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Armenia Aviation up in the Air

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  • Armenia Aviation up in the Air

    Institute for War and Peace Reporting (IWPR)
    June 2 2004

    Armenia Aviation up in the Air

    After a string of managers and failed projects Armenia's national
    airline is formally bankrupt.

    By Rita Karapetian in Yerevan (CRS No. 236, 02-Jun-04)

    The clue to the state of Armenia's civil aviation industry can be
    found in Equatorial Guinea, where six Armenian pilots are expected
    to stand trial shortly, accused of spying and plotting a coup d'etat.

    The pilots deny these charges, and the Armenian government claims
    that they were in the area for perfectly innocent reasons. Foreign
    ministry spokesman Gamlet Gasparian said that dozens of Armenian
    pilots are being forced to find work in Africa because the state
    aviation company Armenian Airlines, AA, has been declared bankrupt
    and is facing a Russian takeover.

    The company's management now has just over a week to present a recovery
    package to the Armenian economic court by June 12, or it will face
    certain liquidation.

    Opposition politicians and industry analysts are furious. "Smart
    operators from the aviation industry with government support have
    ruined a whole strategically important sector of the economy," said
    Dmitry Adbashian, a former AA director, who now runs the National
    Aviation Union.

    Most of the company's employees have since lost their jobs and
    income. According to Marietta Kazarian, head of the airline's legal
    department, the number of company employees has dropped from 1,500
    to 100 people.

    "Of the 300 members of the flying team, only around 30 have secured
    jobs with different airlines; the rest are looking into opportunities
    abroad, " said Kazarian.

    For many pilots, this could be the end of the road. "I am too old
    to change my profession and start again from scratch, but I am too
    young to retire," said 51-year-old pilot Genrikh Pogosian.

    According to Arsen Avetisian, general director of AA, the company
    owes its staff ten months' wages - around 250,000 US dollars in all.
    "The court has decided that debts will mainly be repaid after the
    company property is sold," he told IWPR, adding that the exact scale
    of the firm's debts would only be made clear when the liquidation
    process begins, but it is estimated to be between 12 and 30 million
    dollars. Some opposition figures are alleging that the bankruptcy
    has been deliberately planned. "Since 1998 the authorities have
    been carrying out a policy of artificial bankruptcy for AA," claimed
    parliamentary deputy Tatul Manaserian.

    "Debts have mounted up so as to artificially lower the price of this
    company, which many people want to get their hands on," he added.

    Justice minister David Harutiunian rejected this charge, but
    did concede that there had been "serious mistakes in the company
    management".

    Armenian Airlines was founded in 1993 and given the status of national
    carrier. The company inherited highly qualified staff, a mass of
    equipment and 23 planes.

    Former director Adbashian said he had drawn up plans to make the
    airline, as well as Zvartnots airport and the state-run refuelling
    company GSM, commercially competitive. But he was sacked and his
    programme was not implemented, something which he said "pushed civil
    aviation towards collapse".

    The company has been in financial crisis since 1998. AA lost out both
    to competitors and to other state companies, and the fuel supplied by
    GSM was expensive. Opposition parliamentary deputy Agasi Arshakian said
    that GSM used its monopoly "to sell one tonne of aviation kerosene
    at a price which was 100 dollars higher than the average price in
    the region."

    Trade union leader Garik Mkrtchian says that a heavy blow came with
    the transfer of Zvartnots airport to the management of Argentinian
    businessman Eduardo Ernekian.

    According to an agreement signed at the beginning of 2003, Ernekian
    pledged to invest up to 100 million dollars in reconstruction and
    development of the airport over 15 years. But in practice, almost
    immediately after it took over the management, Ernekian's company
    increased prices on fuel, plane parking and ground service.

    AA has also suffered from having 15 general directors over the course
    of a decade, most of whom were not industry specialists.

    "General directors who presided over mounting company debts were
    replaced one after another, but no one was sacked or made to answer
    for this," AA manager Ashot Berberian told IWPR.

    In March last year, the Armenian government took a decision to transfer
    ownership of AA to the private Russian airline company Armavia. After
    nearly 70 per cent of Armavia's shares were sold to another Russian
    company, Sibir-Avia, that company then took a controlling stake in AA.

    Opposition politicians are outraged. "Armavia cannot be the national
    carrier, as the controlling shareholding belongs to Russian business,
    and the rest of the shares belong to a Russian citizen," said
    Manaserian.

    Another deputy, Grant Khachatrian, believes that the takeover threatens
    the sovereignty of landlocked Armenia, which has two closed borders
    because of the Nagorny Karabakh conflict.

    But the government maintains that the sell-off makes commercial
    sense. Justice minister David Harutiunian said, "The state is a bad
    businessman - only privatisation can guarantee the profitability
    of aviation."

    Rita Karapetian is a correspondent for Noyan Tapan news agency
    in Yerevan.
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