AZAL�s Monopoly - To Be or Not to Be?

According to the report of the Armenian service of Radio Liberty, the Irish low-cost airline Ryanair is planning to launch flights to Yerevan. https://www.azatutyun.am/a/29811123.html

According to Tatevik Revazyan, head of the civil aviation department of the Armenian government, negotiations with the airline have already begun.

According to her, the average price for Ryanair flights is 40 euros, but they will not be able to fly to Armenia at these prices.

"But in any case, it will not be 350, 400 or 500 euros," she said.

E. Revazyan said that if Ryanair enters the Armenian market, the prices of air tickets will fall, and as a result, passenger traffic from Europe to Armenia will grow, as well as from Armenia to Europe.

At the same time, in Azerbaijan, officials are still considering how to sign a similar agreement with the EU, without causing financial damage to the national airline AZAL.

In general, a unique, if not absurd situation has been created around this agreement.

On the one hand, the EU proposes an agreement that opens the way for European airlines to the Azerbaijani market, with the result that the current high prices for air tickets in our direction will undoubtedly fall. Definitely it can be said that this agreement is a plus for ordinary citizens of the country.

On the other hand, the officials of Azerbaijan in every possible way impede and delay negotiations in favor of the monopolistic interests of AZAL.

AZAL has been criticized by experts as a subject hindering the negotiation process with the EU. According to experts, the liberalization of the aviation market in Azerbaijan is not beneficial for the company, since in this case it will lose its monopoly in this area. Currently, AZAL, being a national air carrier, also controls the airport, which gives it the opportunity to dictate terms to other airlines that plan and implement flights to Azerbaijan. At the same time, the monopolist company actively influences the pricing policy, as a result of which flights in the Azerbaijani direction are the most expensive in the region.

Earlier, Turan wrote about the possible conditions of the EU when signing an aviation agreement and possible resistance from the leadership of the national airline AZAL, which is a de facto monopolist in this field. http://contact.az/ext/news/2017/11/free/economics%20news/ru/67171.htm

It should be recalled that the conditions for the EU to sign such an agreement may be the independence of the Baku airport from AZAL, since Azerbaijan is the only European country where the air carrier is also the owner of the airport. Another condition of the agreement is the free access of European airlines to the Baku airport and reduction of taxes and tariffs for air tickets and maintenance.

All these requirements automatically exclude the AZAL monopoly, which has been observed to date. http://www.turan.az/ext/news/2017/-/free/markets/ru/118339.htm

The position of the national air carrier that the company does not put obstacles for other airlines has been repeatedly voiced by the company"s management. If such statements at first inspired hope to European officials, then after two years, these statements only cause an ironic smile from them.

The uniqueness of the situation is that for so long the EU has not negotiated an aviation agreement with any country. The first time the agreement was proposed to Azerbaijan in 2013. Then the negotiations were interrupted due to their futility. In 2017, the EU again offered negotiations. By this time, Georgia and Armenia had already signed a similar agreement, and Azerbaijani citizens began using Georgian airports to travel to Europe.

Despite the optimistic statements of the two sides, the negotiations did not end in 2018.

AZAL is proud to note that at present Heydar Aliyev International Airport serves more than 30 airlines in more than 50 destinations.

Comparison of airline statistics and flight directions across the South Caucasus countries gives reason for some conclusions. This is especially true of the European direction.

And so, the airport of the capital of Azerbaijan, a country with 10 million citizens, serves 30 airlines in 50 destinations.

Twenty airlines fly to Armenia with a population of about 3 million citizens.

The airport of Tbilisi, the capital of a country with just over 3 million citizens, serves 41 airlines. In addition, unlike Azerbaijan, Georgia actively uses its other airports.

The Batumi airport serves 23, and the Kutaisi airport serves 5 airlines.

It should be noted that the directions in which these companies fly are much more than in Azerbaijan. For example, while the same Hungarian low-cost airline Wizzair flies from Baku only to Budapest, then from Kutaisi it flies to eight European cities.

Despite the tightening of negotiations from the Azerbaijani side, the Director General of the European Commission on Transport and Mobility Henrik Hololei does not lose optimism. In an exclusive interview with Turan, the European official expressed hope for an early agreement of the parties.

"The positive results of similar EU agreements with other close partners have certainly strengthened the confidence of the Azerbaijani authorities in the EU."

He noted that the effects of the agreement are both direct and indirect. Citing the example of other countries, H. Hololei said that after signing an agreement with Israel, the number of direct flights tripled.

"After the agreement with Israel, the number of passengers between Israel and the EU is increasing by 1 million people every year. In Morocco, the business of national carriers grew by 60%, and in Serbia - by more than 100%.

Aviation agreement creates competition, where there was a monopoly, or creates direct flights, which have not yet been available. As a result, customers benefit from lower average rates. For example, on EU-Morocco flights, the average price fell by 61%, and on flights between the EU and the US it fell by 27%," he said.

In addition, according to H. Hololei, there are also important indirect effects, including a significant increase in the number of tourists, which helps to develop the tourism industry and related infrastructure and facilitate business contacts.

"In the case of Azerbaijan, perhaps the most important effect will be the ability to use the full potential of the Baku airport. This is a modern 5-star airport with excellent facilities for passengers and cargo, but at present it is not even used up to 50% of its capacity."

In his opinion, the Baku airport has the entire necessary infrastructure to become an important intercontinental transport and logistics hub.

Referring to the conditions put forward by the Azerbaijani side, H. Hololei said that for obvious reasons, representatives of Azerbaijan want to make sure that the agreement will not have negative consequences for the national carrier AZAL.

"The experience of all the aviation agreements that we have signed so far has been very positive for national carriers. The fall in prices does not harm the national carrier, but rather an increase in passenger traffic strengthens the business.

We shared these data with the Azerbaijani side, and we believe that this will help overcome the problems and convince them that the agreement will be a success for both parties."

In addition, according to him, the parties have not yet agreed on the dates of the transition period. In this case, in his opinion, these are all questions that are not among the unsolvable.

Referring to the interest of European airlines in the Azerbaijani market, the official stressed that despite the fact that the market is small for the EU, he in any case expects increased interest from European companies that will offer new direct flights.

In addition, in his opinion, the agreement can provide a good opportunity for Azerbaijani carriers, using the excellent infrastructure of the Baku airport, to carry passengers between the EU and Asia.

"In all my meetings with high-ranking officials of Azerbaijan, I felt a common will to conclude an aviation agreement very soon. Agreement is a victory for both parties," he said.