Iran: Airfares Set to Rise by 10%

EghtesadOnline: The Supreme Civil Aviation Council approved a 10% rise in the ticket prices of domestic flights compared with prices set by the Association of Iranian Airlines in the month ending June 20.

News ID: ۷۵۱۴۹۲

16 November 2020

Members of the council also rejected a bid to set minimum price on air tickets, while warning airlines against selling tickets at prices higher than the set ceilings, Fars News Agency reported.

The council consists of representatives of economy and foreign ministries, a member of Majlis Development Commission, representatives of the Plan and Budget Organization, Public Prosecutor and Revolutionary Court’s Office, Civil Aviation Organization, the managing director of IranAir and representatives of domestic airlines.

At the council’s meeting on Saturday, representatives of domestic airlines presented a report on the financial situation of their companies and costs per hour of domestic flights with regard to the increase in foreign exchange rates, decline in the number of flights and passengers due to the outbreak of coronavirus, airlines’ obligation to sell tickets for only 60% of a plane’s seating capacity in line with social distancing rules and hardship caused by sanctions.

As per the decision of the National Coronavirus Headquarters on new measures to prevent the further spread of Covid-19, all types of aircraft need to observe social distancing by operating at a fraction of their passenger capacity.

In addition to the pandemic, the rise in foreign currency exchange rates has increased airlines’ expenses.

As part of the 80 trillion rials ($300 million) approved by the government as economic relief package for the transportation sector, airlines will receive 20 trillion rials ($74 million) in loans to help them weather the hardship caused by the new coronavirus.

According to Maqsoud Asadi-Samani, secretary of the Association of Iranian Airlines, airlines have been introduced to designated banks and are undergoing loan approval process.

“Since the beginning of June, airline companies could register at Kara.mcls.gov.ir for the coronavirus loans that will be offered at a lending rate of 12%,” he was quoted as saying by News.mrud.ir in July.

“Air travel and tourism have been the hardest-hit industries in the early days of the Covid-19 pandemic. Currently, domestic flights are carried out through some airports in the country, but aircraft fly 40-50% short of full capacity to allow for social distancing.”

Asadi-Samani said in April that Iranian airlines were estimated to have sustained 30,000 billion rials ($187 million) in losses by April 3, as coronavirus has halted flights within the country and abroad.

“The impact of the coronavirus could result in airlines losing up to an estimated 30,000 billion rials ($111 million) by April 3,” he said, adding that three airlines had grounded their entire fleet.

By the end of May 2020, most airlines in the world will be bankrupt, says CAPA – a trusted source of market intelligence for the aviation and travel industry.

Adding that coordinated government and industry action is needed, if catastrophe is to be avoided. British Airways CEO Alex Cruz said today’s coronavirus crisis is more serious than any previous (aviation) crisis.

As the impact of the coronavirus and multiple government travel reactions sweep throughout the world, many airlines have probably already been driven into technical bankruptcy, or are at least substantially in breach of debt covenants.

Cash reserves are running down quickly, as fleets are grounded and what flights there are operate much less than half full.

Forward bookings are far outweighed by cancellations and each time there is a new government recommendation, it is to discourage flying. Demand is drying up in ways that are completely unprecedented. Normality is not yet on the horizon, Aviation24 reported.