Armavia airline company has disseminated an announcement that the company is going to bring new big airplanes to Armenia in April, as well as will enlarge the geography of the flights, including flights to Milano, Stockholm, Birmingham and Amritsar. However, two days before this announcement the owner of the company Mikhail Baghdasarov was complaining about the fees established by Armenia CJSC company for airport services and claimed that the airline company would declare bankruptcy if the fees were not reduced by 25%. We contacted the spokeswoman of the company Nana Avetisova to ask several questions about the matter. “Yes, several days ago Mr. Baghdasarov said that if the airport would not compromise the company would declare bankruptcy, but it would happen if the parties failed to come to an agreement. Today the parties came to an agreement and Armavia is not only operating its flights, but also is going to open new flight routes and bring new airplanes. In a word, the company continues working in the Armenian market,” said N.Avetisova. We also asked questions to representatives of Zvartnots airport. We contacted the deputy general manager of Zvartnots airport Andranik Shkhyan with our questions:
– The negotiations between these two companies finished yesterday morning. What agreement did you reach? According to the announcement the owner of Armavia company Mikhail Baghdasarov on Tuesday, the two companies had failed to come to an agreement, and Zvartnots had changed the agreement that had been reached preliminarily. What did change the situation so unexpectedly?
– Principally the airport has not negotiated with Armavia airline company, and the process has already gone out of the scope of negotiations. The Prime-Minister had ordered to establish a commission, and even we met with that commission twice, and the management of Armavia company was represented there and they said what their demands were. There were no obstacles or negative attitudes on our part, and all constructive ideas addressed to us were adequately answered. There were no changes during the meeting on Tuesday. I think that we should rely on the announcement of the Civil Aviation Board on that day, according to which the parties had come to an agreement and had no problems. I can’t say what announcements Baghdasarov has made after that because I don’t have that information and I don’t know what information they were told. Maybe someone told him something, but not from our company.
– You say that there were no changes during the negotiations but you came to an agreement. What agreement do you mean having in mind Armavia’s announcement that if the airport did not reduce the fees by 25%, they would declare bankruptcy?
– I cannot interpret Armavia’s announcements because those are various and are not connected with each other.
– But the addressee of those announcements is your company.
– Let me explain the situation. The fees of the airport are equal to 10-15% of the entire amount of a flight. Till now no company has met bankruptcy because of the fees of the airport. The fee is not like the price for oil and cannot change every day. For the last time the fees were amended in 2005 and have not been changed during the past 7 years. By the way, in 2005 about 8 new companies entered the Armenian market, which are very famous and influential companies in the airline business. If the Armenian market was not ready with its infrastructure, prices and services, they would not come to Armenia. Currently about 24 airline companies are using our airport.
– Including Armavia as the national air carrier as well?
– Yes, as a carrier Armavia as well, but please note that the understanding of “national carrier” is a very open term. For us the national carrier is the airline company which develops the airport but not transports passengers from A point to B point. According to airline companies, among the three countries in the region we have the best runway, however we don’t have transit passengers that should have been provided by the national carrier, which means that they could bring passengers from Moscow and send to Tehran from here. This is the main concept of developing an airport. Otherwise we would not need such airport and we could simply build a small airport like in Georgia and would have as many passengers as we would need for such small place. It is neither obligatory to have one national air carrier and there can be 3 or 4 such carriers. Armavia has a special agreement with the government, which was made in 2003 and expires in 2013. According to this agreement, the airline company has been given exclusive conditions on special air routes with the necessary right, and the right to make independent decisions in this framework gives some monopoly to this company to decide where to fly, which direction to operate and how often to fly. There are also limitations for other airline companies that may want to operate these routes and flights.
– Does this mean that Zvartnots is discontent with the national carrier?
– Of course. I don’t want to say that we are discontent with Armavia as it does not do the role of a national carrier well, but their policy does not support development of the airport. Our airport is designed to serve 3,5 million passengers annually, but we are serving 1,6 million people only. We are not the one who established these standards; the government adopted this limit six years ago. In 2002, when our company took the management of the airport, we established the future infrastructure of the airport.
– Anyway, the conflicts between the Zvartnots and Armavia companies are no news. What is the reason?
– One year ago this problem existed too and we signed an agreement at the Civil Aviation Board offices and we agreed with the timeline of debt coverage. As a result of that, we have the debt they owe now. At present their debt is five million dollars. If a company is not able to operate normally, it is looking for solutions to reduce the expenses, but the fees of the airport are equal to the 15% of either of those solutions. I don’t know whether the other issues in Armavia are regulated or no if the airline company is addressing the issue of the fares now.
– What do you mean?
– I mean the expenses of the company such as aircraft leasing, which is very expensive, the fuel, which is equal to the 50% of the total expenses, the payments for the crew, pilots, etc. Have they solved all these problems and have to solve only the problem with the airport? We don’t have the answers to these questions.
– However it is not the first time Armavia is speaking about the promises of the airport, according to which the fees would be reduced after the reconstruction works are finished. However, it was the vice versa as the passenger service fee was increased by two Euros. Why?
– Our company could not give such promises because the fees of the airport were discussed in 2005 and approved by the government. In such situation any changes and amendments should be approved by the government too. This means that the company has established fees, which should be applied. As for the increase of the price by 2 Euros, this is not the fee of the airport, but the tax that is levied on passengers that leave from the country. This fee is not a service fee but a tax that is taken from passengers upon buying their tickets and the airline company has to transfer this money to the airport. The airline company was informed about the fact that this tax would be increased six month before but at that time they did not say anything.
– What did you agree upon? How did you come to an agreement?
– We have agreed with the demands Armavia had, and it is a continues process. The same happened in 2011, but we asked at least to pay something to make the debt smaller. Our company is concerned about the debt of that company, especially after the announcements of the owner and management of that company threatening to go bankrupt.
– What was your compromise?
– Unfortunately at this time we cannot compromise because we have a condition and the company cannot agree with the idea of losing that money.
– Does this mean that the debt coverage deadline has been prolonged?
– Of course, we did.
– What is the deadline Armavia has agreed for covering the debt?
– The debt coverage timeline was broken into days, months and we hope that till the end of the year Armavia will fulfill its responsibilities. We have even established some term to provide 1,5 months period for the current debt. This means that the company can pay the debt it has now in 1,5 months. It is also an important fact that now we are fueling the airplanes of this company with the fuel we bought one month ago, but we receive the payment from Armavia 1,5 months later in case when the airline company charges the money for that with the tickets sold to the passengers maximum one month before that. Concerning the fuel there is a connection of interests because the owner of that company and the importer of fuel is the same person. This means that the fuel is imported by Mika Limited company, which belongs to the owner of Armavia company, and they sell it to the airport. By the way, the airport cannot ask for the price it prefers because the competition commission established a mechanism in 2008, according to which the airport can calculate its margin difference on the price of the fuel and resell to companies. We will have problems in case of any exaggerated and reduced price because every month we are submitting reports to the economic competition commission. It means that we are not free in our decisions in difference with Mika Limited company, which in fact sells the fuel to us and takes the payment immediately, but when we resell back to them, they delay the payment. However, when selling the fuel to us this company does not let us delay any payments. In fact the airport is faced with a difficult situation, in which one of the two possible solutions is losing the money the airline company has to pay to the airport.
– According to the interview taken from an employee from Armavia company, during the negotiations the parties discussed about reducing the fees and increasing the taxes. It is also mentioned that the company operating the airport has started negotiations with the RA state incomes committee. How can we understand this situation?
– It is not true. Neither on Tuesday nor on Wednesday during the meetings such issue was not discussed, and it was the airport that had prepared the discussed formulations and passed on to the commission. There has been no meeting with the state incomes committee and there has no negotiation with them. At present I cannot comment on the announcement of Armavia you said because I don’t understand the meaning.
– Yesterday Armavia airline company announced about its new plans and projects to lease new aircrafts. Is the airport informed about this?
– We were not informed about this. Anyway, during all our discussions the main requirement from the airline company was to submit a business plan to us to. However, we do not know what they are going to do. If within one day they made a decision to develop their company, it is very good news.