPORT EXPANSIONS

Facing airport overload, Iran is depending on international investment for airport renovation and extension projects, but fervor may be slipping and leaving the aviation industry not quite so ready for takeoff.

Across Iran, hype of sanctions being lifted had domestic and foreign companies alike excited about new investment opportunities. In the middle of this hype, formerly cash-strapped airlines invested in their fleet capacities, anticipating passenger and cargo growth. But integration into the global market is by no means instantaneous, and investors are hesitating on further investment because of worries about possible reapplication of US sanctions.

Thus, airport expansion is somewhat stuck in limbo like an airplane stuck on the tarmac waiting in the queue for takeoff. Unless infrastructure is improved and expanded, more and more airplanes will be left taxiing on the runway especially as airlines expand their fleets. In interviews with TBY, Iran Airtour Airline and Kish Airlines both indicated that they are looking for investment for new aircraft. Iran Airtour specifically is focusing on domestic routes, therefore necessitating upgraded airport infrastructure throughout the country to support these ambitions.
Rahmatollah Mahabadi, Chairman of the Board and CEO of Iran Airports and Air Navigation Company (IAC), explained to TBY that, “80% of air traffic activities are concentrated in eight major airports. We recently experienced a two-digit increase in these airports, and these airports are going to be overloaded.”
Mahabadi continued to outline IAC's support of infrastructure improvements and new developments, including a new airport in Chabahar, an important port city. Chabahar, on the southern coast, is of strategic importance for Iran's industries and foreign relations through trade. An upgraded airport would complement port expansion plans and enhancements to other transport links such as railways. Exclusive TBY sources indicate an international tender announcement for the project will be conducted soon.
Iran's largest airport, and its most prominent airport for international flights, is also expanding, but construction for the new terminals is not experiencing smooth skies. Completion of Imam Khomeini International Airport's Salam terminal, the airport's second, was expected by the end of May 2017. Completion is now delayed until March 2018 and will increase capacity by 5-6 million passengers annually, according to the Ministry of Roads and Urban Development.
The third, and much larger terminal, at Imam Khomeini International Airport (IKIA) is not fairing much better. Iran canceled its MoU with French Company Bouygues to build and operate the Iranshahr Terminal after the company was unable to deliver on obligations outlined in the MoU. Bouygues struggled to find financial backing amidst hesitation from investors following initial, possibly premature, hype about access to Iran's 80-million strong market.
Despite the turbulence in the project's execution, new completion date estimates say the terminal will be done in two to three years. Following the cancellation of this agreement, Iran put out a call for investment in the build-lease-transfer or build-operate-transfer agreement. The new terminal will handle 20 million passengers when first opened, bumping IKA's total capacity to roughly 30 million people annually.
Iran is also looking at renovations to secondary airports such as Mashhad International Airport and Isfahan International Airport. IAC is welcoming. Another French company, Vinci, is set to complete the extensions at the country's second- and fifth-largest hubs, respectively. In August 2017, Isfahan International Airport announced that the new terminal would reach 25,000sqm in its first phase with expansions up to 35,000sqm in the subsequent phase. Isfahan strives to be the tourist gateway into Iran, and completion of the first phase of the new terminal will almost double passenger capacity from 2.5 million to 4 million. Mashhad will get a 43,000-sqm international terminal and 25,000-sqm domestic terminal upgrade.
French companies have been the most gung-ho to enter Iranian investment opportunities since JCPOA, and airport expansions are no exception to this trend. But while France remains quite eager, initial enthusiasm from other international investors could slow airport expansions from Chabahar to Tehran and everywhere in between.