Airline tickets going sky high?

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  • The end of the popular internal airfare subsidy in #Iran shows the bite of UN sanctions, says @MRubin1971.

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  • As airline fares increase, the ripple effect might begin to undercut small business and internal Iranian commerce.

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Iran is a large country—well over twice the size of Texas and almost four times the size of California. While there are larger countries in the Middle East—Algeria, Saudi Arabia, and Libya, for example—population dispersal within Iran sets it apart. Throughout the rest of the Middle East, the largest cities formed along coasts or on major rivers, leading to narrow, densely populated strips in North Africa, along the Arabian peninsula (with Riyadh being the exception to prove the rule), and Mesopotamia. Iran’s population profile is different: Iranian civilization grew up within a plateau surrounded by large mountains and inhospitable badlands. Rivers never became pre-modern highways: Iran boasts only one navigable river—the Karun—and even then, it is small and peripheral. Rather than concentrate on the coast, Iranian towns and cities formed in interior plains, where they were protected from outside invaders by either mountain ranges or malarial swamps, and separated from each other often by hundreds of miles.

Fast forward to the present: Iran’s largest city is Tehran. Because it was the only city outside the range of Iraqi missiles during the Iran-Iraq War, Mashhad—over 550 miles away from the capital—grew rapidly through the 1980s and is now Iran’s second largest city, but about 10-12 hours away by bus or train from Tehran. To travel from Tehran to Isfahan can take eight hours by bus, and to move onward to Shiraz another eight hours. To drive from Kerman or Zahedan, the two most important cities in southeastern Iran, to Tehran can take more than a day. Poor roads and the necessity to bifurcate high mountain passes and traverse hostile desert with temperature fluctuations that can buckle even well-engineered highways compound the problem.

Throughout recent history, however, Iranians have been able to take advantage of extremely low fares on internal flights to avoid the hassle of overland travel. In the late 1990s, an airline ticket between two Iranian cities might be only twice the bus fare, if even that much. While the price has increased marginally over the past decade, a flight between Tehran and Mashhad now only costs $45. To fly from Tehran to Zahedan—800 miles away by road—costs only $60, the most expensive flight inside Iran. In a country where average per capita income is still above $13,000 per year, such fares put air travel into the realm of the possible, even for the poor, who live on less than one-tenth that amount. As fares increase, the ripple effect might begin to undercut small business and internal Iranian commerce. If past patterns of subsidy reform are any indication, once the government removes the barrier to price increases, subsequent price hikes follow rapidly.

While Iranian leaders have responded to international sanctions with defiance, the effective end of the popular internal airfare subsidy shows the bite which sanctions and poor economic management are now taking. There is a huge difference between increasing fares along with inflation, and jacking up prices by two-thirds. Indeed, on the same day as the announcement of the airfare increase, the Central Bank announced that average inflation over the previous year had increased to 24.9 percent, but in the past month it was even larger, at 32.0 percent.[1]

The excerpted story illustrates other aspects of Iranian strategy and diplomacy. In the West, attention to internal Iranian air travel often revolves around the safety of Iranian airliners. Iranian authorities often ask for sanctions waivers in order to purchase spare parts to maintain the safety of the fleet. Such waivers are seldom effective in improving civilian fleet safety, however, as the Iranian government tends to cannibalize the new parts for military aircraft, leaving the civilian fleet in consistently poor condition. That the internal Iranian discussion regarding the airline industry focuses more on fares than on safety also highlights the discrepancy between Iranian rhetoric as directed toward Western diplomats versus toward its own internal audience.

[1]“Sima-ye Rasmi Tavarram Mah-e Mehr,” (Broadcasting Official Exchange Rate for the Month of Mehr [22 September – 21 October] Donya-ye Eghtesad, November 8, 2012. http://www.donya-e eqtesad.com/Default_view.asp?@=327468>

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Michael
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