Trump Storm May Hit Air­lines’ Iran Plans

Air In­dia Ex­press, Jet, GoAir re­view flight plans as US weighs sanc­tions

The Economic Times - - Companies: Pursuit Of Profit - Anirban.Chowd­hury @times­group.com

Mum­bai: In­dian car­ri­ers are ei­ther re­view­ing or stalling their plans to start flights to Iran as the Don­ald Trump-led US gov­ern­ment hard­ens its stance on the Is­lamic na­tion, ratch­et­ing up diplo­matic ten­sions.

Air In­dia Ex­press is now tak­ing a sec­ond look at its plans to start flights to the capital city of Tehran ini­tially slated for later this year, two peo­ple in the know said. The car­rier has al­ter­na­tive plans ready — Delhi-Tashkent-Al­maty or Delhi-Doha-Bahrain — if geopo­lit­i­cal con­di­tions make it dif­fi­cult to start op­er­a­tions to the coun­try, one of them said, adding that the plans haven’t been dropped yet. Air In­dia Ex­press is the low fare in­ter­na­tional sub­sidiary of staterun Air In­dia.

Low-fare car­rier Go Air, which was plan­ning Tehran as one of its ini­tial over­seas des­ti­na­tions, has stalled those plans for now, said a sec­ond per­son aware of the mat­ter. The air­line plans to start in­ter­na­tional flights later this year.

Jet Air­ways had last year made plans to fly to Tehran but put them on hold be­fore some clar­ity emerged on who would lead the US gov­ern­ment and which way it would move, said two peo­ple fa­mil­iar with the mat­ter. The plans

are now on the back burner, they said. The Trump gov­ern­ment is said to be con­sid­er­ing a re­newal of sanc­tions — cut­ting trade and aid — on Iran af­ter it re­cently tested a mid-range bal­lis­tic mis­sile. The plans fol­low Trump’s far reach­ing de­ci­sion of tem­po­rar­ily ban­ning the cit­i­zens of Iran and six other Mus­lim coun­tries from en­ter­ing the US.

In­ter­na­tional sanc­tions on Iran were lifted in 2015 un­der the Barack Obama-led US gov­ern­ment, af­ter a nu­clear pact un­der which Iran agreed to curb its nu­clear pro­gramme. But Trump re­cently is­sued a warn­ing to Iran say­ing “there’s a new pres­i­dent in town” who won’t “sit by” while the coun­try pur­sues its mil­i­tary am­bi­tions. On an­other oc­ca­sion, he called Iran “No. 1 in ter­ror”.

In­dia, un­der the Naren­dra Modi gov­ern­ment, has been try­ing to strengthen re­la­tions with Iran but any kind of ties with it may an­tag­o­nise the US gov­ern­ment, said ex­perts.

There are tac­ti­cal prob­lems, too. Air In­dia Ex­press op­er­ates US plane-maker Boe­ing’s planes. The big­gest chunk of Jet’s fleet is also Boe­ing-made. If sanc­tions were to be im- posed, any air­line which owns Boe­ing planes fi­nanced by the US Exim bank, would have to seek let­ters of guar­an­tee from the bank for flight op­er­a­tions. “Also, sanc­tions may make it dif­fi­cult to repa­tri­ate rev­enue earned in lo­cal cur­rency in Iran back to the home coun­try,” said an Air In­dia ex­ec­u­tive.

The geopo­lit­i­cal an­gle aside, the air­lines’ re­view of plans also comes at a time when a slow­down in the Gulf sec­tor — as a re­sult of a fall in oil prices — have im­pacted yields for In­dian car­ri­ers fly­ing to the re­gion. Jet Air­ways’ act­ing CEO Amit Agar­wal, in a re­cent post-earn­ings con­fer­ence call with an­a­lysts, spoke of yields tak­ing a hit in the market. Jet is the big­gest car­rier out of In­dia to the Gulf.

Yields for Air In­dia Ex­press’ — which fer­ries the largest chunk of In­dia’s mi­grant labour traf­fic to and from the Gulf — are down 15% for the cur­rent fi­nan­cial year, said its CEO K Shyam­sun­dar.

The air­line’s av­er­age flight oc­cu­pan­cies are down to 79% from 83% a year ear­lier. Its profit for the on­go­ing fis­cal is es­ti­mated to be at .₹ 300 crore com­pared with .₹ 362 crore a year ago.

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