ISTANBUL-YEREVAN FLIGHTS: TURKISH FIRM ENTERS THE

C O N F I D E N T I A L ISTANBUL 001847

SIPDIS


E.O. 12958: DECL: 12/17/2013
TAGS: PREL ECON PGOV AM TU
SUBJECT: ISTANBUL-YEREVAN FLIGHTS: TURKISH FIRM ENTERS THE
FRAY


Classified By: Consul-General David Arnett for Reasons 1.5 (b&d)



1. (C) Summary: Absent an open border between Turkey and
Armenia, twice-weekly flights between Istanbul and Yerevan
since 1995 have provided some of the only direct contact
between Turks and Armenians. Initially operated by the
state-owned (and now bankrupt) Armenian Airlines, the rights
were taken over last year by a private Russian company,
Armavia. Following an agreement between the Turkish and
Armenian Foreign Ministers, however, on October 16, a Turkish
firm, Tower Aviation, initiated twice-weekly flights of its
own. End Summary.



2. (SBU) Twice-weekly flights between Istanbul and Yerevan
since 1995 represent the only direct links between Turkey and
Armenia. According to Dikran Altun, a Turkish-Armenian who
acted as Armenian Airlines' Istanbul representative for
several years, 90 percent of the passengers are Armenian
"suitcase traders" traveling to Istanbul to purchase goods
for resale in Armenia. Only 10 to 15 tickets are sold on
each flight to Turks (generally Turkish-Armenians, but
occasionally Turkish businessmen). Although the Turkish
government requires the airline to submit seasonal and
monthly applications for the charter flights, Altun claims
that there were never any real problems with securing the
necessary approvals. It was always clear, however, that
Turkish Civil Aviation authorities passed along applications
to the Turkish Foreign Ministry for "political" approval.
(Note: Altun neglected to mention the brief period when the
flights were disrupted by the Turkish government's decision
to stop issuing visas for Armenians at the Istanbul airport
following the passage of an Armenian "genocide law" by the
French parliament. End Note.)



3. (C) After two years of trying, Altun himself recently
secured permission and initiated additional flights on
October 16 along the same route under the auspices of his own
firm, Tower Aviation. Altun told poloff that while a
personal appeal to then-Foreign Minister Ismail Cem failed to
secure the necessary political approval, an agreement reached
between FMs Abdullah Gul and Vartan Oskanian earlier this
year did the trick. Arsen Avegyan, the Armenian
representative to the Black Sea Economic Cooperation forum,
confirmed to poloff that the Foreign Ministers had
specifically discussed this issue. Avegyan added that in the
framework of seeking a gradual improvement in bilateral ties,
the Armenian side is now interested in exploring the idea of
allowing cargo flights between the two countries.



4. (SBU) Tower Aviation rents both its equipment and crews
from another private Turkish firm, Fly Air (which also
recently initiated the first domestic Turkish flights to
compete with state-owned Turkish Airlines). Altun told
poloff that he has minimal expectations regarding potential
profits from this venture. His costs are about USD 19,000
per round-trip flight (USD 18,000 for the equipment and crew
and approximately USD 1,000 for ticketing, sales, and
marketing expenses). The capacity for each flight is 148
passengers and tickets are currently available for TL 270
million (USD 190). According to his calculations, Altun said
that he needs to sell about 100 seats on each flight to break
even. Since October (admittedly not the high season),Altun
said that he has had only 60-70 passengers on each flight.



5. (SBU) Altun's biggest concern, however, stems from what he
labeled "unfair competition" from Armavia. Altun claimed
that Armavia is "trying to crowd him out" by pressuring
travel agencies in Armenia not to sell his tickets. Because
Armavia now controls most of the flights in and out of
Armenia, Altun claims that travel agents are susceptible to
such pressure. Armavia has also threatened to add a third
weekly flight in order to undercut demand for Tower/Fly Air.
If he continues to have problems, Altun said that he plans to
petition the Turkish Civil Aviation authorities to cancel one
of Armavia's twice-weekly flights. This would force Armenian
passengers who do not want to spend a full week in Istanbul
to use Altun's airline. Altun was confident that such
pressure would immediately resolve his problems with Armavia.



6. (C) Embassy Comment: The Turkish MFA views the approval of
these flights, NGO exchanges, and the proposed joint
restoration of historic monuments as modest examples of
improved Turkish-Armenian relations. They continue, however,
to link the opening of the border and the restoration of full
diplomatic relations to a Nagorno-Karabakh settlement (or at
least to Armenian concessions towards such a settlement).
ARNETT