Iran to ground indebted airlines

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

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

It was announced on January 8 that Iran has given 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 fuel price increases and the loss of access to government-subsidized foreign currency exchange rates which has resulted in a sharp rise in spare parts costs, Reuters reported.

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

The total amount of outstanding 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, national carrier Iran Air nearly doubled prices to international destinations after facing soaring costs due to the slump in the value of the Rial.