British Airways and Air France to Suspend Iran Service
August 25, 2018
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British Airways and Air France to Suspend Iran Service

By Rick Gladstone and Zach Wichter    |   Aug. 23, 2018

Two major European airlines said Thursday that they would suspend service to Tehran next month, a double-punch that underscored the power of reimposed American sanctions on Iran and the limited abilities of others to sidestep them.

The suspensions, by British Airways and Air France, mean at least three large European carriers, which once held out great promise for their Iran business under the now-threatened nuclear agreement, will quit flying to and from the country in September. KLM, the Dutch sister airline of Air France, announced a similar suspension last month.

The moves seemed bound to deepen Iran’s sense of economic isolation, which has worsened considerably in the nearly four months since President Trump scrapped American participation in the nuclear agreement negotiated by the administration of his predecessor, Barack Obama.

Mr. Trump and his aides have warned foreign businesses to steer clear of Iran to avoid reimposed American sanctions, which take full effect in November.

“Drastically reducing direct flights to Europe certainly has a psychological and economic impact,” said Richard Aboulafia, vice president of analysis at Teal Group, an aviation and defense industry consultancy in Fairfax, Va.

Both British Airways and Air France attributed their decisions to a drop in demand that had made the Iran routes unprofitable, and they did not mention the effects of Mr. Trump’s actions. But industry analysts said the primary cause was clear.

“There’s no question that the economic sanctions that have been imposed on Iran are affecting its economy and limit some companies’ ability to do business there,” said Henry Harteveld, founder of Atmosphere Research Group, a travel industry analysis firm in San Francisco. “So I’m sure there’s been a sharp falloff in traffic both originating from Iran as well as traffic from Europe and other international points, including the U.S., going into Iran.”

Mr. Harteveld said a rise in the price of jet fuel might also have played a role. “Jet fuel is like a stern parent,” he said. “It forces a lot of discipline on you as an airline, and routes that are marginal are often scaled down or cut if they’re not meeting profit expectations.”

British Airways said its last round-trip flight between London and Tehran would be Sept. 22-23. In a statement, the airline apologized for “any disruption this may cause to our customers’ travel plans” and said it was arranging re-bookings or refunds.

Air France said it had “decided to early-end the summer season service from Paris to Tehran” starting Sept. 17, “as a result of weak economic performance.” It offered customers rebooking options.

Other foreign-based airlines still provide service to Iran. But the departures of British Airways and Air France will reduce travel options as Britain and France are trying to save the 2015 nuclear agreement, which was intended to end Iran’s economic isolation in exchange for its verifiable pledges of peaceful nuclear development.

“The news that British Airways and Air France will stop flying to Iran is a prestige blow to the government,” said Cliff Kupchan, chairman of the Eurasia Group, a political risk consultancy in Washington. “Major carriers from two nations that support the nuclear agreement are no longer serving Tehran.”

Iran’s official media appeared mostly to play down the airline service suspensions. But Press TV, a state-run news website, quoted Iran’s ambassador to Britain, Hamid Baeidinejad, as saying that there was high demand for travel to Iran and that the British Airways decision was “regrettable.”

Mr. Trump, who has described the nuclear agreement as a disaster, even though most countries including the United States’ European allies have said it was working, announced in May that the United States was withdrawing from the accord.

The Trump administration has since begun reimposing suspended American sanctions on Iran, including severe restrictions on Iranian banking, auto making and — most significantly — sales of petroleum, Iran’s vital export.

Under the reimposed sanctions, companies that do business with Iran risk penalties in the far larger American market, which has intimidated big multinational companies that depend on their connections with the United States. Many have withdrawn from Iran or suspended plans to invest there.

The impact has helped to severely weaken Iran’s currency, the rial, which has made imports in Iran and travel abroad for Iranians far more costly.

“The market is punishing Iran,” Mr. Kupchan said, “which for better or worse is exactly what Trump wants.”

 

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