Aviation Reforms in Uzbekistan: New Yet Old?

Aviation Reforms in Uzbekistan: New Yet Old? “If the government of Uzbekistan truly wished to liberalize the aviation industry, it needs to renounce the support for the national air carrier,” said political economist Bakhrom Radjabov in an article just for CABAR.asia. Follow us on LinkedIn Uzbekistan has far failed to discard a big share of state presence in the economy. Photo: Repost.uz We recently learned that the transfer of the state airline Uzbekistan Airways to a foreign company has been discussed at a meeting with the President of Uzbekistan[1]. Apparently, transferring Uzbekistan Airways to a foreign company has become more acute due to the crisis and the airline’s difficult financial situation as the travel slowed by the coronavirus. Though, there were many challenges even before the pandemic. How did it happen and what is a plan for aviation reforms? Aviation Reforms in Uzbekistan: New Yet Old? As before? Uzbekistan Airways (Oʻzbekiston havo yoʻllari) has been the only airline on the Uzbek market with 100% state support maintaining a monopoly in the country’s airspace over the years of Uzbekistan’s independence.[2] Then came the trouble with the country’s civil aviation industry that Mirziyoyev’s government started addressing. The main issue on the agenda is liberalizing and introducing competition in that sector. As planned, this should make the field more attractive to foreign investors, lower the prices, and improve the service, as well as turn Uzbekistan into a regional aviation hub. Generally, there is a big plan to increase passenger traffic to Uzbekistan and thus stimulate the country’s tourism industry. To help you better understand the current status of the national airline and Uzbekistan’s aviation industry as a whole, we need to determine why this airline was created in the first place. In January 1992, President Islam Karimov signed a decree establishing a national air carrier. The Uzbek part of the former Soviet Aeroflot has become the Uzbekistan Airways. Later in February of that year, the country’s cabinet of ministers approves the goals and objectives of the airline. It is important to recognize that the airline was originally created as a state entity in the field of aviation and was meant to be a non-for-profit[3]. The past three years, however, indicate substantial shifts in the activities of the national airline. As part of the competition development program, the number of foreign airlines operating flights to the republic increased from 15 in 2017 to 23 in 2019.[4] Projective figures for the increase in the number of passengers, flights, foreign airlines and destinations are given below (See infographics). This projection seems to be logical because of the fact that Uzbekistan started opening up to the world, thus increasing the tourist flows. The latter necessitates the aviation sector development. Aviation Reforms in Uzbekistan: New Yet Old? Aviation Reforms in Uzbekistan: New Yet Old? Aviation Reforms in Uzbekistan: New Yet Old? Aviation Reforms in Uzbekistan: New Yet Old? Source: Uzbekistan Airways What’s being proposed? The Uzbekistan Airports, Aviation & Logistics Forum (UAALF), held for the first time in Uzbekistan in February 2020, was organized by the State Committee for Tourism Development, the Ministry of Transport of Uzbekistan and Fair Exhibition. Aviation Reforms in Uzbekistan: New Yet Old? Chairman of the State Committee for Tourism Development Aziz Abdukhakimov, Minister of Transport Elyor Ganiyev, head of Uzbekistan Airports Ravshan Ismailov, director of Uzaviation Agency Tolib Ulzhayev at a press conference dedicated to the international Uzbekistan Airports, Aviation & Logistics Forum. Photo: uzreport.news It was stated that civil aviation was subject to major reforms that have not been implemented for the past 30 years. Among the reforms are: 1. The reorganization of Uzbekistan Airways in October 2019 had formed two independent companies – Uzbekistan Airways and Uzbekistan Airports. 2. Since October 2019, the “Open Skies” regime using the “fifth air freedom” was introduced at the international airports of Karshi, Nukus, Termez, and Bukhara. 3. A new passenger terminal and a runway are to be constructed at Samarkand International Airport, increasing the airport’s carrying capacity from 500 to 1,500 passengers per hour. The review and reconstruction of the Tashkent International Airport under the German experts’ supervision increase the airport capacity from 4 to 7 million passengers per year. The construction of a new runway at the Termez international airport and the reconstruction of the Andijan international airport will enable different aircrafts maintenance, while also increasing by 2-3 times the number of flights.[5] Aviation Reforms in Uzbekistan: New Yet Old? Aviation Reforms in Uzbekistan: New Yet Old? Aviation Reforms in Uzbekistan: New Yet Old? A new uniform of Uzbekistan Airways’ pilots and cabin crew Photo: Uzbekistan Airways The ultimate goal is to increase the passenger flow to Uzbekistan by establishing one prerequisite facilitating the tourism industry development. 4. A new Humo Air airline and Uzbekistan Helicopters are being created to broaden the competitive space in this area, meet the needs of passenger services both domestically and throughout the Central Asian region.[6] 5. Enhancing the attractiveness of Uzbek airports by reducing aviation fuel prices and airport charges. According to Uzbekistan’s Minister of Transport Elyor Ganiyev, “there has been a substantial decrease in jet fuel prices that are now $ 880 per ton”[7]. Minister Ganiyev also pointed out that “the launch of the Uzbekistan GTL plant in Kashkadarya region, which will produce 1.7 million tons of various fuels, including over 300 thousand tons of jet fuel, diesel, and gasoline, will be essential for the aviation fuel market. “[8] “There will be a control over the jet fuel prices so that they are not higher than the regional average. This will promote competition. “[9] It looks like a good start at first glance, but what’s the problem, then? Aviation Reforms in Uzbekistan: New Yet Old? What’s the problem? Too much of a state Uzbekistan has far failed to discard a big share of state presence in the economy. Economist Yuli Yusupov writes: “The share of state-owned companies in the country’s GDP is 55%. This indicator is 35% in Russia and 15% in Singapore; the average value for the state shares in developed countries is 20–25%.” This and a big share of the state budget in the country’s GDP indicate that Uzbekistan is yet to transition to the market economy.[10] Little has changed in civil aviation, too. Despite the government’s ambitions to develop low- cost airline services, there is not much of an excitement. As previously mentioned, aviation in Uzbekistan used to belong to one state-owned enterprise Oʻzbekiston havo yoʻllari. The Government decided to reorganize and form Uzbekistan Airways and Uzbekistan Airports to separate the functions of air travel and airport servicing. The restructuring efforts were not, however, well received by investors disrupting the state’s expectations. According to Alisher Annazarov, the head of SilkJet, this further hindered the demonopolization of the aviation industry in Uzbekistan. The former national air carrier remained on the market but this time dividing a monopoly into parts and allocating responsibility to each enterprise[11]. Annazarov believes there is no sign of demonopolization in the aviation industry for investors and no guarantee that the newly- emerged private airline won’t be infringed by a state-owned company.[12] Alisher Annazarov, Photo: kun.uz For instance, the Humo Air, being a state airline, will directly report to the Uzbekistan Ministry of Transport. The Government’s view was to make short distances domestic flights possible. The company won’t become a competitor to Uzbek national airlines. All these efforts are aimed at servicing the estimated increase in passenger traffic that was expected with the influx of tourists into the country. Uzbekistan Helicopters has recently changed ownership. However, the enterprise was founded by joint-stock companies with the main government share. So, Uzbekistan Airways JSC, established on the basis of the National Airline Directorate and state-owned unitary enterprises “Flight Complex”, “Main Air Communications Agency” and “Uzaviatekhsnab Aviation Reforms in Uzbekistan: New Yet Old? Logistics Supply Complex“, is the founder of Aviation Training Center LLC,“ Uzbekistan Airways Technics ”,“ Uzbekistan Airways Catering ”, as well as “Uzbekistan Helicopters”.[13] The Uzbekistan Helicopters division was founded on the basis of the State Unitary Enterprise “Airline for Special Aircraft Operations”. It will be managed by the Ministry of Transport.[14] Such facts reasonably cause concern among private investors, as they do confirm the continued state support to the National Air carrier and its affiliated airlines[15]. Uzbekistan Airways continues to receive state aid in the form of state guarantees and various subsidies. It had become imperative especially amid the coronavirus pandemic when nearly all world air carriers suffer enormous losses and turn to creditors and/or their states for help. In the case of the Uzbek national airline, according to international aviation law expert Rakhmad Sobirov, “the difference is that the government of Uzbekistan must rescue only one airline, otherwise the entire aviation sector of the country will collapse.”[16] According to economist Behzod Khashimov, such support

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