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FM AMEMBASSY YEREVAN
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RUEBBEA/DEPT OF TRANSPORTATION WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 YEREVAN 000063 
 
SIPDIS 
 
E.O. 12958: DECL: 02/01/2020 
TAGS: EAIR ECON ETRD AM
SUBJECT: ARMAVIA OWNER OUTLINES PLANS FOR U.S. FLIGHTS 
 
Classified By: AMBASSADOR MARIE L. YOVANOVITCH.  REASONS 1.4 (B,D) 
 
SUMMARY 
------- 
 
¶1. (C) During their meeting on January 21, Armavia Airlines 
owner Mikhail Baghdassarov told Ambassador that the company 
has reached agreement to purchase a Boeing 767 as a first 
step toward establishing its long-awaited service to the U.S. 
 Despite the toll the economic crisis has taken on the 
worldwide airline industry, Baghdassarov indicated that 
Armavia has been profitable and was adding new routes. 
Armavia recently suspended its Yerevan-Tbilisi service in a 
dispute over high airport taxes in Tbilisi (though that was 
resolved not long after the meeting).  Armavia's U.S. service 
is unlikely to begin before summer 2011. End Summary. 
 
PLANNING FOR U.S. SERVICE 
------------------------- 
 
¶2. (C) In a wide-ranging discussion on January 21 devoted 
largely to political issues (septel), Armavia Airlines owner 
Mikhail Baghdassarov told Ambassador that Armavia has reached 
an agreement to purchase a used Boeing 767 from the UAE royal 
family for use on a long-anticipated route from Yerevan to 
New York or Los Angeles.  Armavia personnel were in Dubai on 
the day of the meeting to inspect the aircraft, but 
Baghdassarov said the deal is essentially complete. The 
price, quality and terms and conditions were significantly 
better than what Armavia had received from Airbus, with which 
it had negotiated over leasing an A330The only downside of 
this transaction is that Armavia will need to train crew and 
pilots on Boeing aircraft; up to now the fleet has consisted 
entirely of Airbus. (Comment: Baghdassarov sometimes appears 
to run ahead of the situation.  Notwithstanding his 
statements to the Ambassador, Armavia's press representative 
told EconFSN on February 4 that negotiations to purchase the 
767 were not yet finalized and that Armavia was still 
considering leasing the Airbus A330. End Note). 
 
¶3. (C) Purchase of the 767 is the first step in Armavia's 
planned introduction of service to the U.S.  He was not clear 
about the ultimate route, or whether it would make another 
stop in Europe prior to landing in New York or Los Angeles. 
In the past, Armavia's preference was to operate directly 
between Yerevan and Los Angeles, or perhaps direct flights 
from both New York and Los Angeles to Yerevan. (Note: In 
November, Navasard Kachatryan,Armavia's former commercial 
director, who is now director of Baghdassarov's ISG Insurance 
and remains familiar with Armavia's operations, told Econoff 
that Armavia was hoping to purchase a Boeing 777-200 capable 
of flying directly from Yerevan to Los Angeles; we are not 
aware if the 767 Armavia now plans to purchase has sufficient 
range for that route. End Note). 
 
¶4. (C) While Baghdassarov did not specify a timetable for 
initiating service to the U.S., on several occasions in 
recent months, and again in a press conference on February 3, 
he stated that U.S. service would commence in 2010.  However, 
given the lead time required for purchasing an aircraft, 
clearing all USG certification processes, marketing and 
putting the route into reservations systems, it is unlikely 
that service could begin before summer 2011 (Note: 
Khachatryan told Econoff in November that summer 2011 was the 
earliest likely date for launch of flights to the U.S.. End 
Note). 
 
NEW LEGISLATION REQUIRED? 
------------------------- 
 
¶5. (C) In addition to meeting various USG certification 
requirements for the aircraft and Yerevan's Zvartnots 
Airport, Baghdassarov claimed that the GOAM will need to 
revise existing legislation.  He complained that the GOAM 
appears to feel no particular urgency to make those changes. 
(Note: Baghdassarov was vague about what type of change is 
required.  We are not aware of any required legislative 
amendment; nor was the Director of Armenia's General 
Department of Civil Aviation (GDCA).  End Note). 
 
SERVICE TO GEORGIA SUSPENDED 
---------------------------- 
 
¶6. (C) Earlier this month, Armavia suspended its twice-daily 
Yerevan-Tbilisi service that was introduced in March 2009. 
While many assumed that the suspension was due to a decline 
in traffic--due either to seasonal factors or to a 
restoration of direct Tbilisi-Moscow service--Baghdassarov 
claimed the primary factor was high airport tariffs in 
Tbilisi (which on February 3 he asserted contributed to a $3 
million loss on the route in 2009).  He told Ambassador that 
 
YEREVAN 00000063  002 OF 002 
 
 
he was negotiating with airport officials to lower them, and 
on February 3 announced that airport authorities had agreed 
to reduce the taxes.  Service is set to resume before the end 
of February. 
 
ARMAVIA WEATHERS RECESSION WELL 
------------------------------- 
 
¶7. (C) While the global economic crisis has caused serious 
trouble for many airlines and forced them to cut back 
service, Armavia has expanded routes, gained passengers and, 
Baghssarov claims, is turning a profit.  While it suspended 
the Yerevan-Tbilisi route, in recent months it has added such 
destinations as Berlin, Zurich, Rome and Kharkov (Ukraine). 
In an interview with The Armenian Reporter in late November, 
he also said Armavia is looking to expand to South America, 
India and China, and on February 3 announced plans to extend 
service to Barcelona, Warsaw and perhaps Canada. Armavia 
generally avoids routes served by western carriers, leaving 
it the lone carrier, with correspondingly higher airfares. 
YOVANOVITCH