Iran tells airlines to pay debts or face grounding

IranAir01(Reuters) – Airlines in Iran have seven days to repay more than $200 million in debts they owe to the oil ministry for fuel or face being grounded, a senior official was quoted as saying on Tuesday.

Several airlines have amassed large debts due to the pressure of successive fuel price increases and the loss of access to government-subsidised foreign currency exchange rates which has resulted in a sharp rise in spare parts costs.

The demand for payment comes amid continued economic pressure from sanctions over Iran’s disputed nuclear programme which have more than halved its revenue from crude oil sales.

“Based on meetings with officials from the Civil Aviation Organisation, it was agreed that all airline companies have seven days to clear their debts to the National Oil Refining and Distribution company,” Mehr news agency reported deputy oil minister Alireza Zeighami as saying.

He admonished airline companies for not taking the opportunity to address the issue in recent meetings with state officials.

The total amount of payments outstanding amounted to more than $200 million, two-thirds of which was owed by domestic carriers, he added.

Zeighami did not say which companies were in debt but Iranian media have reported that they include Mahan, Aseman and Zagros airlines.

The cost of fuel domestically has risen seven-fold since mid-2011 after the government launched a programme to withdraw generous subsidies.

In September 2012 the government withdrew the airlines’ access to a preferential rate for foreign currency as part of a drive to reduce state spending.

As a result, airlines have been forced to raise ticket prices. In November last year national carrier Iran Air nearly doubled prices to international destinations after facing soaring costs due to the slump in the value of the rial.

Finding spare parts continues to be a challenge for carriers, which are prevented by sanctions from making purchases directly from manufacturers Boeing (BA.N) and Airbus (EAD.PA).

By Reuters


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