Pressing funding problems forcing action (430 words)

Published: 11/22/2000

Armenia has decided to privatise the state owned Armenian Airlines and has created an interdepartmental commission to prepare for the sale of the airline. The privatisation originally decided in July 1997, was delayed as recently as October 1999, when Ervand Zakharyan, the Minister of Transport, said the sale of the carrier was not on the government's privatisation agenda. According to David Vardanyan, the Minister of State Property, Levon Barhudaryan, Minister of Economics and Finance, will head the commission, which according to preliminary reports will sell the airline through an international tender, but is due to appoint an international consultant to advise it on the process. The need for the privatisation of the airline is however, not universally supported. Dmitry Atabashyan, Chairman of the National Aviation Union, has suggested that the problems of the airline are attributable to the overly liberal unbundling of the former monopoly of the state aviation entity. He sees the means of resolving the situation as the consolidation of the industry, presumably under government leadership, as Atabashyan is scathing about the capabilities of the industry's current management. The primary reason for the airline's urgent privatisation is the pressing need for investment primarily in aircraft, estimated to be between $15-20m within 1-2 years. Funding that the struggling Armenian authorities cannot provide, despite the fact that in 2001 according to reports, most of airline's aircraft will reach the end of their safe lives. The airline's fleet has fallen dramatically in the last twelve months and was reported to be 11 aircraft (3 Tu-154, 3 Yak-40,2 Tu-134,2 Il-86 and an A-310) at the beginning of October 2000 having fallen from 18 a year earlier through scrapping and write offs. The fleet's shrinkage is also being highlighted by the suggestion from the National Aviation Union, that the write offs in some cases were premature. Although the union has not explained who benefited from such actions. The fleet's flagship A-310 has also been something of a white elephant according to local sources bringing the airline substantial operating losses estimated in 1999 to be $5m. The airline recorded losses overall in 1999 of 850m drams ($1.6m) while Armenia's total aviation sector recorded a profit of 1 billion drams ($1.8 m). The number of passengers carried by the airline also fell by 34% from 516,000 passengers in 1998 to 340,000 passengers in 1999. Armenian Airlines currently operates passenger routes to Amsterdam, Anapa, Athens, Ashgabat, Beirut, Volgograd, Dubai, Ekaterinburg, Kiev, Krasnodar, Larnaka, Mineral Waters, Moscow, Nizhni Novgorod, Novosibirsk, Odessa, Paris, Rostov-on-Don, Samara, St.-Petersburg, Simferopol, Sochi, Stavropol, Tashkent, Teheran, Frankfurt, Zurich.

Article ID: 2205