Wednesday, February 10, 2016

Analysis of Iran Air Airbus aircraft order

The state of Iran has officially announced that it has placed a US$ 25 billion order with Airbus + ATR for the supply of 158 aircraft to completely replace Iran Air's aging fleet of 44 aircraft. The breakdown is as follows:

12 A380s
16 A350-1000s
27 A330-200/300s
21 A320CEO family line of aircraft

24 A320NEO family line of aircraft 
18 A330-900s
40 ATR 72-600s



This was arguably the most anticipated order in commercial aviation for years as many pundits were speculating countless times what will IR end up ordering once all sanctions are lifted. Just like the below analysis on Gulf Air (scroll down) this order too has many positives and negatives hence shall be looked at in an objective manner.


·         Ordering the A350-1000 and A320NEO family line of aircraft    

Ordering the ATR 72-600s for domestic flying rather than DH4 as the AT7s are cheaper to purchase and operate on flights under 1 hour 15 minutes in stage length

· It is expected that many A321NEOs will be ordered from A320NEO family order as this aircraft is ideally suited to operate to popular Iranian emigrant cities in Western Europe year round rather than a more expensive wide body. Cities that are perfect for A321NEO service (3-4) times per week are IKA-DUS, IKA-HAM, IKA-ARN, IKA-MAN, IKA-OSL, IKA-FCO, IKA-CPH and IKA-MUC. 

· The A321 is also perfectly suited for the high demand Shia pilgrim season with the main destinations being BAH, DMM, KWI, DXB and KHI.

· The desire to make IKA airport similar to AUH/DXB/DOH as the government wants to make it a key transfer hub connecting Europe to Asia especially Central Asia via IKA.


Ordering the A380 purely out of prestige and a good discounted offer provided by Airbus without looking into the actual commercial requirement of it

Ordering the A330-900 which is not required at all

Too many fleet types (5) i.e. AT7s + A320s + A330s + A350s + A380s

Current fleet of Iran Air is only 44 aircraft where as Mahan Air is 57. If this order was exclusively for IR then there are grand expansion plans put in place which are realistically not commercially viable to achieve even by 2022 due to the rapid scale of expected growth in an uncertain political environment

My recommendation

Reduce fleet types from 5 to 3 which in turn helps reduce overall costs across the board

Fleet types should revolve around AT7 + A320 + A350 family line of aircraft only

The A359 should have been ordered rather than A339 as the A359 offers the same capacity but more flying range and better operating economics. A bunch load of A332s only should have been ordered as a dry leased aircraft for “bridging purposes”.

Wide body fleet should have revolved exclusively around the A350 family i.e. A359 + A351. The A359 can easily fly IKA-LAX nonstop where as the A351 can do IKA-JFK/YYZ nonstop without any payload restrictions!

The A350 helps build up the route on a frequency based level which is more required to be competitive versus TK/LH/QR/EK/EY rather than capacity based with expensive A380s which will never be filled on a year round basis on any route even at 70% SF!

Future fleet (exclusively meant for Iran Air only) should have looked like this if it was an all Airbus/ATR order:

           i.     20 AT7s for domestic secondary cities operations

         ii.     15 A321NEOs

        iii.     20 A320NEOs

         iv.     10 A350-1000s

           v.     15 A350-900s

         vi.     In total 80 airplanes should have been ordered (not 158 which were ordered) with IKA being the major hub and MHD + SYZ acting as secondary hubs.

        vii.     The A350s should be configured in a dual class layout like the current A300s/B747s are presently in IR’s fleet. A maximum of 30 business class flat bed seats should be in the premium cabin and not more.

      viii.     In order to grow the infrastructure of the country’s various industries, the state of Iran needs a viable freighter carrier too importing and exporting goods/raw materials hence it was surprising to note no freighter was ordered. Ideally an order for 5 A330-200Fs should have been placed to cater for this soon to be booming market segment.

Since many would ask what would have been the perfect Iran Air order if all manufacturers could sell aircraft would any obstacles, then my recommendation would have been as follows:

25 Boeing 787-9s exclusively for its wide body operations. This would seat 30J + 261Y and can easily fly IKA-LAX nonstop if need be without suffering any payload restrictions.

15 A321NEOs to be in two different configurations i.e. one for medium haul EU routes with 12J flat beds + 138 economy class (7 units) and another in a regional configuration for high demand domestic + Middle East/Central Asia/ISC routes with 12J + 168Y.

20 Bombardier C300 series aircraft seating 127 passengers i.e. 12J + 115Y and used for regional/domestic services. Using this aircraft type is much cheaper than the A320NEO and also offers the right capacity requirement!

20 ATR 72-600Ts for secondary city flying

In this manner, the order is commercially + politically balanced out with Airbus, Boeing, ATR and Bombardier kept happy by being given a fair slice of the cake. If by 2025, demand explodes for IR then it can consider adding a larger aircraft type.

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