Aviation Development and Hub Evolution in Iran

Diogenis Papiomytis

Frost & Sullivan

26 April 2016

Iran Aviation Summit

2

Routes to/from Iran are among the most profitable in foreign carrier

networks

Turkish Airlines and Persian Gulf carriers have been growing

their seat capacity at a rate of 25% and 15% yoy,

respectively

Operating margins on routes to/from Iran are 35-50% (excl

overheads)

45%

Op ProfitDOCRevenues

Typical Route P&L profile

Source: Frost & Sullivan, OAG, IATA

1

10

100

1,000

10,000

1 10 100 1,000 10,000

Traffic in Thousand Passengers

Cap

acit

y in

Th

ou

san

d S

eats

Pakistan

United Arab Emirates

Turkey

Netherlands

Germany

United Kingdom

India

France

Qatar

Sweden

Between 2010 and 2015 capacity

between EU and Iran has fallen by 360K

seats, while demand has actually

increased by 150K passengers

India and Pakistan are growth markets

that are underserved (direct flights)

The UAE, Qatar and Turkey have seen

demand increasing by 500K pax but

seats have grown by 750K over 5 years

Capacity-Demand profile (2015)

3

The Tehran hub has a similar profile to UAE hubs and is superior to

IST, in terms of its reach for medium and long-haul flights

Modern widebodies can easily reach any world

destination, with only a couple of exceptions

Particularly strong position for the following traffic

flows:

Europe - India/Pakistan

Europe – Pacific

Source: Great Circle Mapper

ISTANBUL

ABU DHABITEHRAN

6 hours

10 hours

15 hours

4

Iran’s aviation market has enormous potential

• 80 mn people

• 34 mn domestic travellers

• >40 mn international visitors

• Approx. 30 mn international

transfers

Strategy:

Use strong local demand to grow hub

potential

STRONG DOMESTIC MARKET AND

GOOD INTERNATIONAL DEMAND

• 30 million people

• 16 million domestic travellers

• ~20 million international visitors

• Very limited international transfers

Strategy:

Aviation an enabler for new Reform

Plan 2030

• 9 million people

• 0 domestic travellers

• >15 million international visitors

• 75% of airline traffic is international

transfers (over 50 million people)

Strategy: Focus on UAE as a global

destination

Leisure (theme parks, EXPO 2020)

Business (Free Zones, Airport

Cities)

Other (medical tourism DXH.AE)

• 80 million people

• 6 million domestic travellers

• >5 million international visitors

EXCELLENT DOMESTIC MARKET,

INTERNATIONAL DEMAND AND A

GROWING INTERNATIONAL HUB

GOOD INTERNATIONAL DEMAND

AND A WORLD CLASS

INTERNATIONAL HUB

+110 million trips +130 million trips+80 million trips

5

Route to success

1) Hygiene Factors

• Industry & Tourism

• Infrastructure (Fleet, Ground, Airspace, IT)

• Network breadth and depth

• On-board product

2) Value adding Factors (non-exhaustive)

• Airline Partnerships

o Marketing Partnerships

o Strategic Alliances

• Joint planning of aviation supply chain

o Iran Aviation Inc

• Promotion

o PR/ Roadshows

o Bilateral relations

6

What about the economic impact?

Economic Impact

• In 2014 Dubai Aviation contributed $16.5 billion and supported 260,000 jobs in Dubai economy

• Etihad Airways contributed $5.0 billion and supported 45,000 jobs in Abu Dhabi economy

• Aviation is both a contributor and an enabler in a diversified economy

• Direct Impact: EBITDA

• Profitable airlines

• Indirect: Supply chain spending

• Buy locally or offset

• Induced: Employee wages

• Hire locally

• Catalytic: Tourism and Trade enabler

• Joint planning of Aviation entities with Tourism Organisation (ICHTO) and Ministry of

Economic Affairs

7

So what is the vision?

• AIRLINES:

• Grow to meet O&D or compete in global East-West traffic flows?

• The former requires aircraft to meet future demand

• The latter requires new operating models to cater to a global market (e.g.digital

transformation, marketing strategy, distribution strategy, loyalty schemes, etc.)

• AIRPORTS:

• Build to just manage future demand (Airports) or build to contribute to the economy (Airport

Cities)?

• Airport Cities require joint master planning for Airports, Airlines, MROs, Cargo, Real Estate

• AEROSPACE:

• Do you want to create an offset assembly line, a manufacturer of consumables / wing parts, or a

high tech manufacturer that could potentially build its own aircraft?

• Distinct advantages of the Iranian industry (i.e. skilled staff, low material costs, high

quality)

8

Thank you!

Contact me on:

diogenisp@frost.com

Frost & Sullivan is a global growth partnership company, with over

1,800 analysts and consultants located in 47 offices across the world

Visionary Innovation Group Market Research Consulting

Frost & Sullivan’s innovation

experts, with experience in

workshop-based project delivery

Macro-to-Micro exercises with a

range of organisations across

industries

Access to proven tools,

simulation, gaming and other

techniques to facilitate

workshops

Recent aviation-related research

reports:

2030 Vision for Airport Terminals

Analysis of the Global Airport

Industry

Global Airport Passenger Screening

Market

Global Airport Notification Systems

Global Airport Ticketing Kiosk

Market

Airport Security – Technical Insights

and Innovations

Helping Aviation end-users and

suppliers:

Develop strategic plans and

support in strategy execution

Perform qualitative Customer

research and Competitor

benchmarking

Define growth opportunities

Develop new business models

and monetise opportunities