Kish finds its niche
Though its economy is tiny compared to the Gulf's developed city-states, Kish Island has bold plans to become a regional hub for tourism and business. Martin Rivers assesses the prospects for local operator Kish Air.
Kish Island – pronounced ‘quiche’ – has been a focal point for Iranian aviation since the 1970s, when Mohammad Reza Pahlavi, the last Shah of Iran, transformed the desolate Gulf island into a luxury casino and vacation resort.
Its small airport was specifically designed to handle the supersonic Concorde, which whisked foreign dignitaries in from Paris under a wet-lease agreement with Iran Air.
Much like the flag-carrier’s own order for Concordes, however, the debauchery came to an end with the 1979 Islamic Revolution that deposed the Shah and introduced more conservative values across the country. Kish now adheres to the same religious codes that govern the rest of Iran – alcohol is forbidden; hijabs are mandatory for females.
The island forged a new path in the 1980s by becoming one of Iran’s free-trade zones. Governing body, the Kish Free Zone Organisation (KFZO), now woos overseas investors with the promise of visa-free travel, 15-year tax exemptions and no restrictions on foreign ownership.
Its overarching plan is to transform Kish into “the next Dubai” – an oasis for business and high-end tourism in the Persian Gulf.
Yet, sanctions have long scuppered that vision. Despite steady investment in shopping centres, luxury hotels and even a dolphinarium, Kish remains a predominantly domestic resort served only by Iranian and Iraqi airlines. Persians account for nearly 90% of the 1.5 million people who visit the island each year. Among foreigners, the largest contingent is migrant workers from the United Arab Emirates, who come solely to renew their visas.
According to Saeed Kalhori, deputy-managing director of KFZO-owned Kish Air, the lifting of nuclear-related sanctions gives the island the best opportunity yet to make good on its long-standing aspirations.
“I remember when Concorde was landing here. Kish is a free-zone area and from the very beginning it has been a focal point for the tourists,” he said. “So we know it could be a very good transportation hub for cargo and for the passengers – and there is no need for a visa when coming here. Anybody can come very easily. They are all welcome.”
Kish Air operates a dual-hub strategy from both Kish International Airport and Tehran’s Mehrabad International Airport. Its network primarily focuses on domestic links from the capital, but also includes scheduled and charter flights to Turkey, Iraq, Azerbaijan, Armenia, Oman and the UAE.
As well as tapping into Kish Island’s potential as a tourism destination, Kalhori is mindful of the Gulf's geographical advantage for connecting traffic. “Iran is in the middle [of the world], so we have lots of capability to go to the north to Commonwealth of Independent States (CIS) countries; to the south to all the Arabic places; and also to Europe or Asia,” he said, using language reminiscent of the sixth-freedom Gulf carriers.
“Iran is just in the middle. We have possibilities in all four directions.”
Casting his eye over markets within narrow-body range, Kalhori named Vienna to the west, Delhi to the east, and Moscow to the north as the boundaries for route development. A mixture of both scheduled and charter flights will be pursued.
Kish Air’s expansion programme formally kicked into gear in March – just weeks after the lifting of nuclear-related sanctions – when the airline wet-leased two Airbus A320s from Jordan Aviation.
The aircraft joined a pre-existing fleet of seven McDonnell Douglas MD-80s and three Fokker 100s. They will be followed or replaced later this summer by two A321s. With near-term plans for six to eight additional narrow-bodies, the fleet could number 20 by the end of the decade.
“We have lots of offers from difference companies,” Kalhori noted, voicing a preference for second-hand units during the initial growth phase. “For the price of one brand new aircraft, we can buy maybe three or four [older] aircraft.”
Asked whether the deliveries could allow Kish Air to retire some of its pre-existing aircraft – the MDs and Fokkers are all between 21 and 29 years old – he said adding capacity was the main priority in the short-term. Keeping the vintage planes in service will also give his pilots and engineers breathing space while they re-train for the latest generation of aircraft.
“We have to give ourselves a little time to be settled down,” he stressed. “It’s better to do it step-by-step.”
Interestingly, although Airbus has secured a head start in post-sanctions Iran, Kish Air does not rule out transitioning to a Boeing fleet when it eventually acquires new-build aircraft.
Kalhori held informal talks with the US manufacturer at last year’s Dubai Airshow, and he considers either the 737-800 or 737-900 to be viable long-term replacements for the A321. “Whatever is available; we want to expand the airline as soon as possible, so who is coming first is the one who gets the door open,” he said. “Airbus has been here in Iran for the last 35, 40 years. Boeing is just starting to look [at Iranian deals], so they have to do a lot [to catch up].”
Should one of the manufacturers secure a direct purchase, the spoils may even include wide-body commitments. Kish Air expects to order long-haul aircraft in about three years, Kalhori confirmed, and a mixed fleet is not in the plan.
“One type of aircraft is to the benefit of the airline,” the deputy chief said, pointing to synergies for engineering, maintenance and training.
“By the end of the third year [of the initial growth phase] we will go for wide-body, long-range aircraft. If we go with Airbus for the narrow-body aircraft, then certainly it will be Airbus family for the wide-body. And the same [principle applies] for Boeing.”
As recently as December, media reports suggested that Kish Air was preparing to place an order for 10-15 Tupolev Tu-204s. Russian-built aircraft were easier to source and maintain during sanctions, but a spate of high-profile accidents tainted their image and prompted Iran’s Civil Aviation Organisation to impose a blanket ban in 2011. Despite previously operating Tu-154s, Kalhori was adamant that Kish Air would not be acquiring Tupolevs.
With so much optimism about Iran’s post-sanctions prospects, it is important not to forget the uphill struggle that awaits its long-handicapped airlines.
Kish Air’s heavy exposure to the island after which it takes its name is particularly sobering.
Though officials speak confidently about a doubling of visitor numbers within three years – 2.7 million passengers passed through the airport in 2015 – delivering that goal will be no mean feat. Even if the airport’s new terminal is completed on time, the ever-present threat of snap-back sanctions could deter some foreign businesses and hoteliers from setting up shop. Iran’s national ban on alcohol may also be a dampener for foreign tourists.
Nonetheless, President Hassan Rouhani’s visit to Kish in March, underscores how the government now sees the island as a test case for the country’s economic renewal and global reintegration.
With Ayatollah Khamenei, Iran’s supreme leader, voicing support for a “resistance economy” that empowers domestic industries, the stars seem perfectly aligned for a new era of growth in the Shah’s former playground. As a subsidiary of KFZO, Kish Air is in pole position to facilitate and benefit from the developmental renaissance.