Will the new law affect the cost of air tickets?

The Azerbaijani parliament has recently received a draft law titled "On Aviation," reflecting the nation's evolving aviation sector and the pressing need for enhanced security and air traffic regulation. However, beneath these technicalities lie long-standing grievances about aviation monopolies and elevated civil aviation transportation costs.

During a discussion on pricing at the October 18 meeting of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, Rahman Humbatov, Deputy Minister of Digital Development and Transport, underscored pivotal factors impacting aviation prices. Humbatov emphasized that fuel costs, procured at global market rates, contribute significantly to pricing dynamics. He also noted that there are no preferential arrangements in place for Azerbaijan International Airlines (AZAL), adding that the acquisition and maintenance of aircraft further influence ticket prices.

Crucially, Humbatov revealed that AZAL did not receive state budget funding this year, with the airline mandated to cover its operating expenses independently.

AZAL, in a statement, elaborated on its international flight pricing strategy, emphasizing a dynamic pricing policy. Ticket costs vary based on factors such as the booking date, seasonal flight schedules, flight frequency, and seat availability. The airline clarified that various tariff classes are offered for each flight, with the initial tickets sold at lower rates. As seat availability decreases, subsequent ticket prices increase, encouraging passengers to secure their bookings early while assuring the airline of adequate occupancy.

Economist Natig Jafarli in an interview with Radio Azadlig  addressed AZAL's monopoly position, suggesting that monopoly issues should be governed by existing antitrust legislation rather than necessitating new laws. Jafarli stressed the importance of effective law implementation, emphasizing that Azerbaijan encounters challenges in this regard.

The Economist noted that AZAL remains the sole player in the market, primarily due to the significant barriers to entry for new air carriers in Azerbaijan. Launching a private airline in the country requires substantial investments, particularly given the high costs associated with aircraft acquisition. While some foreign companies have made inroads into the market, Jafarli contends that these developments are insufficient to address the sector's challenges.

Jafarli proposed a potential solution in the form of airport privatization, citing underutilized airports that continue to strain the national budget. For instance, the Lankaran airport, constructed during 2005-2008, represents a substantial fiscal burden, with annual maintenance costs still exceeding $2-3 million. Privatizing such facilities could alleviate financial pressures and potentially stimulate competition within the aviation sector.

The debate surrounding aviation in Azerbaijan reflects a complex situation where economic, regulatory, and operational factors converge. The introduction of new aviation legislation holds the promise of addressing some of these concerns, but effective implementation remains a key challenge on the path to achieving a more competitive and accessible aviation market.