TAJIK AIR MONOPOLY HARMS TAJIKISTAN'S ECONOMIC PROSPECTS

C O N F I D E N T I A L DUSHANBE 001786

SIPDIS


E.O. 12958: DECL: 11/8/2015
TAGS: PGOV PREL EAIR ECON TI TU RS
SUBJECT: TAJIK AIR MONOPOLY HARMS TAJIKISTAN'S ECONOMIC PROSPECTS


CLASSIFIED BY: Richard Hoagland, Ambassador, US Embassy
Dushanbe, State.
REASON: 1.4 (b),(d)


1. (SBU) SUMMARY: Despite 30% annual growth, Tajikistan State
Airlines (TSA) presents
a mismanaged, bloated organization unable and unwilling to
reform itself or
respond to market forces. Turkish Air is still negotiating to
fly between
Istanbul and Dushanbe, but threatens the very lucrative
international
travel that subsidizes TSA's domestic routes. Despite limited
attempts to
modernize-including the promise of online ticketing in early
2006-the
leadership of Tajikistan Airlines shows little inclination to
turn the
company around and Tajikistan Airlines will likely remain an
ineffective
remnant of the Soviet days. END SUMMARY


2. (C) Anyone who has ever flown Tajik Air marvels at three
things: the shabby
interiors reminiscent of 1975, the haphazard way in which
passengers elbow
each other for seats and the box lunch with unidentifiable
fluorescent green
beverage, two boiled eggs and three candy bars. During a
November 2 lunch
with Poloff, Firdavs Mukhtarov, Head of TSA's Marketing
Division, painted a dismal
picture of a company with $90 million annual turnover, but no
business plan.
TSA remains mired in the Soviet way of doing business. Many of

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the fees for
landing, taxiing and ground services are made in cash, remaining
non-transparent and vulnerable to pilfering. In 2001, TSA
employed 125
security workers at Dushanbe Airport; today almost 300 draw
salaries of
$50-65 a month. (NOTE: This wage is decent by local standards,
where
teachers and doctors officially earn $15-20 per month. END
NOTE.)
Mukhtarov noted most new hires come to work, drink tea all day
and leave.


3. (C) TSA's international flights drive the company's 30%
growth rate and
subsidize domestic routes. In addition to the two daily flights
to Moscow
and three weekly flights to Almaty, TSA operates weekly flights
to Munich
and Istanbul. Around 15 Russian airlines fly between Tajikistan
and Russia,
meeting the growing demand for transport for at least half a
million Tajiks
working in Russia by flying into Tajikistan's smaller, regional
airports
like Khojand and Kilo.


4. (C) Tajikistan Airline's General Director Mizro Anvarov is
not receptive to any
initiatives to make the company market-oriented, according to
Mukhtarov.
Anvarov took eight months to decide yes or no on a lucrative
proposal to
lease unused TSA helicopters to private ventures. Mukhtarov
observed that
Anvarov places personal interests above corporate. Anvarov's

son represents
one of the Russian airlines flying to Dushanbe and so the
General Director has little incentive to expand TSA flights at
the expense of his son's business.


5. (C) Meanwhile, the work culture at Tajikistan Airlines
mirrors the paralysis
that seizes other parts of the Tajik government. "If you don't
do anything,
you can't make a mistake," explained Mukhtarov. "It is
impossible to
introduce any initiatives." Despite this, he reported that TSA
would
implement an electronic reservation and ticketing system by
January 2006.
He dismissed the idea of refurbishing TSA's interiors to make
them more
attractive, observing they would be trashed in six months. "Our
planes are
not old compared to Western fleets, but our customers do not
understand
commercial standards."


6. (C) Despite more than two years of negotiations, Mukhtarov
said Turkish Airlines
was close to entering Tajikistan's market with regular
Dushanbe-Istanbul
flights, but TSA offered only one, between Ankara and Khojand
only.
Mukhtarov acknowledged many passengers would prefer to fly
Turkish Air and
three flights would make Istanbul a hub for Tajikistan-bound
travelers, thus
cutting into TSA's profitable international market. Mukhtarov
also
indicated Turkish Air had originally offered Tajikistan Airlines
a
Munich-Istanbul route to help TSA passengers make more
connections, but then
rescinded the offer. "Why would we give them something they
took away from
us?" He asked.


7. (C) COMMENT: Mukhtarov has worked for Tajikistan Airlines
for more than twenty
years. Like a minority of talented Tajiks, he carries the air
of someone
frustrated by ineptitude, but powerless to change anything. We
share his
pessimism that any true reform can turn around Tajikistan Air.
Only outside
competition will change the airline industry in Tajikistan and
make
Tajikistan a destination that Western businessmen and tourists
take
seriously.


8. (C) COMMENT CONTINUED: We continue to see press reports
that TSA is about to
lease two "Boeing Airbuses." According to our commercial
section, this is
nothing but sycophantic eyewash to please President Rahmonov,
because he has
said he wants to add Western aircraft to the TSA fleet. END
COMMENT.


HOAGLAND


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