Iran's aviation industry infrastructure was by and large established in the 1930s, at the time of the Shah Reza Pahlavi, where the German Junkers & Co Aviation provided the foreign expertise and assistance.
The Iran Aviation Industries Organization (IAIO) (Persian: سازمان صنایع هوایی ایران) was established in 1966 for the purpose of planning, controlling, and managing the military aviation industry of Iran.
The IAIO was responsible for directing five aviation organizations: SAHA, HESA, PANHA, GHODS, Shahid Basir Industry. These five organizations have different and complementary roles in the Iranian defense industry and Iranian civil aviation, and have progressed, with the exception of Ghods, from repair and maintenance facilities to larger defence enterprises with several thousands employees.
The Iran Helicopter Support and Renewal Company (IHSRC), or PANHA, was formed in 1969, the Iranian Aircraft Industries (IACI) in 1970, and Iran Aircraft Manufacturing Industries Corporation (IAMI), also known under its Persian acronym HESA, in 1974. Two other companies, Iran Aviation Industries Organization of the Armed Forces, (also known as the Iranian Armed Forces Aviation Industries Organization (IAFAIO)), and GHODS Research Center were formed in the early 1980s.
The industry was later expanded in the 1970s in the reign of Shah Muhammad Reza Pahlavi, benefiting from the boosted oil revenues. Not only did the Shah order vast quantities of America’s most advanced weapons, he was also acquiring the capability to produce them in Iran. Under a multibillion-dollar industrialisation programme, the Shah commissioned US arms firms to build entire weapons factories from scratch in Iran.
Thus Bell Helicopter (a division of Textron, Inc.) was building a factory to produce Model-214 helicopters in Isfahan. Northrop Corporation was also a joint partner in Iran Aircraft Industries, inc., which maintained many of the US military aircraft sold to Iran and was expected to produce aircraft components and eventually complete planes. These efforts represented a large share of US industrial involvement in Iran, and were a centrepiece of the Shah’s efforts to develop modern, high-technology industries.
After western sanctions following the Iranian Revolution, the general official policy of Iranian government changed from having the best available in the world to being able to manufacture independently in order to meet domestic needs, specially of technological products and therefore becoming "sanction-proof".
In no other field this urgency was higher than aeronautics. Therefore Iran has avoided the need to purchase better western aircraft available to it from time to time in favor of inferior ones that could be manufactured in Iran through arrangements of purchasing licenses and technologies as well as reverse-engineering parts, mostly to avoid situations that Iran has gone through during 1980s till now by not being able to maintain what it had due to domestic technological starvation.
Former Iranian President Mahmoud Ahmadinejad had favored the purchase of aircraft such as Iran-140 which are manufactured in Iran. An agreement for licence production of the Antonov An-140 by Iranian Aviation called ‘Iran-140’ was signed in 1993. The first aircraft, supplied as a kit, flew on 7 February 2001.
Negotiations were underway to manufacture 50 An-148 under licence to be named Iran-148. Agreements were signed with Russia for co-development and co-manufacture of an uncertain amount of Tu-334 airliners in Iran with production to commence simultaneously both in Iran and Russia.
Another agreement with Poltava Helicopter Company of Ukraine allows Iran to manufacture the Aerokopter AK-13 ultra-light multi-purpose helicopters in Iran. Yet, Iran says it is prepared to order passenger planes from Boeing and Airbus if the United States lifts sanctions against Iran. In 2010, Iran's Defense Ministry said it will begin the production phase of a domestically-manufactured medium-size passenger plane designed to carry up to 150 passengers.
Qaher-313, single-seat stealth fighter aircraft publicly announced on 1 February 2013.
In 2006 Textron sued IAIO, for producing counterfeits of six types of its Bell unit helicopters without licenses thereby using trade secrets and patented designs without permission and demanded compensation for damages. In another lawsuit (Bell Helicopter Textron Inc. v. Islamic Republic of Iran, Case No. 06cv1694, in U.S. District Court for the District of Columbia) brought by Iran against Textron earlier, Iran had sought damages against unfulfilled contracts dating back before revolution. Textron ultimately sent five commercial helicopters to Iran in addition to providing spare parts and training in 1994 to settle the dispute.