Iranian airlines demand price cuts on jet fuel

Azerbaijan, Baku, Feb.1/ Trend, F. Milad‎‏

Iranian airlines have urged the government to cut jet fuel prices, the head of the Association of Iranian Airlines, Abdolreza Mousavi, announced on Friday.

The rising price of US dollar is affecting Iranian airlines, the Mehr News Agency quoted Mousavi as saying.

Iranian airlines are even willing to once again cut ticket prices, if the government decreases jet fuel prices that is, he said.

Some of the airlines have been grounded due high costs, Mousavi added.

Jet fuel is currently being sold at 7,000 rials ($0.57 based on the official rate of USD) per liter.

Iranian Roads and Urban development minister said last month that airlines that don't pay off their debts to the oil ministry for jet fuel will be grounded.

Ticket prices were increased by 65% in order to cover jet fuel costs; this leaves airlines with no excuse for not paying off their debts, the ISNA News Agency quoted Ali Nikzad as saying.

It was announced on January 8 that Iran gave airlines several days to repay more than $200 million in debts owed to the oil ministry for fuel before being grounded.

Several airlines have amassed large debts due to pressure from successive increases of the price of fuel and the loss of access to foreign currency at government-subsidized exchange rates. The cessation of these subsidies created a sharp rise in the cost of spare parts, Reuters reported.

The demand for payment comes amid continued economic pressure caused by sanctions over Iran's disputed nuclear program which more than halved the country's revenue from crude oil sales.

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

Iranian media has reported that the indebted airlines include Mahan, Aseman and Zagros airlines.

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

In September 2012, the government withdrew the airlines' access to preferential rates 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 of last year, the 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 from making purchases directly from Boeing and Airbus by sanctions.

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