Armenian “Armavia” goes bankrupt: future of national air traffic under question

YEREVAN, April 2. /ARKA/. According to official information released Thursday, Armenian national air company Armavia made a decision to cease its flights as from April 1st 2013 and start a bankruptcy procedure. For the second time an Armenian national air carrier goes into bankruptcy: Armenian Airlines turned bankrupt in 2003.

There has been a lot in mass media about Armavia’s problems, its big debts and that its license may be revoked. Now events take an unexpected turn. Armavia’s press service announced the company’s decision to cease the flights and start a bankruptcy process.

“Aviation is a field where you must not be satisfied with what you have already achieved. During three years, owner of Armavia air company kept investing money from his other businesses to support the air carrier. But today the situation is that there is no possibility left to continue like this. Hence, a decision is made to cease flying and start a bankruptcy”, says the report. The document also says that the 2008 global economic crisis cause bankruptcy of many foreign air companies, such as KUBAN, AEROSWIT, RED WINGS, AMERICAN AIRLINES and others.

As early as in November 2012 reports said that owner of the company, president of MIKA Limited and a major Armenian businessman Mikhail Baghdasarov intended to sell its Armavia. The 

The main alleged reason was the economic crisis and the losses suffered from maintenance of the new Russian SuperJet.

Last year Armavia returned one of the two Sukhoi SuperJet 100 on order to Sukhoi Civil Aircraft company: the reason given was the low quality assembly. The second Sukhoi SuperJet 100 had not been supplied and Baghdasarov said he had no debts to the jet manufacturing company.

But the Sukhoi Civil Aircraft said that Armavia had not paid some 4 million dollars for the first aircraft, that there is encumbrance recorded against it in an Armenian bank that the air company could not return the jet unless it exonerated the aircraft. 

Baghdasarov retorted saying that if the manufacturer had a buyer they would have exonerated the aircraft themselves since long ago.

Yet, according to Armenian mass media, Armavia owes not only to Sukhoi Civil Aircaraft.

Haykakan Zhamanak newspaper says the company has not repaid its 22 million dollars loan from Bank VTB Armenia (taken for buying SuperJet 100) and has not paid overdue salaries to the staff.

Armenian print media say Baghdasarov intends to sell the air company at $50 million, but potential buyers are scared away because of the huge debts of Armavia.

Late 2012 Baghdasarov told RBC daily that no Russian investors are interested in the deal, but there are Italians and investors from the East among potential buyers. 

According to Armenian mass media, a major businessman and leader of Prosperous Armenia party Gagik Tsarukyan showed the greatest interest in purchasing Armavia, but, reportedly, the two businessmen failed to come to an agreement. 

According to mass media reports, negotiations are under way with two foreign, an American and an Italian, companies.

Allegedly, during his meeting with Baghdasarov Tsarukyan tried to convince him to first declare the company bankrupt and then sell it to him, but the government said the overdue salaries should be paid first (to avoid protests).

Press secretary of Tsarukyan Ivetta Tonoyan, in commenting allegations, said that Gagik Tsarukyan has never had intentions to buy Armavia. “This information has no basis in fact”, she said.

A number of questions remain to be answered after Armavia announced it will start a bankruptcy process, and the first one is who will be operating the company’s flights. The press service said the company will cease its flights as from April 1, yet no single Armavia flight was operated from Zvartnots on Friday March 29.

Will the company be sold or nationalized? For instance, Armenia’s Public Council suggests partly nationalizing Armavia.

“We believe that Armenia should have its national air carrier registered in Armenia, with most of its staff being Armenians”, head of the Public Council Vazgen Manukyan told journalists. He also said that partial (from 30 to 51%) nationalization of air companies is quite common in many countries.

According to Manukyan, having a national air company is of strategic importance to Armenia. “In case of a war, if we don’t have our own air company, flights from other places may be forbidden, and then we will find ourselves in a full blockade”, Manukyan said.

Apart from this, many people still remember the protests held by employees of Armenian Airlines who were set adrift for long years in fighting for their occupational disease compensations to be paid.

Let us hope the questions will be answered by the respectively agencies in the near future and both the staff and the passengers of Armavia will then know what to expect.

Hayk Khalatyan, reporter of ARKA Agency

The author’s opinion does not necessarily reflect the opinion of the editorial office.