Foreigners in native sky: National air carriers again face problems as foreign companies enter market

ArmInfo. I do not think that the  goal of Russian low- coster ''Pobeda'' is to dump local air carriers.  Otherwise, it would not be allowed to Armenian airline market, Head  of Flight Regulation Division of General Department of Civil Aviation  Anna Chobanyan expressed this opinion at a press conference on  November 1 answering to ArmInfo's question that Russian low-coster  may oust  Armenian air company ''Armenia'' from the market.

Russian ''Pobeda'' low-cost carrier (member of Aeroflot Group) was  given a permit to make flights from Moscow to Gyumri, the second  largest city of Armenia. The flights will be carried out during the  day time three times a week and the ticket prices will start from 10  thousand drams (nearly 20 USD). The problem is that according to the  Head of General Department of Civil Aviation (GDCA) Sergey Avetisyan  Pobeda has submitted application also for carrying out  Minvodi-Yerevan-Minvodi and Voronezh-Yerevan-Voronezh flights.  Armenian ''Armenia'' company operates on the first route and plans to  launch flights on the second route in December. Experts state that  for the nth time Russian air companies by setting lower tariffs oust  local air carriers from the market.  ArmInfo's several attempts to  get any information in the press service of ''Pobeda'' air company  failed. The company, <dumping policy> of which  raised in Yerevan  serious concerns, prefers to keep silence and does not answer to  questions.  

Meanwhile, Chobanyan assures that if the fact of dumping is proved  the issue will be settled within intergovernmental agreements and  conventions in relevant agencies. Chobanyan recalled that ''Armenia''  and ''Taron Avia'' (conducts freight forwarding) two local air  carriers currently operating on the market entered the airline market  in 2015 when Open Skies policy was already in force and they realized  it. Chobanyan explained that this means that the companies have  relevant potential to confront competitors as the Armenian government  has chosen policy of non- assistance to local air carriers and 'zero'  restrictions for foreign airline companies. ''Open Skies'' policy  does not envisage any assistance by the government to any local,  Russian and European airline company'', the specialist stated adding  that even in European countries there is a liberal regime for all the  airline companies and no assistance is provided to them, which is  however a very  doubtful argument. 

However, CEO of ''Armenia'' airline company Robert Hovhannisyan  considers that Open Skies policy does not cancel intergovernmental  agreement between Armenia and Russia, according to which the air  carriers should enjoy equal competitive conditions and none of the  companies should have dominant position. According to him Armenia  airline had quite other plans at the beginning of its operation on  the Armenian market. ''The company's business plan was developed for  conducting more flights including Europe with more number of planes.  However, it turned out that there is not protection of the market  from unfair competition by the government and administration of the   General Department of Civil Aviation'', he stated. According to  Hovhannisyan the company did not hope to receive any preferences but  only to be protected from dumping and enjoy equal conditions for all  the air carriers as GDCA promised during the negotiations. 

Thus, according to Hovhanissyan Austrian Airlines pays $1000 for  service in Zvartnots airport, and ''Armenia'' airline should also pay  the same price. ''If Russian Vim Avia pays $500 in Domodedovo airport  the Armenia as Armenian air carrier should pay $500 in Vnukovo but  never $5000'', Hovhannisyan stated. At the same time he pointed at  the official document published in Russia for foreign and local air  carriers, according to which if the prime cost of Yerevan-  Moscow-Yerevan flight is calculated it is by $10-12 thousand lower  for Russian air carrier compared to the Armenian one. At the same  time Hovhannisyan clarified that if Armenia company complains about  dumping by Russian companies the Russian side will state that it  operates on cost price, while the Armenian air carrier can not do the  same. Meanwhile, there are leverages over Russian airline authorities  as the intergovernmental agreement between Armenia and Russia on  setting equal conditions is violated. Hovhannisyan emphasized that  the company had applied to the GDCA in December 2015 on the matter,  however did not receive any answer till today. '' I do not state that  the Russian companies are dumping prices on the market as I do not  possess certain data but I want to emphasize that the Armenian  authorities do not control the process at all'', the Head of  ''Armenia'' company stated.

''Armenia'' company that carries out flights on  Yerevan-Minvodi-Yerevan route may soon compete with Russian low cost  company ''Pobeda''. In this case Hovhannisyan informed that he will   have to apply to relevant anti-dumping agencies and Armenia's Economy  Ministry demanding to set equal conditions.''Otherwise, Armenia will  again lose its national air carrier'', CEO of ''Armenia'' airline  stated. 

To recall, the national air carrier of Armenia - Armavia - suspended  its flights on 1 April 2013 and launched the bankruptcy procedure  because of unfair competition and pressure from Russian airline  companies. In 2014 the same happened to Air Armenia. On October 23,  2013, the Armenian government approved the programme implying  provision of competitive and long- term air transportation services  in the country. The program is based on a joint study of McKinsey &  Company and National Competitiveness Foundation of Armenia. According  to the program Open Skies policy  would have positive impact on  opening of job places, growth of passenger transportation and  reduction of tariffs. Particularly, it was anticipated that the Open  Skies policy would reduce the prices of flights to Armenia by 10% on  the average, would lead to opening of 18.000-23.000 new jobs, growth  of passenger turnover by 20- 25%. According to the plan this would  allow the country to additionally increase the GDP by 1.5% or  $0.3-0.4 bln AMD per annum.