TAJIK AIR STILL NOT SOARING

UNCLAS SECTION 01 OF 02 DUSHANBE 001573

SIPDIS

SIPDIS

SENSITIVE. NOT FOR INTERNET DISTRIBUTION.

E.O. 12958: N/A
TAGS: PGOV ECON EAIR EAID TI
SUBJECT: TAJIK AIR STILL NOT SOARING

REF: A) DUSHANBE 1314 B) DUSHANBE 626

DUSHANBE 00001573 001.2 OF 002



1. (U) SUMMARY: On the surface, two recent developments in the
airline sector appeared to signal forward progress. However,
despite opening the long-completed air terminal at Khujand and
coming closer to leasing two Airbus aircraft, Tajik Air remains
a protectionist, Soviet-style state-run entity, flying in the
wrong direction. Without the modernization and significant
restructuring donors have long recommended, Tajik Air will
continue to frustrate Western passengers while lining the
pockets of a handful in power. END SUMMARY.

BETTER AIRCRAFT INCOMING?

2. (U) An August 2 press release announced that state-owned
Tajikistan State Air (TSA) signed a Memorandum of Understanding
to lease two Airbus 320 aircraft from the India-based Sister
Trading Company, according to a representative of the trading
company. Under the preliminary agreement, Sister Trading will
"wet lease" the aircraft, pilots and technical support crew for
a one-year period, costing Tajik Air $2,500 per hour. The 150
passenger aircraft will serve international routes 30 hours per
month. Representatives of TSA declined to comment until the
agreement was signed. However, according to the Air Code, the
legislation that regulates Tajikistan's airspace, only citizens
of Tajikistan are allowed to be a member of crew. It is unclear
how an international crew under "wet-lease" would be able to
operate an aircraft.

3. (SBU) Tajik Air has long toyed with the idea of leasing
either Boeings or Airbuses to upgrade their aging fleet of
Soviet-era Tupelovs and Yaks. President Rahmonov is rumored to
want new Western planes flying under a Tajik flag at any cost,
particularly before Tajikistan's 15th anniversary of
independence September 9. Despite much talk about leasing
Boeings, and several fruitless discussions between the
government and Boeing's representative in Moscow, TSA
representatives have not disclosed any concrete plan to lease
any particular aircraft (Reftel A). The Sister Trading Company,
previously reported to be located in Dubai, has undisclosed
backers, possibly a Tajik businessman looking to capitalize on
personal connections to Tajik Air.


4. (SBU) The current structure of Tajik Air may be designed to
serve President Rahmonov's needs first, and the customer base
second. At present, Tajik Air has one Tupelov-154M for
President Rahmonov's trips. He travels once or twice per month
on average, costing Tajik Air hundreds of thousands of dollars
per year. Were Tajik Air to privatize, as donors and advisors
have long recommended, President Rahomonov would need to pay out
of the budget or from the "President's account" for his trips.
The current organization of Tajik Air makes it possible for
President to travel for "free" as Tajik Air fully covers the
President's expenses.


5. (SBU) The European Bank for Reconstruction and Development
(EBRD) offered Tajikistan a $5 million commercial credit to
modernize its operations months ago, but TSA has yet to meet the
audit requirements and fully take advantage of the assistance.
The EBRD project includes a component for training pilots for
western carriers, but does not support the wet lease approach to
upgrading the fleet, due to the high costs. The EBRD credit
could also help Tajik Air operate profitably with leased jets.
However, at an estimated $200-$300 thousand per month each,
according to the Dushanbe EBRD representative, Tajik Air would
need to reform business practices and reduce costs by over 50%
in order to become profitable.
KHUJAND AIR TERMINAL OPEN FOR BUSINESS - TWO YEARS AFTER
COMPLETION

6. (U) On August 5, Authorities officially opened a new
international terminal in the northern city of Khujand. The
terminal was completed in 2004, but sat dormant due to
bureaucratic wrangling and political jealously, possibly
involving the President's family demanding a significant share
in the company (Reftel B). Nurullo Usmonov, chairman of
"Noorafshon", the company that constructed the terminal, said in
his inaugural remarks that the terminal would provide jobs for
300 people and hoped to host transit flights with Indian and
British air companies. The new international terminal includes
a zone for duty-free trade, business-center with computers
connected to Internet, and a mosque.

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7. (SBU) COMMENT: The opening of the Khujand international air
terminal and the announcement about leasing Airbuses from a
little-known trading company do not represent real progress in
Tajikistan's airline sector, but instead suggest that things
only happen after the right palm has been greased. Leasing
planes under a hurry-up wet lease agreement will ultimately
hemorrhage money and instead of demonstrating that Tajik Air is
modernizing, will show the world just how little TSA has managed
to reform. END COMMENT.
HUSHEK