Armenia to open up air transport sector after Armavia collapse

By bne IntelliNews August 22, 2013

Clare Nuttall in Astana -

The Armenian government plans to hold a tender for airlines to operate flights to three world regions in September, part of plans to liberalise the air transport sector after the country's largest carrier Armavia filed for bankruptcy.

The process is due to be launched in mid-September, two months later than previously planned. The rights to operate flights to Europe, Russia and the Commonwealth of Independent States, and the Middle East will be put up for tender, with a decision to be made based on flight safety, the condition of the carrier's planes, the ticket sales system, and the carrier's financial stability, a spokesperson from the Armenian civil aviation department told ArmInfo. The winning bidders will be awarded a five-year licence to operate on selected routes.

Yerevan has had to rethink its strategy on the development of the air transport sector following the bankruptcy of the country's main carrier Armavia earlier this year. The Armenian government is currently working with the consultancy McKinsey & Company on plans to increase competitiveness in the sector.

In May - a month after Armavia stopped flights as it entered bankruptcy proceedings - the government announced plans to liberalise the sector. The following month, the government adopted new concept for development of the air transport sector that will see a gradual liberalisation.

Speaking to journalists on June 6, the head of the General Department of Civil Aviation, Artyom Movsisyan, said that the government does not plan to sponsor domestic airlines. However, he added that since local companies are not yet established in the market, it is too early to talk about an "open skies" policy, News.am reported. A department spokesperson told bne that work was in progress, and more information on plans for the sector would be released in October

Armavia grounded its flights on April 1 after announcing that it would begin bankruptcy proceedings due to being unable to repay around $50m of debts mainly to Yerevan's Zvartnots international airport and several Russian airports. The airline's owner, Mikhail Baghdasarov, told journalists that he was unwilling to continue subsidising it from his other business operations.

Armavia had the exclusive right to operate on several routes out of Yerevan, not including the Brussels, London and Vienna routes. The rights were offered as part of the government's deal with Baghdasarov when he took over the international license of the bankrupt Armenian Airlines in 2003. However, the ten-year agreement was due to expire in March shortly before the airline filed for bankruptcy.

Since then, several airlines from Russia and Ukraine have been authorised to increase the frequency of flights serving routes to Moscow and other cities during the summer, the busiest time of year. However, this appears to be a temporary solution, and with the upcoming tenders and plans for further liberalisation being considered, much of the market is likely to come up for grabs later in the year.

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