Following the United Nations nuclear inspection breakthrough at the end of last week that cleared the way for lifting of sanctions on Iran, the country’s air transport industry appears poised to enter a period of modernization and growth. However, no clear picture has materialized over which manufacturers will emerge winners and losers, and when deliveries of new aircraft could start.

Some observers remain bullish, however. “Iran will buy a total of 80 to 90 airplanes per year from the two aviation giants in the first phase of renovating its air fleet,” Mohammad Khodakarami, caretaker director of Iran’s Civil Aviation Organization (CAO), announced last year. “We will purchase airplanes from Boeing and Airbus in equal numbers.” Iranian industry officials project that that their airlines will need 400 to 500 aircraft worth at least $20 billion in total.

But Richard Aboulafia, vice president analysis with Teal Group, warned of several barriers to Iranian airlines’ ability to buy new airplanes. “The post-sanctions Iran aviation market will be good for exactly zero new aircraft,” he said, citing the effect of low oil prices on spending power; the wariness of aircraft finance houses to possible sanctions snapbacks; unexploited “back channels [that] could have allowed Iran to purchase aircraft if it really wanted them”; and “dismal brands” in the face of the Gulf super-connectors. “An aging legacy fleet doesn’t necessarily indicate a strong replacement market,” said Aboulafia. “In fact, very often it indicates that there’s really no market at all.”

Theodore Karasik, a Dubai-based senior advisor to Washington D.C. think tank Gulf State Analytics, told AIN the Iran civil aviation fleet consists of 250 aircraft at present. “They want to buy 400 airplanes by 2025, 100 of which will go to flag carrier Iran Air,” he said. “They spend 25 percent [of revenues] on MRO, compared to a global average of only 6 percent.”

The Middle East’s major airlines have not been slow to explore the Iran opportunity. Tehran served as Emirates Airline’s sole Iranian destination until earlier this year; the airline began flights to the Iranian capital in 1990. It began serving a second Iranian city, Mashhad, on September 1, with five weekly scheduled flights using Airbus A330-200s.

In addition to Tehran and Mashhad, Sharjah’s Air Arabia also serves Abadan, Isfahan, Lar and Shiraz. Meanwhile, Flydubai also serves all those routes apart from Abadan, plus Tabriz, Hamadan, Ahwaz and Bandar Abbas.

UK aviation consultancy OAG recently issued a report analyzing the Iran market, which it said had had grown at an average rate of 3 percent a year over the past decade. “In 2015 there were just over 22 million scheduled seats to, from and within Iran,” said the report. “Total capacity of 22 million for a country of almost 80 million people shows how much potential there is,” it continued. Schedules to, from and within Germany, whose population totals slightly more than 80 million, accounted for 250 million seats. IATA forecasts that Iran’s market will grow to 43 million seats by 2034.

The domestic market is home to 14 airlines but “the current trend appears to be one of decline,” as capacity shrunk 13 percent in 2015.

The largest domestic carrier, Iran Air, suffers from an old fleet and increased competition, and has seen its market share fall from 68 percent in 2000 to 33 percent in 2010 and, finally, to 22 percent last year.

International capacity has grown steadily since 2000, expanding by an average of 6 percent since 2010. While Iran Air lost market share, the likes of all-international carrier Mahan Air has gained in recent years. Still, the most dramatic growth has come from the Gulf carriers, which saw their share of Iranian capacity rise from 21 percent in 2010 to 33 percent in 2015. Turkish Airlines also has done well.

Overall, Iranian carriers’ share of international capacity has fallen since 2010, from 56 percent to 43 percent.

OAG says that 2016 will likely mark the first year in which international capacity exceeds domestic capacity in Iran. European carriers also plan new routes; for example, Air France plans to start services to Tehran from April.

But an incursion by foreign airlines represents only part of the Iranians’ challenge.

“One of the greatest challenges facing Iran’s airlines is not just increasing competition from international carriers but their aging fleets,” said the OAG report. “Decades of sanctions have affected carriers’ ability to source spare parts and new aircraft, resulting in an average fleet age of 22 years for Iranian airlines, twice the international average.”

An apparent difference of opinion between Iran’s ruling elite and the air transport industry over sourcing has led to ambiguity over which airframers appear in the best position to benefit from the lifting of sanctions.

Iran’s supreme religious leader, Ali Khamenei, has pledged Tehran will not cooperate with the West beyond the recently struck nuclear deal and will instead develop economic ties with China and Russia. His views have met with the uncompromised support of the defense ministry and local manufacturers under the ministry’s banner, whose interests lie primarily with development of in-house capability with Russian assistance.

Russian minister for transportation Maxim Sokolov said last year that negotiations on Sukhoi Superjets continued. According to Russian sources, Iranian airlines would get access to three aircraft for operational trials, wet leased from a Russian airline, most likely Red Wings.

Manouchehr Manteki, CEO of Iran Aviation Industries Organization (IAIO), told reporters last September that a preliminary agreement had been signed at the MAKS show in Moscow last year calling for the provision of two SSJ100s on operating lease terms.  

In late September Ilyushin Finance Company general manager Alexander Roubtsov told AIN his company has been talking to four Iranian airlines about the Superjet, as well as the Tupolev Tu-204 and the Irkut MC-21. “We will make an official offer to the Iranian airlines as soon as the sanctions regime is lifted,” he said.

However, Iran’s minister for roads and urban construction stated last year that the Sukhoi Superjet, for example, did not present an option for Iran’s airlines. “We have already reached preliminary agreements with the world’s leading manufacturers,” Ahmad Abbas Akhundi said, referring to Airbus and Boeing.

Although the U.S. trade embargo with Iran remains in place, it has lifted so-called secondary sanctions that applied to non-U.S. individuals and companies. The U.S. has also agreed to allow for limited business activities involving U.S. interests, including the sale of U.S.-made commercial aircraft and parts, clearing the way for direct negotiations between Boeing and Iranian Airlines. The EU, meanwhile, has lifted all nuclear-related financial and economic sanctions, including prohibitions against commercial aircraft transactions. Over the weekend Iranian transport minister Abbas Akhoundi told the semi-official Tasnim news agency that Iran plans to buy 114 civil aircraft from Airbus. However, Airbus has denied holding any direct talks with Iranian airlines.      

“We are studying our way forward in view of this new environment—in full compliance with all international laws,” said Airbus in a written statement.