In 2013 the Armenian government moved towards a liberalization of the aviation system with the aim of creating a free-market environment and equal competitive conditions for all airlines. Yet, the open sky policy complicated the life of Armenian carriers which started struggling, and then, unable to compete, went belly up.
Flight connections are vital for Armenia. The landlocked country’s economy has been hobbled by the longstanding closure of its borders with neighbouring Azerbaijan and Turkey due to the conflict over the region of Nagorno-Karabakh; it relies on two road connections with Iran and Georgia for much-needed trade and citizens’ travel. The tarmac strip leading to Georgia provides a key connection to Russia via the upper Lars crossing point, although the harsh climatic conditions on the Caucasus range regularly hinder the link during the winter months.
Yet, skies offer a limited alternative. In 2015, Armenia ranked 126 out of 137 in the World Economic Forum’s Travel and Tourism Competitiveness report in terms of flight accessibility, which consider both ticket tariffs and airport taxes. High prices mean that Armenians often choose to fly from Georgia’s capital, Tbilisi - even factoring in the five hour-long trip to Tbilisi from Yerevan, since the overall cost is lower than tickets’ fares from Armenia.
Exact figures are lacking, making it difficult to quantify the size of the phenomenon, maintains management expert Harutyun Mesropyan.
“[High] air fares reflect poor management and the absence of a national strategy in developing such an important sphere as flight connections,” he told Chai Khana. A comparative study conducted in 2012 by the United States Agency for International Development (USAID) between Georgia’s and Armenia’s aviation policies showed that in the case of the former, which liberalized its sky policy in 2005, the government showed recognition “of the critical importance of this mode of transport for the country’s economic competitiveness.”
Tbilisi International Airport and Georgian Civil Aviation Agency did not respond to queries about the number of Armenian citizens flying from Georgian airports, based on Armenian passports processed.
The Armenian government’s decision followed the collapse of leading carrier Armavia in 2013 which left the country with a dramatic void as in 2011-2012 the company operated 48% of all passengers’ air traffic. The USAID analysis conducted on 39 international non-stop routes to and from Yerevan and between other regions in the world highlighted that in late 2012 fares for travel to and from Armenia were consistently higher than fares in Europe, Latin America, and the United States. The new policy aimed at liberalizing the market with lower prices stimulating travel thus leading to increase passengers’ traffic. It led to some results as new players, like Air Armenia, got in the market and prices did register a decline. However, according to Shahen Petrosyan, who headed the government’s general department of civil aviation in the 1990s, the drop is in line with the global trend, not a direct result of the program.
The saga of debt-ridden Armavia was painful, but it was not the only one flying through rough skies. One year after its debacle, another privately-owned airline, Air Armenia, filed for bankruptcy as well - the carrier had entered the market in 2003, specializing in freight transportation and branching out to passengers’ flights in 2013, but was unable to compete with major airlines’ practises - like dumping, whereby a product, in this case air tickets, is cheaper in the foreign market than the price charged domestically.
Armenia features two international airports - Yerevan’s Zvartnots International which covers over 95% of the total passengers traffic, and Shirak International, serving Gyumri, the country’s second biggest city about 120 km from the capital. Both are operated by “Armenian International Airports” a company owned by the Argentinian-Armenian businessman Eduardo Eurnekian whose “Corporación América” operates 53 airports in Latin America and in Europe. Other airfields have either different destinations like Stepanavan’s (139km north of Yerevan) which serves the Ministry of Emergency Situations of Armenia, or ended up falling into disuse at the fall of the Soviet Union, like Gavar’s, in central Armenia.
In 2012, Russia accounted for the sale of over 60% of all international air tickets, a USAID report showed. Two are also the Armenian passenger airlines in operation - Armenia, which flies to 17 destinations, and Taron Avia, which operates six destinations.
Operating since summer 2016, Armenia is an Armenian-Georgian joint-venture featuring the secluded and media-shy businessman Ashot Torosyan as the majority stakeholder (51% stake) while the rest is divided between Tamaz Gaiashvili, founder of Georgia’s carrier Airzena, and Robert Hovhannisyan, Airzena’s former deputy chief executive officer. The new airline has been complaining about unfair competition, specifically with regards to the regular dumping from the Russian low cost airline Pobeda. The latter launched in 2016 flights from Gyumri, Armenia’s second biggest city to Moscow.
A cargo airline in operation since 2007, Taron Avia started passenger flights in 2015. Businessman Garnik Papikyan is CEO of the company and its sole shareholder.
The country’s fragile geographical position calls for solid passengers’ transport. Yet, after state-owned Armenian Airlines defaulted in 2004 the government has not invested in setting up a flag carrier. Armenian Airlines was later acquired by businessman Mika Bagdasarov who renamed it Armavia. After the default, Armavia’s market share was taken by Russian airlines which now account for 30% of the airlines present in Armenia.
Critics have slammed the liberalization, stating that national airlines were not ready to properly compete with powerful international companies. Petrosyan maintains that the new policy is a one-sided step where is missing a national carrier.
“The open air policy can be effective when there is an alliance of countries with similar codes. By doing one-sided concessions Armenia jeopardizes the national carriers,” he notes.
For Mesropyan, “if a national strategy is in place then all the companies are obliged to abide by it. As there isn’t, then wild market rules come into action,” he says, adding that, “in Armenia it is not yet clear that dumping is regular practise, it could well be prevented by adopting anti-dumping laws.”
Crossing into Georgia to catch a flight is also a choice blamed on bad inter-city transportation - for people living near the Georgian border, access to the Tbilisi airport is easier than the trip to Yerevan’s airport.
Armenia is holding talks with the European Union about Armenia joining and signing the European Common Aviation Area agreement for Single European sky. The accord is aimed at increasing passenger traffic between the country and the EU countries and at decreasing flight fares. The agreement has already been signed by Georgia, Moldova, Albania, Israel, Jordan, Morocco, Serbia, Bosnia and Herzegovina, Slovenia, Macedonia, Montenegro and Croatia.