This is not a merger, but a rebranding of AZAL and Buta Airways

Rumors about the merger of AZAL and Buta Airways have already spread in the society. They caused fears that prices will rise, the quality of services will decrease, and AZAL will have the final word, as before, etc.

However, this decision will come into force in October 2023. But it is still useful to understand in advance the concerns that may arise in the coming months. However, AZAL justified this step by the fact that it will be possible to make a reservation and make a payment through its mobile application. The rationale states: "The merger, combining the best qualities of both airlines, will further expand the opportunities for passengers to travel at affordable fares, as well as provide our customers with convenient travel planning and increase the level of service provided to them. After the merger, all Buta Airways flights will be offered under a single AZAL brand while maintaining the current affordable prices, but with an increased level of service. Various discount promotions will continue throughout the year."

The question arises - which associations and companies that occupy a dominant position in the market offer high-quality service for reasons of conscience? If AZAL occupies a dominant position in the market and has a large market share, then why should it not continue to move "on autopilot", and pursue a pricing policy leading to competition? The answer to this question is unambiguous: a high-quality service arises not because of the desire to achieve consumer satisfaction, but because of the requirements of the market.

First of all, it should be noted that the public of the country has the wrong impression that they recognize Buta Airways as a separate private airline. In fact, Buta Airways is not a private airline, but a structural subdivision and subsidiary of AZAL (Closed Joint Stock Company). But AZAL has higher fares than Buta Airways. AZAL explains the difference in price by a wider range of services provided. Justifying the price increase of AZAL itself, he justifies the appearance of this difference by the variety of additional services provided to passengers (luggage, meals, etc.). However, despite the difference in these price increases, AZAL has a larger share of passenger traffic in the market.

If we take the number of passengers at Baku Airport on international flights, the share of AZAL exceeds the share of Buta Airways by about 3 times. In general, the share of the two national airlines in the market is 45-50%. Foreign airlines account for most of the ground passenger traffic. Thus, 31 passenger airlines operate direct flights to the Aliyev International Airport. The top five such well-known airlines include Turkish Airlines, Aeroflot and FlyDubai, as well as AZAL and Buta Airways.

If we want our citizens, for example, not to fly to Istanbul from Tbilisi, then we need to increase the number of airlines and create conditions for new players to enter the market. This means not only the earnings of an airline in Georgia, but also that many of our citizens flying to this country make an additional contribution to the market of goods and services of another country and fuel it.

What is the reality?

Starting from October of this year, Azerbaijan Airlines and Buta Airways will unite under a single AZAL brand. In itself, this is an interesting trend. Many of us are interested in what lies behind the scenes and what kind of picture in air transport we will observe from now on.

In order not to find the answer to this question, it is necessary to consider the preferences that AZAL currently has automatically. AZAL clearly performs a double function in its actions. It has an infrastructure created for it for aircraft flights, and to ensure these flights it receives large subsidies from the state budget every year.

At the same time, being in superior conditions, it competes with other airlines. The company that owns the airport has the ability to put pressure on other airlines, deciding whether they can fly to our country or not. On the one hand, AZAL allegedly competes with these companies, and on the other hand, has the right to dispose of the airport providing flights. This is a clear case of a conflict of interest. The merger of 2 companies under the AZAL brand, which caused such a conflict of interests, will undoubtedly increase its special weight in the market.

As already noted, Buta Airways is a subsidiary of AZAL. Its merger with AZAL does not mean the merger of 2 different authorized funds, separate companies with capitalization.

It is worth paying attention to the conditions in which this decision was made... The country's land borders are closed and the only means of access to foreign countries is air transport. There is not only fierce competition in this area, but even an element of low-level competition. Buta Airways, the only alternative to AZAL, is also being "absorbed" and branded under the name AZAL. So we will not see the type of trademark anymore. All service offers will go under the name AZAL. The branding will be accompanied by an increase in the price tariffs of AZAL as a company.