Citing recommendations made by a U.S. consulting firm, the Armenian government decided to fully liberalize the domestic civil aviation sector on Wednesday more than six months after the bankruptcy of the Armavia national airline.
The government announced that all local and foreign airlines meeting safety standards will now be allowed to fly to and from Armenia without special authorizations or other restrictions. “This will create new jobs, make air transport more comfortable and reduce fares,” Prime Minister Tigran Sarkisian said at a weekly meeting of his cabinet.
The landmark decision overruled a different aviation strategy that was approved by the government as recently as in June. It envisaged only a “gradual liberalization” of the sector whereby Armavia was to be replaced by up to three Armenian airlines enjoying some state protection.
Sarkisian and other officials said the switch to a full “open skies” policy was recommended by the McKinsey and Company consultancy. The U.S. firm was contracted by the government in July to look into the sector and propose ways of developing it.
Armavia enjoyed exclusive rights to carry out flights to Europe, the former Soviet Union and the Middle East for almost ten years. Foreign airlines needed Armavia’s permission to launch flight services to and from Armenia. This translated into a disproportionately high cost of air travel.
Sarkisian cautioned that the tangible effects of the sector’s liberalization will be felt within one or two years. Economy Minister Vahram Avanesian predicted that ticket prices will drop by 10 percent and air traffic will increase by at least 20 percent in the coming months.
Avanesian said the measure will also have a positive impact on the Armenian economy as a whole. He said it will make the country more attractive to foreign investor and tourists. “In the medium and long terms, this could lead to an extra economic growth of 1-2 percent,” he added.
The government decision came as Air Armenia, a company aspiring to replace Armavia, carried out its inaugural commercial flight from Yerevan’s Zvartnots airport. Its Boeing 737 aircraft flew to the southern Russian city of Rostov-on-Don.
Air Armenia executives said the private company will lease two Airbus 320 jets to launch regular flight services to several cities in Russia and Europe before the end of this year.
Air Armenia was founded a decade ago and specialized in cargo traffic until now.