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Azerbaijan Airlines

Azerbaijan Airlines

May 28 str., 66/68
Baku, AZ-1010
Azerbaijan
Telephone: (994-12) 493 40 04
Fax: (994-12) 497 28 04
Web site: http://www.nac-azal.com

State-Owned Company
Incorporated:
1992
Employees: 6,000
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 481212 Nonscheduled Chartered Freight Air Transportation

Azerbaijan Airlines (AZAL) is the national airline of Azerbaijan, an oil-rich former Soviet republic. It operates a network of scheduled routes throughout the former Soviet republic and its neighbors, the Middle East, Europe, and Asia. More than one million people fly the airline each year.

AZAL has a very diverse fleet for its size, consisting of aircraft made in Russia, the Ukraine, the United States, and Europe. The fleet even includes helicopters, of both European and Soviet origin. The company that runs the airline is also in charge of Azerbaijan's civil aviation authority and airports.

ORIGINS

Azerbaijan has had scheduled air service since 1923, when German-made Junkers aircraft of the day plied a route between the republic's capital of Baku (a port on the Caspian Sea) and Tbilisi in Georgia. In 1990, Azerbaijan announced that it was setting up its own airline independent of Aeroflot, the behemoth that had previously handled air services for the Soviet republics. Azerbaijan Airlines (AZAL) was officially established on August 17, 1992, according to Airline Business. Its first president was Vagif Sadykhly. According to Flight International, it was one of nearly 70 airline companies being set up across the Commonwealth of Independent States (CIS).

Formed from the regional branch of Aeroflot, Azerbaijan Airlines, also known as Azerbaijan Hava Yollari, soon spread its wings into the world outside the Soviet Union that had been Aeroflot's exclusive domain. A scheduled Baku-Istanbul route was launched in January 1991 in partnership with the Turkish state airline, and the cargo enterprise Aviasharg was created with the United Arab Emirates.

State Concern of Civil Aviation included Azerbaijan Airlines as well as the country's civil aviation authority and air traffic control. It employed about 6,000 people and, according to the European, was reaping profits of more than $25 million a year.

AZAL inherited a huge fleet from Aeroflot, including more than 20 Soviet-made Tupolev airliners, some regional airliners and freighters, 90 light aircraft, and 50 helicopters. It was quick to lease a pair of Boeing 727s, however, that once belonged to Pan Am (and were built in 1968). AZAL had an extensive involvement with ALG, the U.S.-based lessor of these Boeing 727s. It had a transatlantic charter cargo joint venture with ALG's Buffalo Airways, which was also training AZAL aircrews to Western standards in Dallas, Texas.

Azerbaijan worked out a deal to acquire Boeing airliners (of the 737, 757, 767, and 777 models) in the mid-1990s in exchange for the amount of fuel the more efficient planes were expected to save compared with the old Tupolevs, reported the Interfax news agency. AZAL also was operating ten smaller Yakovlev Yak-40 tri-jets, a massive Ilyushin Il-76 freighter, and several Antonov turboprops.

A new rival, Imair, emerged in 1994. The growth of tiny Azerbaijan's aviation industry was disproportionate to its population of just seven million, as foreign investment poured in, looking to exploit the country's enormous oil reserves. Whereas these brought business and cargo traffic from abroad, Azerbaijan Airlines also was charged with maintaining air links to the country's isolated communities.

NEW LEADERSHIP, NEW ROUTES IN THE MID-1990S

In November 1994 AZAL began a route to Dubai, which, along with Istanbul, was a key source of Western goods. It was soon also flying to Tehran, Tel Aviv, Moscow, Saint Petersburg, London, and China. Service to several regional destinations was suspended in mid-1998 due to low margins and the need to repair three Yak-40 aircraft.

With the exception of a few major cities, service to neighboring CIS countries was suspended as well in January 1999. These routes were generally unprofitable as well and were facing new competition from trains. The main reason for the suspension was that it owed money to its neighbors. According to the Trend news agency, domestic flights accounted for only about 16 percent of AZAL's traffic in 1998.

According to Flight International, the airline's fortunes took a leap forward in May 1996 when Djanguir Askerov became AZAL's director-general. A pilot himself, Askerov reorganized AZAL into five units: the airline, airports, air traffic control, in-flight catering (a joint venture with Abela of Dubai), and cargo.

The country invested in a new air traffic infrastructure, including a new airport terminal and new air traffic control facilities (air traffic control had to deal not only with arrivals and departures, but with more than 1,600 overflights a month, noted Flight International.) The national airline was running out of aircraft, however, due to a lack of spare parts, an official told AssA-Irada. In 1999, AZAL was down to seven Tupolevs and two Boeing 727s.

In spite of the new infrastructure, leading foreign airlines (British Airways, Lufthansa, KLM) were shutting down their operations in the country due to high fees, poor service, and the widespread practice of bribery, reported Russia's ITAR/TASS News Agency. Azerbaijan President Geidar Aliyev promised a crackdown on corruption.

NEW WESTERN PLANES IN 2000

Azerbaijan's border dispute with Armenia had delayed financing for two new Boeing 757s from the U.S. Eximbank. The $66 million loan guarantee was the Eximbank's first transaction for Azerbaijan, according to Air Transport Intelligence. The financing also was guaranteed by the Azerbaijan government and the International Bank of Azerbaijan. The United Kingdom's Export Credit Guarantee Department guaranteed financing for the aircrafts' Rolls-Royce engines.

The first of these Boeing 757s was delivered in the fall of 2000. The planes offered the carrier unprecedented range, comfort, and efficiency on long-haul international routes. They also helped project a modern image to the world. Interestingly, the second Boeing 757 to be delivered arrived in December laden with medical supplies due to a recent earthquake in Azerbaijan. In January 2001, AZAL used one of the planes to begin operating a Paris-Baku route in collaboration with Air France.

Azerbaijan, a predominantly Muslim country, experienced a reduction in air traffic following the September 11, 2001 terrorist attacks on the United States. AZAL was able to remain profitable through 2001, however, and even make progress toward paying off its debt. The airline was soon shopping for more new aircraft as it retired its aging Soviet models. AZAL ordered its first Western-made helicopters in October 2002, purchasing six for EUR 52 million from Eurocopter. AZAL used helicopters to ferry personnel and equipment oil rigs in the Caspian Sea.

COMPANY PERSPECTIVES

We are made for You!

In July 2004, two of AZAL's airliners were impounded by Turkey over a 12-year-old debt owed by Azerbaijan's Agriculture Ministry to a Turkish company. In the same month, AZAL ordered new Ukrainian-made, 52-passenger An-140 turboprops to replenish its regional fleet, paying about $36 million for four planes.

The company also was ordering four aircraft from Airbus, three A319 mid-size airliners and one Airbus Corporate Jetliner (ACJ), for use as an official state aircraft. These were all powered by CFM International engines. AZAL had a large number of aircraft types for such a small company, from manufacturers in Russia, Ukraine, Europe, and the United States.

In 2005 AZAL began serving the Indian subcontinent with flights to Delhi and Karachi. Azerbaijan and Pakistan were working to build trade between the two predominantly Muslim countries. AZAL's code-share partners included Pakistan International Airlines, Emirates Airlines, Air France, and Austrian Airlines.

Azerbaijan Airlines continued to buy aircraft from the former Soviet states. In August 2005 it ordered three Ilyushin Il-76 freighters to be built in nearby Uzbekistan (it had lost one of its Il-76s in a China crash the previous year). AZAL ended 2005 with bad news; one of its brand new An-140 airliners crashed into the Caspian Sea, killing all 23 aboard. The company attributed the accident to instrument failure.

PRINCIPAL COMPETITORS

Aeroflot Russian Airlines JSC; El Al Israel Airlines Ltd.; Imair; IranAir; Turkish Airlines Inc.

KEY DATES

1923:
Azerbaijan gets its first scheduled air service, from Baku to Tbilisi.
1992:
Azerbaijan sets up its own airline independent of the Soviet Union's Aeroflot.
2000:
AZAL acquires two new long-range Boeing 757 airliners.
2002:
The first Western-made helicopters are acquired.
2005:
Routes are added to the Indian subcontinent.

FURTHER READING

"AZAL Buys 3 Modern Il-76 Airplanes," Asia Africa Intelligence Wire/AssA-Irada, August 19, 2005.

"AZAL Files Lawsuit Against Turkish Company," AssA-Irada, July 27, 2004.

"AZAL Launches Regular Baku-Paris-Baku Flights," AssA-Irada, February 22, 2001.

"AZAL Paying Off Loans," AssA-Irada, November 14, 2001.

"AZAL Running Out of Planes," AssA-Irada, May 29, 1999.

"AZAL Signs Deal for An-140s," Flight International, July 6, 2004, p. 10.

"Azerbaijan Airlines Starts Delhi-Baku FlightsIndian Agency," BBC Monitoring International Reports, July 18, 2005.

"Azerbaijan Resumes Cargo Plane Flights to China," Business Daily Update, November 15, 2004.

"Azerbaijan to Get 12 Boeing Liners in Exchange for Fuel," RusData DiaLineBizEkon News/Interfax, August 13, 1993.

"Azerbaijani Plane Crashes Off UAE," Gulf News, July 14, 1998.

"Azerbaijan's Aliyev Set to Get Tough on Corruption," ITAR/TASS News Agency, April 14, 2000.

"Azeri Airline Suspends Flights to Most CIS Destinations," BBC Monitoring Former Soviet UnionEconomic/Trend, January 2, 1999.

"Azeri National Airline Resumes Some Regional Flights," BBC Monitoring Former Soviet UnionEconomic/Trend, December 22, 1998.

Blacklock, Mark, "Regional Rivalries," Airline Business, November 1993, p. 41.

Chuter, Andy, "Azerbaijani Airlines Look West to Help Expansion," Flight International, September 3, 1997, p. 14.

, "Bridge Building in Baku," Flight International, November 26, 1997.

"CIS Authorizes New Operator Licences," Flight International, March 11, 1992.

Dunn, Graham, "Azerbaijan Airlines Orders Three A319s, One ACJ," Air Transport Intelligence, August 25, 2004.

"Eurocopter Sells Six Helicopters to Azerbaijan," Agence France PresseEnglish, October 2, 2002.

"Ex-Soviet Republic Takes Ex-Pan Am 727," Flight International, January 13, 1993.

Kjelgaard, Chris, "Eximbank, ECGD Guarantee Azerbaijan 757 Financings," Air Transport Intelligence, April 28, 2000.

Morrow, David, "Azerbaijan Airlines Gears Up for 757 Operations," Air Transport Intelligence, October 10, 2000.

"Security Beefed Up at Baku Airport, Official Says," BBC Monitoring International Reports/Turan, April 6, 2004.

Shulman, Viktor, "Azerbaijan Opens Its Own Airlines," TASS, December 11, 1990.

Sultanova, Aida, "Azerbaijani Plane Crash That Killed 23 Caused by Instrument Failure, Panel Says," America's Intelligence Wire/AP Worldstream, December 29, 2005.

"Three CIS States Operate Boeings," Flight International, November 25, 1992.

"Turkey Impounds Another Azeri Passenger Aircraft, Ship Over Debts," BBC Monitoring International Reports/Azad Azarbaycan TV, July 21, 2004.

"2001 Proves Profitable for AZAL," AssA-Irada, February 4, 2002.

Verchere, Ian, "Azeri Ambition Shines Through Peeling Paint," European, November 9, 1995, p. 32.

Wastnage, Justin, "Azerbaijan Goes on Upgrade Trail; Airbus and Boeing Asked to Provide Proposals for Four Narrowbodies, While Flag Carrier Also Seeks Turboprops," Flight International, September 10, 2002, p. 16.

Zaitsev, Tom, "Azerbaijan Airlines Stakes Claim on Baku-Moscow Route," Air Transport Intelligence, October 10, 2003.

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