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Armavia Reimagined: Solutions for a Successful National Carrier

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  • Armavia Reimagined: Solutions for a Successful National Carrier

    Armavia Reimagined: Solutions for a Successful Armenian National Carrier

    http://hetq.am/eng/news/24996/armavia-reimagined-solutions-for-a-successful-armenian-national-carrier.html
    22:46, March 31, 2013

    By Raffi Elliott

    A history of problems:

    The brief time since Armenia's regaining of independence has been
    rather turbulent for its small aviation industry.

    As the USSR fell apart, Armenia, having been a constituent republic
    received a number of former Aeroflot jets which formed the basis for a
    new Armenian national carrier, Armenian Airlines, which served a
    number of routes to Russia and continental Europe.

    However, environmental restrictions within the European Community
    meant that the soviet-era fleet would no longer be able to fly its
    European routes, effectively condemning the new airline to bankruptcy.
    This failed first attempt was shortly followed by a second, albeit
    controversially short-lived venture; Air Armenia's assets were
    opaquely liquidated to form the new, privately-run, supposedly
    publicly-traded, Armavia.

    Armavia, officially managed by the Russian-Armenian oligarch Mikhail
    Baghdasarov was able to lease, and later purchase, a small fleet of
    second-hand airbuses, allowing it to expand its routes into the EU and
    Russia, as well as serving some middle-eastern destinations, such as
    Dubai, Aleppo and Beirut. despite a few accidents, Armavia
    essentially flew with a descent record.

    Despite apparent successes, it soon became apparent that Armavia was
    being plagued by financial issues, incompetent management, and
    inefficient use of resources; with more flights being cancelled, and
    others being delayed as a result. The company's true financial
    situation began to surface when, being the first recipient of the
    Russian-Italian made Sukhoi Superjet, it soon had to return its
    purchase, as well as cancel a second order for a second one.

    This was followed by a drastic reduction of routes. Armavia further
    caused controversy, when they cancelled their flight to Aleppo, only
    to reinstate it with grossly inflated ticket prices, which most of the
    ethnic-Armenian refugees fleeing the Syrian Civil War could not
    afford.

    A recent dispute between the failing airline and the
    Corporacion-America-managed Zvartnots Airport over gate fees further
    raised speculation of imminent bankruptcy; and, as an "ArmeniaNow"
    article pointed out, fully embodied the stark contrast between a
    western-style properly managed corporation (such as the Airport), and
    a soviet-style oligarch run and operated company which relies on
    kick-backs and government favouritism to survive.

    Today, Armavia flights are routinely between 2 and 3 hours late or
    sometimes cancelled, to the great discomfort of travellers, and its
    future is uncertain. As of March 30th, Armavia has already filed for
    bankruptcy.

    Challenges and Solutions

    Other than the obvious factors such as the endemic results of
    oligarch-style mismanagement, which plagues most other sectors of the
    Armenian economy, the most glaring problem is that Armavia simply
    missed its mark. the airline failed to establish its niche. it flies
    against tough competition in very crowded routes such as
    Yerevan-Moscow, Yerevan-Sochi, Yerevan-Krasnodar, and so on, which are
    served extensively by a number of domestic Russian airlines, without
    offering a competitive edge such as better service, cheaper airfare,
    customer loyalty points or anything. As far as most labour migrants
    are concerned, it is a soviet airline like all the others. The
    Yerevan-Dubai route, for example, is served by both Armavia and
    Emirates subsidiary: FlyDUBAI. The difference in Ticket-price is
    almost minimal (usually less than 50 Euros), yet FlyDUBAI offers
    outstanding customer service, friendly staff, both on the phone, and
    on the plane, as well as online booking. Armavia offers none of
    that…well worth the extra 50 Euros….

    Low-Cost People Mover?

    Second, Armavia totally fails to make proper use of its logistical hub
    in terms of boosting number of travellers. There is a gross
    miscalculation in their mission statement: Yerevan does not have to be
    a FINAL DESTINATION, as much as it could also serve as a transit
    station. Granted, Zvarnots airport (which recently won an award for
    the best-managed airport in Eastern-Europe by the way) DOES have
    higher-than-average gate fees, which, with some negotiations, could be
    brought down, but the point is that the aerodrome is equipped to
    handle almost all aircraft flying in the world today, and the
    facilities could handle much larger volume than it does today. This,
    coupled with Armenia's suitable geographical location as a transit
    point between east and west would allow the company to compete in a
    new airline market: that of low-cost alternative.

    If people could travel from Western Europe, or North America to
    South-East asia for several hundred dollars less than one of the major
    airlines, they would certainly not mind a layover in Armenia; and
    similarly, Hotel managers, tour companies and various other Armenian
    businesses wouldn't mind the extra customer base. Seems like a win-win
    for all.

    It wouldn't be difficult for Armavia to pull this off. It would be as
    simple as following the Ryanair, or EasyJet model of avoiding large
    airports in favour of smaller, regional airports, where gate fees are
    much lower, serve better quality meals for a small fee, charge for
    luggage, or extra leg room and so on.

    Brand Recognition

    One of the most irritating parts about Armavia, is the fact that the
    first 3 letters in the name correspond to the name of the Republic of
    Armenia. Right now, there is no greater shame than having such an
    airline serving as Armenia's national air carrier. I'm also sorry to
    say that hiring Gerard Depardieu, who has recently lost his marbles,
    and began prostituting himself to the whims of a number of post-soviet
    dictators does nothing to help raise brand awareness.

    Maybe Armavia would do well to hire a public relations firm, rebrand
    itself as safe, reliable and cheap alternative to Emirates of British
    Airways, and advertise themselves as such.

    Freight-Traffic Development

    Being based in a tiny, landlocked country which is being blockaded on
    two sides, it comes as a total shock that Armavia hasn't yet developed
    a cargo division. the solution seems obvious: buy freight aircraft and
    start flying cargo in and out as a way to make extra cash.

    Of course, none of these changes could be implemented until the
    management problem is resolved. the practice of hiring and promoting
    based on nepotism and kick-backs needs to cease immediately, as such
    positions which be awarded on the basis of meritocracy. This would
    allow a competent management team to properly oversee company
    operations.

    To recap: if Armavia one day decides to get its act together, it could
    very easily rise from the grave through a simple formula of hiring a
    competent management team, finding its niche, and gaining the
    competitive edge by rebranding itself as a safe, reliable, low cost
    airlines which can connect the world. That way, Armenians will finally
    regain their pride in their national carrier....oh, and maybe have an
    ARMENIAN version to their site for a change...

    Raffi Elliott is a Yerevan-based Canadian-Armenian political
    commentator who frequently writes about Armenian social, political and
    economic trends on his blog: www.mshak.org

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