Aviation & Airlines Industry

A small, diverse fleet without economies of scale

One of the less discussed but highly influential challenges in Iran’s aviation industry is the large number of airlines with small fleets and a wide variety of aircraft types. Many domestic airlines operate small, heterogeneous fleets of diverse aircraft types, with the following consequences:

• Higher maintenance and repair costs due to a lack of economies of scale
• Difficulty managing the parts supply chain
• Weaker bargaining power in sourcing fuel, insurance and airport services
• Limits on flight network planning and fleet utilization
• Reduced ability to standardize operations
• Lower productivity of capital and human resources

The lack of economies of scale puts constant financial pressure on airlines and makes liquidity management one of their main challenges.

Limited access to parts and maintenance, repair and overhaul (MRO) services

Direct and indirect sanctions have severely limited Iranian airlines’ access to original parts, OEM services and the official maintenance network. This:

• Increases dependence on informal, high-risk markets
• Increases aircraft-on-ground (AOG) time
• Puts extra pressure on flight safety
• Increases maintenance and repair costs

Meanwhile, despite relative progress, domestic MRO capacity still cannot fully meet the needs of the current diverse and aging fleet.

In such conditions, relying solely on short-term fixes can threaten operational sustainability and calls for a systematic, managed approach.

Financial, insurance and leasing constraints

Aviation is inherently capital-intensive and cannot grow or renew without effective financial instruments. In Iran:

• Access to international leasing is limited or blocked
• Aircraft hull and liability insurance is expensive
• Currency risk puts pressure on airlines’ liquidity

These conditions have made fleet renewal slow and costly. Limited access to:

• International aircraft leasing
• Reputable hull and liability insurance
• Long-term foreign-currency financing

has made conventional fleet renewal models practically unworkable in Iran. These constraints directly affect network design, the choice of international routes, and airlines’ profitability and financial resilience.

Rising operating costs and liquidity pressure

Rising costs of fuel, maintenance, staff, parts and financing, together with revenue volatility, have made liquidity management the top concern of Iran’s aviation executives. In this environment, aggressive growth without financial backing can increase survival risk.

An aging fleet, high maintenance costs, limited parts and liquidity pressure directly affect:

• Cost per seat-kilometer
• Operational reliability
• And ultimately, flight safety

Managing these risks is impossible without analytical tools and advanced systems.

Limited international routes and refueling challenges

Flight restrictions, refueling issues at some foreign airports and reduced access to profitable international routes have cut airlines’ foreign-currency revenue and increased their dependence on the domestic market.