Golden Opportunity

I am thinking of the passengers of Malaysia Airlines' flight from Amsterdam to Kuala Lumpur. Their journey came to an end in a matter of seconds. One moment, they were having a wonderful flight to a beautiful Asian city and the next; they were having a 10 thousand-meter plunge towards death. Words cannot possibly describe these tragic moments. The catastrophic accident which has been widely compared to Iran Air Flight 655 brought down by American missiles reminds us of the sad truth that a safe flight is bound to safe airways. But secure airspace over the Middle East and Eastern Europe is shrinking, thanks to increasing conflicts in these regions. Is there a possibility that Iran's airways grant safe passage to international passengers and airlines? This week, the number of Emirates' over flights in Iran's airspace doubled.
Before investigating political and economic consequences of this turn of event, we need bear in mind that Iran has been recognized as an important intersection for transit and transportation due to its particular strategic position in the Middle East. Political circumstances of the past decade and huge competitions in the region as well as manipulations of World Powers led to a massive investment for downgrading Iran's strategic and geopolitical status. But in the state of emergency, Iran has always been a secure path. The increase in the number of overflights through Iran's airways is in agreement with the image we are striving to show to the world and is completely in line with national development plans.
Additionally, Iran is a country which considers the provision of safe and secure transportations for passengers a moral duty due to its pure historical and cultural background. It is sad to say that international airways were reminded of the importance of Iran's airspace only on the wake of such tragic accident. Nevertheless, the country has a brilliant history in terms of flight structures and infrastructures and the provision of safety for international flights.
It is up to political experts to examine the consequences of recent flight accidents, but, in terms of political economy, the attention of international airlines to Iran's airspace is a blessing. In fact, this is an unprecedented window of opportunity for turning a geopolitical advantage to common economic interest. Increasing the common interests not only strengthens political ties, but also helps to maintain security and stability in the region.
It would be possible to explore economic consequences of the increase in navigation service exports and as well as the increasing flights of international airlines over the country's airspace by taking into account the potential impacts of direct, indirect and collateral consequences.
The demand for Iran's navigation services and flight permission through the country's airspace is presently on the rise. The direct consequences of the present situation will include increased revenues and increase in the number of activities immediately related to flight services. Furthermore, indirect consequences will be the reduction of indirect airport-related activities, such as change in necessary goods and services for airlines and flight companies. Ultimately, the transformation of economic activities independent from flight industry will be the collateral consequence. The first direct impact will be the increasing revenues of airports and airport-related companies.
It is difficult to comment on the exact volume of these improvements at the moment. Naturally, airlines would step forward to negotiate potential tariffs, but final tariffs may be far from our speculations. Undoubtedly, the revenues of flight companies will considerably increase and the rise will bring about different consequences at the moment. As a result of the recent overhaul, domestic airlines will be able to gradually clear their debts to Iranian Airports Holding Company and increase the maintenance of the country's aviation infrastructure while curbing potential side effects. More financial transparency and less depreciation of the country's airports will be the result of growing revenues. Furthermore, the amount of Iranian Airports Holding Company's non-performing loans means that little fraction of these new revenues will be re-invested in airport infrastructure.
In other words, we will probably not be seeing much infrastructure renovations in airports following increased exchange revenues, while equipment maintenance and services will most certainly improve. Considering the vast network of the country's airports, the development of airports is not the main concern of Iran's flight industry, but the real challenge is the depreciation and the fixed maintenance costs of airports. More flights through the country's airspace will expand the services of Iranian Airports Holding Company. The expansion could be the cornerstone of winning back the trust of international airlines. The demand of big names and players in flight industry to fly through Iran's airspace will inevitably boost the country's reputation and will ultimately attract renowned global airlines. The present trust-building period will increase the amount of revenues in a stable fashion. For many, branding and the mental image of an enterprise lack financial value, but in today's economic exchanges, a brand is equal to potential financers and customers.
Following the increased traffic in Iran's airspace, international airlines will soon notice the country's extensive airport system and the quality of navigation services. More precisely, we are undergoing an introductory period through which, many global investors and financers may approach Iranian airlines and airport companies. The biggest indirect impact of recent occurrences would be the improved ability of Iranian Airports Holding Company to attract investors. The increased revenues of the Holding will result in higher return rate for the Holding. In today's world, there are few opportunities for investment in infrastructures whose final prices are not competitive yet. The recent upturn could potentially improve the quality of airports and increase the employment rate.
It would be next to impossible to fully exploit these opportunities without addressing some of the fundamental issues of the country's airports. It seems that the current business model of Iran's flight industry heavily relies on exchange revenues from navigation services. These revenues serve the maintenance of those airports unused by domestic airlines. Accordingly, the real rate of return on capital among the country's airports is lower than that of under normal conditions. There is no denying that adjusting the airport tariffs and finding solutions to address non-performing loans is a necessity. However, it is important to bear in mind that despite the issues of Iran's flight industry, we need to grasp every opportunity to begin a new era in the history of the country.