Transport Fallout from COVID-19 Estimated at $495 Million

EghtesadOnline: Iran’s transportation sector has sustained an estimated loss of 80,000 billion rials ($495 million) following the outbreak of coronavirus, an official with the Ministry of Roads and Urban Development said.

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07 May 2020

“After tourism, the transportation sector took the biggest hit from the pandemic, which prioritizes it to receive government aid,” Mohsen Sadeqi was quoted as saying by the Persian-language daily Iran.

The government has approved a 750-trillion-rial ($4.64 billion) package to help low-income households and struggling businesses impacted by the rapidly spreading coronavirus. The loans will be given to small- and medium-sized enterprises hit hard by the pandemic, according to the website of the Central Bank of Iran.

Noting that rail companies and airlines mostly take out loans in foreign currency rather than rial, the senior official said, “In addition to corona relief measures like granting cheap loans, tax and insurance premium relief, the extension of repayment schedule for foreign currency loans is the newest proposal we came up with to support rail companies and airlines.”

“The lending rate for the government aid package will be 12% to be repaid within two years,” Abdolnasser Hemmati, the CBI governor, said. Commenting on the interest rate, Hemmati said it is reasonable in view of the high inflation rate.

“Even if banks had set 18% interest on loans, the real interest rate would still be negative when compared to annual inflation … Any rate below 12% would apparently impose further financial strain on banks,” he added.

Hemmati noted that only businesses that did not lay off workers during the corona crisis would be eligible for the loans. He instructed banks to process the loans soon and cut red tape.

Losses of Airlines at $187m by April 3

Last month, Secretary of the Association of Iranian Airlines Maqsoud Asadi-Samani said the impact of coronavirus could result in airlines losing up to an estimate of 30,000 billion rials ($187 million) by April 3.

The number of air passengers reduced by 76% and flights by 90% during the Iranian New Year holidays [March 20-April 3], he added.

Moreover, Iran Airports Company's revenues have declined by 80% following the suspension of domestic and international flights, Hamid-Reza Seyyedi, an official with the company, said.

“The company has sustained losses to the tune of 2,000 billion rials [$12.38 million] in the 12th month of the last fiscal year [Feb. 20-March 19].”

Domestic and foreign airlines have provided passengers refunds worth more than 8,000 billion rials (about $50 million) for cancelled flights since the outbreak of coronavirus, spokesperson of Iran Civil Aviation Organization, Reza Jafarzadeh, said recently.

“According to the Cultural Heritage, Handicrafts and Tourism Ministry, 95% of passengers whose flights have been cancelled have received compensation so far,” he was quoted as saying by IRIB News last week.

CAO spokesman’s comments come as Hormatollah Rafiei, the head of Travel Agents Guild Association, says Iranian and foreign airlines refuse to return as much as 4,000 billion rials (about $25 million) worth of people’s cancelled tickets.

Last week, he issued a warning to airlines about their failure to follow the refund rules and that his association is mulling over taking legal action against them, the Persian-language daily Etemad reported.

“Many foreign airlines have been offering vouchers and credits for future travel, which customers often must use before the end of the year, instead of honoring their obligation to give refunds,” Asadi-Samani said.

“However, I am confident that almost all Iranian airlines have provided refunds to passengers for flights cancelled due to the pandemic. For example, one of the major domestic airlines has repaid 400 billion rials [$2.5 million] to passengers so far.”

Rail Companies’ Losses at $37m

Mehrdad Taqizadeh, the secretary of Iran’s Guild of Rail Transport Companies, said passenger and freight rail transport could see up to 5,050 billion rials ($31.26 million) and 1,000 billion rials (about $6.2 million) in losses by June 20 due to the spread of coronavirus.

Noting that the number of rail passengers fell by 94% during the holidays compared with last year’s similar period, the official said, “A total of 300,000 tickets were cancelled and 910 billion rials [$5.63 million] were paid back to people following the disease outbreak.”

Taqizadeh noted that his guild will seek a 2,000-billion-rial ($12.38 million) bailout and loans with an interest rate of 4% for rail companies in a letter to the government, Fars News Agency reported.

“The Roads and Urban Development Ministry has put together a comprehensive report on the jobs hurt by the coronavirus based on different transportation sectors,” Sadeqi said.

“For example, we have taken into consideration the number of airplanes an airline owns or how many active plane seats and insured employees it has. The same considerations were made in relation to rail and road sectors. We have even worked out a solution to lend support to marine transportation, although it incurred the least loss among modes of transportation.”

The Roads Ministry official said road transportation accounts for the largest portion of passengers moving 400 million people annually compared with 22 million rail and air passengers, and thus sustained the brunt of the crisis.

“There are 113,000 drivers who hold smart driving cards. As we speak, all roads are open but traffic has decreased by 60%. The number of jobs has fallen by the same percentage in this sector and only about 40,000 drivers are working now,” he said.

“The movement of freight is back to normal; any decline is due to the closure of factories. Loading at ports is higher than last year’s volume.”

Hassan Momeni, the head of guild association of passenger transport companies, said a large number of passenger transport companies affiliated to the municipalities have been closed due to the virus.

“Those still active are faced with a 93% decline in their business. Less than 10% of employees in these sectors continued to work during the peak of the crisis,” he said.

According to a report by the research arm of the parliament, Majlis Research Center, Over 1.32 million people in road transportation, 70,000 in air transportation and more than 35,000 in rail transportation sectors lost their jobs amid the outbreak of coronavirus.