Armavia grows rapidly, in spite of the global crisis

An interview with owner Mikhail Baghdasarov

by Vincent Lima

Published: Friday November 27, 2009

Mikhail Baghdasarov. Photolure.

Yerevan - Armavia, the airline that has Yerevan's Zvartnots International Airport as its main hub, has been adding new routes and buying new planes notwithstanding the financial crisis. The aviation industry is posting heavy losses, and numerous airlines are either in bankruptcy or on the brink of it, as fuel costs have risen but people have been taking fewer flights.

The owner of Armavia, Mikhail Baghdasarov, thinks the crisis is the best time to seize opportunities. In an interview on November 9, he identified three facts that underlie his company's growth.

The first is the large Armenian diaspora. Mr. Baghdasarov noted that Armenians who live outside Armenia are visiting the country in growing numbers, and many of them are Armavia's passengers.

A transit hub

The second factor that favors flights to and from Armenia is the land blockade. And the third is Armenia's geographic position. "We are on the crossroads of Eurasia," Mr. Baghdasarov noted, "and not too far from Africa." Armenia can be a transit point, connecting east and west, north and south.

Armavia is now offering two short-haul flights a day to and from Tbilisi, making Yerevan a transit point for people who wish to travel between Georgia and Russia. It's also flying to Batumi, Georgia. Thus, if Turkey's decision to close the border with Armenia has created business for Georgia, the closing of the Georgian-Russian border has created some business for Armenia.

In the quest to make Yerevan a transit center, Armavia is also offering flights to Bahrain and looking to add a Kuwait route. In addition to Bahrain and the Georgian routes, in recent months, Armavia has added Berlin, Zurich, Rome, and Kharkov as destinations. It has offered flights to Marseilles since 2008. Flights to Barcelona are in the works for next year.

The airline is also looking to expand to India, China, and the Western Hemisphere.

New York and Los Angeles

Mr. Baghdasarov expects Armavia to begin offering direct flights to and from the United States in 2010. "Only technical details are left, and they are being resolved," he said. "The strategic issues have been resolved, for all practical purposes, and government decisions are in place. We just need the civil aviation administration in Armenia to take some steps."

Under the Open Skies agreement signed between the United States and Armenia, Armavia will be able to operate flights on the domestic Los Angeles-New York corridor. Thus, New York can be a transit point for flying to and from Armenia.

Mr. Baghdasarov said he also plans flights between Canada and Armenia, and hopes to add Latin America to his airline's route map as well. But first comes the United States because of the large concentration of Armenians there.

Attracting passengers

For the airline to grow, Mr. Baghdasarov said, it has to be no worse than others, and preferably better. That means it needs new planes and trained pilots, flight attendants, and technicians. It needs to provide good conditions for passengers, good connections with reasonable transit times. "If we can do all this and also take care of our staff and provide customer service, this can lead to the success of the company," he said.

Of course, there's the question of prices.

"I think the aviation business is very complicated today," Mr. Baghdasarov said. "Many companies are going bankrupt or close to it. Even the biggest are in the red. This has to do with ups and downs of aviation fuel prices and the financial crisis. The number of passengers has gone down, while costs have gone up. So I think we should be very careful. We'd like to lower our prices. Some flights bring us no income - especially on the newer routes; we even work at a loss in some cases. But still our prices are high. So today we think about how to lower our prices."

Frequent fliers often consider loyalty programs in choosing flights. Will Armavia be joining any of the popular alliances that allow passengers to earn frequent-flier miles on partner airlines? Mr. Baghdasarov noted that Armavia is starting a program of discount cards for its business-class passengers. Starting next year, it will have a bonus system based on distances flown. Like on Aeroflot, customers will be able to get a discount or a free ticket after traveling a certain distance in aggregate. "We have codeshares with Air France, Georgian Airlines, and several Russian companies. Also we are flight partners with 14 or more companies. After a year, we might join an alliance and thus be part of a broader frequent-flier program," he said.

New aircraft

Armavia has been investing in new aircraft. Its business plan calls for it to have some 30 planes, including three or four long-haul aircraft and eight to 10 short-haul planes with 50 seats.

It currently flies mostly Airbus jets. But it has now ordered jets from Sukhoi's brand-new civil aviation line.

"We don't want too many kinds of planes," Mr. Baghdasarov said, noting that pilots and technicians specialize. "We train a lot of young specialists. Many young technicians (mostly 22 to 25, but also as young as 19) are studying abroad under our auspices."

Armavia studied Sukhoi's plans and systems carefully, he said, and decided to take a calculated business risk.

The Sukhoi jets have much in common with Airbus products, he said. "If you can fly an Airbus plane, you can easily transfer your knowledge to Sukhoi." And specialists have come to believe that Sukhoi's product is no worse than Airbus' and in some ways it's better, he said.

In the mountains

Mr. Baghdasarov said that Armavia asked Sukhoi to fly its jets to Gyumri, Armenia, for trials. "Some aircraft develop problems in high altitudes in the heat of summer. Yakovlev's YAK-42 and others don't do too well in the mountains in the heat. So we asked for these trials in Armenia, and Sukhoi did well. No limitations emerged."