AZAL is in proud solitude. Monopoly?

Baku/31.07.23/Turan:  Azerbaijan Airlines OJSC has announced its decision to merge low-budget airline Buta Airways with AZAL, with the merger set to take place in October this year. The move aims to combine the strengths of both airlines, providing passengers with increased opportunities for affordable travel, convenient planning, and enhanced service levels, as stated in the company's announcement.

Economist Elchin Rashidov shed light on the purpose behind the combination of Buta Airways and AZAL during his appearance on the program "A Difficult Question." According to Rashidov, the driving force behind the merger is financial gain, but the critical question is how and for whom this profit will be generated.

In the past, Buta Airways offered lower fares compared to AZAL. However, with the end of the COVID-19 pandemic and closed land borders, the demand for AZAL's services has increased. Rashidov highlighted that AZAL is not an ordinary airline; it also owns airports and controls passenger and cargo transportation to the country. Therefore, it has the authority to determine which airlines can use its airports and under what conditions.

While being a state-owned company, AZAL's interests may differ from those of the state and its citizens. While the state's interests may lie in the profitability and affordability of the airline's services, AZAL's priorities may be geared towards maximizing profits and maintaining a competitive edge. To achieve this, AZAL may aim to set higher prices for its services and keep its financial statements opaque to receive additional government subsidies, thus increasing its profits.

Rashidov pointed out that the state appears to have limited interference in the economic policy of the airline. Two years ago, the Azerbaijani Investment Holding was established, and AZAL was transferred under its subordination. The merger decision might have been driven by Buta Airways becoming an additional burden for the holding.

In summary, the merger of Buta Airways and AZAL is seen as a strategic move to capitalize on their respective strengths and cater to the evolving demands of the aviation industry in Azerbaijan. However, there may be differing priorities between the state's interests and the profit-driven motives of the airline.