Report: Uzbekistan Airways to face debt crisis due to Soviet management model

A group of experts from the World Bank and the International Finance Corporation (IFC) prepared their Uzbekistan Economy Development Report. One reports that one enterprise manages the airline, the airport and the dispatch service, which hinders the development of the airline.

The Report notes that Uzbekistan Airways did not abandon the old Soviet model of governance, which was the reason for the current situation.

On November 27, 2017 the President Shavkat Mirziyoyev signed a Decree “On Measures to Fundamentally Improve the Civil Aviation Sector in Uzbekistan.”

According to the Decree, Uzbekistan Airways, as a national air carrier, was reorganized, and Uzbekistan Airways and Uzbekistan Airports were established on its basis; the last manages the airports of Uzbekistan. A Civil Aviation Agency was established under the Ministry of Transport.

Despite the measures taken, the Report’s authors noted that the debt of the state air carrier in Uzbekistan is a serious problem.

“With the right investments and benefits, Uzbekistan Airways could be established in a growing but competitive market, following the example of Emirates Airlines and Singapore Airlines, which are state-owned companies. In the near future, it is likely to face a serious debt crisis. In connection with the purchase of new aircraft and the expansion of airport infrastructure, Uzbekistan Airways has a very large debt – this problem should be resolved immediately,” the Report says.

Experts say that the development of air transport in Uzbekistan is also the slowest in the region: only 2% per year since 2010. This is especially low in comparison with such neighbours as Kyrgyzstan (16% per year) and Kazakhstan (10% per year).

According to the authors of this Report, Uzbekistan received only 2.8 million tourists by air in 2017. For comparison: Georgia, with a population of only 3.5 million people, which is one tenth of the population of Uzbekistan, annually receives a similar number of tourists by air, while Jordan, with a population of less than 10 million, receives up to 10 million tourists every year.

The reasons for this are explained by the fact that flights to Uzbekistan are expensive for both passengers and airlines.

Tashkent International Airport is one of the most expensive airports in the world in terms of service for foreign airlines and passenger customs fees. But at the same time, the national air carrier enjoys preferential prices,” the Report says.

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