NOV. 26 2015 (The Conway Bulletin) — An appeals court in Armenia upheld a bankruptcy order against Air Armenia, dealing a major blow to the national flag carrier’s chances of survival.

Earlier this month a court declared Air Armenia bankrupt because it owed HSBC Armenia over 2m euro.

After losing an appeal against the bankruptcy order, Arsen Averisyan, majority owner of Air Armenia, said he would be able to pay back the loan once he had cashed in various assets.

“We can’t cash these bonds now, but if creditors uphold the recovery program, then we will remain in the market. We have 50 days,” he said.

Until 2013, Air Armenia had only flown cargo flights. After the bankruptcy of Armavia, though, it stepped into the gap and started up an ambitious network of passenger routes from Yerevan to various Russian cities, Paris, Frankfurt and Athens.

Mr Averisyan wanted to adopt the Armenian national livery and become its biggest and most important airline.

But Air Armenia’s timing was poor. The same year that Air Armenia started its passenger operation, the Armenian government liberalised air routes in and out of the country. This increased competition and drove down prices. The price of tickets on the most important routes between Yerevan and Moscow and St Petersburg plunged.

Opposition politicians have blamed the liberalisation for pushing Air Armenia into bankruptcy.

After only one year of flying passenger routes, Air Armenia stopped flights altogether.

It was handed a lifeline earlier in August when a deal was agreed with East Prospect Fund, a Ukrainian company registered in the British Virgin Islands, to buy a 49% stake in the company for $68.6m.

This cash injection, though, was clearly not enough to pay off Air Armenia’s debts. Air Armenia’s needs another deal if it is to survive.

ENDS

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(News report from Issue No. 258, published on Nov. 27 2015)