Jahan Hoggarth in Baku -

In 1991, when Azerbaijan split from the collapsing Soviet Union and central government subsidies dried up, its economy was in tatters and its infrastructure almost non-existent. Left without funds, the Azerbaijani government had to scramble to find ways to survive the new and alien market economy - Azerbaijan Airlines (AZAL), which had been carved out of Aeroflot, was no exception.

Aeroflot bequeathed AZAL a huge fleet, including more than 20 Soviet-made Tupolev airliners, but little else. So to secure its long-term future, AZAL's management decided to go down the privatisation route, which involved reorganizing the company into five units - the airline, airports, air traffic control, inflight catering and cargo - and then bringing in the private sector to manage parts of it.

In 2005, Silk Way Holding, an Azeri private aviation company, took over some parts of the business, while other strategically important parts, such as air traffic control, staff training and fuel supply to airports, remained in the control of AZAL. "If we hand it over to a private company, they'll jack up the fuel prices," says Sabir Ilyasov, AZAL's first vice-president. "We have a unique amalgamation of private and government sectors here at AZAL."

Collaboration with Silk Way has helped AZAL to increase the number of flights to the regional cities of Azerbaijan, and for some of these cities this opportunity is vital. "With up to six flights per day, 70% of communication with the Nachichevan region of Azerbaijan [enclosed within Armenian territory] is done via airways, as the region is in blockade."

Hubbub

According to Kamran Gasimov, CEO of Silk Way Airlines (part of Silk Way Holding), the volume of cargo flights is falling rapidly around the world due to the global slowdown and the opening of international land borders that is making ground transportation cheaper and more accessible. "On average, we currently lose one out of three cargo flights a week, but we have to keep flying to keep our air space with our destination countries," Gasimov says.

As a solution, AZAL and Silk Way plan to turn Baku into a hub of international transits and cargo flights. "We are working together with AZAL to secure the state the reputation as a key regional hub," says Gasimov.

The new Air Traffic Control Tower will allow AZAL to increase the number of chargeable flights over Azerbaijani territory, whilst a new cargo terminal will offer technical assessment, support and refueling to more airplanes using Baku as an interchange between Europe, the Middle East and Southeast Asia. "This will also allow us to pay off the loans taken to purchase the new airplanes," explains Ilyasov, referring to the airline's new fleet.

That will include two new aircraft from the Boeing 787 Dreamliner series in 2014, which would make AZAL the first airline in the CIS region to operate such planes. The ambitious plan is to use these on a Baku-New York route. "We have already done a trial flight to New York and it was just under 12 hours," Ilyasov says.

The "hub" idea is very much a desired outcome for AZAL. If plans to add Peking as a new destination materialize, it would increase the number of passengers, albeit business tourists, travelling to China via Azerbaijan.

Cost of improvement

Monitored by an assertive government, AZAL is constantly under pressure to improve its service. The latest push was the purchase of special equipment for scanning passengers' shoes without having to take them off. "It's a rather unpleasant procedure when you have to take your shoes off in front of other people," Ilyasov sniffs.

Once very affordable, AZAL's ticket prices have rocketed over the last five years as a result. "With the latest technology available and the most modern airplanes in our fleet, our costs have increased," Ilyasov admits. "Improving the quality of our service, even the on-flight food, costs a lot of money and that is, unfortunately, reflected in the price of the tickets."

Key to AZAL's success will be the government's attempts to put Azerbaijan on the tourist map; the country can offer not only beach resorts, but also skiing holidays in the Caucasian mountains, with some of them covered in snow all year round.

Measures are being taken by the Ministry of Tourism and Leisure to develop infrastructure and to keep costs affordable to encourage a sustainable level of tourism. "The Azerbaijani government recognizes the fact that it's cheaper and less hassle for international tourists to travel to Turkey, for example, than come to Azerbaijan. I can say that measures are being taken to improve the situation and encourage mid-range tourism to our country," Ilyasov says.

The tourism pusch has certainly been helped by the PR generated from hosting this year's Eurovision Song Context. "It's good that we had Eurovision. It was the biggest advertising campaign we could've hoped for. People want to come and see what it's like in Azerbaijan. Eurovision tourism has increased the volume of people travelling to Azerbaijan by 25%. This, in turn, should help to ease off visa regulations and cut down ticket prices to encourage the tourism industry in Azerbaijan, as government organizations are recognizing the need to modernise and become more accessible," Ilyasov says.