“Open Skies policy – liberalization of the national air transportation market may become one of the conditions for the growth in the number of foreign tourists,” mentioned Aziz Timurov, a participant of the CABAR.asia School of Analytics.
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Black swan events and window of opportunities
The beginning of 2020 was rich in the appearance of black swan events – unpredictable phenomena that significantly change the situation. COVID-19 also became a black swan event, which has already dealt a severe blow to the global economy.
Forecasts depict Tajikistan at least a drop in growth. The World Bank estimates that Tajikistan’s GDP growth will be 1-1.7% in 2020, compared with a growth of 7.5% in 2019.[1] According to some experts, Tajikistan will soon lose migrant money transfers (remittances), budget revenues will decrease significantly, and a severe crisis will begin in small and medium-sized businesses.[2]
One can confidently talk about the negative impact of the crisis on the tourism sector of the Republic of Tajikistan. In 2019, 1.2 million tourists visited Tajikistan.[3] Income from the provision of tourism services amounted to about 41.7 million US dollars. The sale of airline tickets to tourists brought another 267.5 million US dollars.
The World Bank believes that in Tajikistan, every guest, in addition to paying for air tickets, spends an average of 800-1400 US dollars for 6-12 days of their stay in the country.[4] If the data is correct, then last year, 960 million to 1.68 billion US dollars came from tourism into the country. If the crisis lasts until the end of the first half of the year, then losses can range from 480 million to 840 million US dollars.[5]
Nevertheless, along with the crisis for the Tajik economy, including the tourism sector, windows of opportunity have opened, and new growth points have appeared. For decision-makers, accordingly, an opportunity appeared to make Tajikistan more competitive in the near future in terms of attracting tourists, taking on the experience of neighbors and competitors.
Find the bottleneck of the tourism industry in Tajikistan
Tajikistan competes for the money of tourists with all countries of the world, and most of all with Uzbekistan and Kyrgyzstan.
It is very important to take into account the fact that, as a rule, it is the first place of arrival that receives most of the income from tourists. Tourism is such a sector where the bolder reformative steps of neighboring countries can nullify the result of any “simplifications”.[6]
For example, the closest neighbors in the region have already taken a number of measures to liberalize the aviation market. In this vein, back in 1998, Uzbekistan signed a bilateral “open skies” agreement with the United States, becoming the only country in the region that has direct air communication with North America. In 2012, Kyrgyzstan granted Turkish Airlines the fifth air freedom regime, which flies in transit through Bishkek from Istanbul to Ulan Bator and vice versa.[7]
Tajikistan’s access to international getaways is limited, there are very few direct flights with countries of origin of the main flow of tourists.[8] The privileged position of local airlines (and actually a hidden monopoly) in the passenger air transportation market hinders the development of the country’s tourism industry.[9] If we bought a ticket for the next flight, then the prices would look like in Fig. 1.
When making a travel decision, foreign tourists appreciate such basic factors as affordability and ease of travel. In such a situation, the “closed” sky approach makes Tajikistan less competitive compared with neighboring countries.[10]
Closed sky refers to entry barriers for foreign players in the aviation market: airlines, low-cost airlines. Surely, there are no guarantees that after the liberalization of the air regime, airlines will come to the market. Other conditions are also necessary for this to happen.
For a long time, Tajik migrant workers were the main users of airline services. During the good times, remittances amounted to 49.6% of Tajikistan’s GDP.[11] In such a situation, local airlines had little incentive to change anything.
The deterioration of macroeconomic indicators in Russia and the tougher migration policies of the Russian government reduced the flow of remittances and limited the ability of some Tajik citizens to leave for Russia to earn money. COVID-19 exacerbated the problem.
High costs due to expensive jet fuel and high tariffs for airport services lead to higher prices for airline tickets. And for foreign airlines, such costs serve as an additional barrier to enter into the local aviation market.
At such high prices, even Tajik airlines are forced to refuel at airports in neighboring countries, jeopardizing their reputation and creating inconvenience for passengers.[12] The probability that a foreign air carrier or a low-cost airline wants to fly at high transport costs is very small. Fig.2
It is necessary to identify a bottleneck – a problem zone that impedes the development of tourism in Tajikistan. From the formation of a desire to visit the country to the actual implementation of the planned tourist, many obstacles can be expected. At the moment, the possibility of direct and inexpensive access to Tajikistan is the bottleneck of tourism policy and the market in general.Will an open sky lead to a tourist boom?
“Open Skies” is an international practice to liberalize the aviation markets, when government control over the determination of routes, destinations, volumes and costs of tickets and freight is canceled, and other restrictive measures are lifted. Airlines can share codes or choose charter rights jurisdiction.[13] There are already more than 400 such agreements on the Open Skies in the world, and more than 20 states have unilaterally applied this policy. “Open Skies” begins with the “fifth freedom of the air.”[14]
Last year, Kyrgyzstan granted a fifth freedom of the air to foreign airlines.[15] This means that a foreign airline operating from one point to another with a stop in Kyrgyzstan can land and pick up new passengers and fly to a third country.[16]
The initiators of the reform believe that it will become an incentive for foreign air carriers to come to Kyrgyzstan. The country itself will be able to become a small hub, whose airports will turn into transit points on the way between Europe and Asia. Following the opening of new flights, more tourists will be able to come to the country.
Similar were the motives of the authorities of Uzbekistan where they introduced the open sky regime in some cities of the country. The authorities expected to attract up to 10 million tourists a year.[17]
Tajik aviation authorities oppose liberalization of the country’s airspace, viewing it as a threat to local airlines.[18] Such fears were experienced by all their colleagues from countries in which the open skies regime was introduced. Among the CIS countries, Azerbaijan, Georgia and Armenia “opened the sky”. As a pilot program, Russia has opened the sky at some airports as well. Ukraine has partially liberalized its airspace for foreign airlines.[19]
Certainly, as in any reform, “open sky” may not lead to the expected results. Some carriers went bankrupt or suffered losses after they faced the opening of new markets, for example, Sabena, Alitalia, Olympic Airlines, Air Jamaica. However, on the other hand, new airlines have been created.[20]
As a counter to such risks, the Tajik government can gradually take approaches to strengthen national carriers as important facilities, while at the same time moving towards liberalization of the air transportation sector, which will provide economic benefits. Armenia did not save the bankrupt national carrier “Armavia”, and unilaterally declared open skies in 2013. In the same year, passenger traffic grew by 20%, in 2017 by 21%. In addition to foreign air carriers, local private airlines appeared.[21]
In most cases, a country that pursues such a liberal policy benefits from this: passenger traffic through airports is increasing, the number of foreign tourists arriving in the country is growing, and freight traffic is also increasing, which sometimes contributes to an increase in the export of domestic goods.[22]
However, not a single foreign airline, nor a single low-cost airline has yet arrived in either Uzbekistan or Kyrgyzstan.[23] This can be explained by the short time that has passed since the reform and the pandemic that arose.
Competition among airports and hubs for the right to host national and foreign airlines can reduce the impact of the liberalization of the airline market. Aircraft of foreign airlines and low-cost airlines can fly by, preferring commercially more profitable transportation hubs.
Nevertheless, the introduction of the fifth and higher degrees of freedom is the first direction in the package of measures to achieve the ultimate goal – competition and the selection of prices in the passenger and cargo air transportation market. The experience of countries that have liberalized and integrated their airspace and aircraft market has demonstrated an increase in passenger traffic and an expansion of the geography of flights. As an illustration, we can compare the statistics of passenger air transportation of the aforementioned Armenia and Tajikistan for the period 2013-2017. Fig. 3. However, one should not expect a “miracle” only from “open skies.”[24]
When implementing the “open skies” policy, the government should consider several factors that may impede the liberalization of airspace and the aviation market. These include the presence of strong lobbyists who advocate maintaining competitive advantages for local airlines, the lack of effective management in the field of civil aviation, fair competition and uniform rules of activity for all market participants, the lack of a competitive national air carrier and industry, insufficiently effective tourism policy and adequate antitrust policy. Without solving the accompanying problems, even if Tajikistan introduces an “open sky” unilaterally, like Kyrgyzstan, the effect of such a state policy will be vague and insignificant.In addition to the open sky, there are alternative solutions in the world. There is an example of Turkey and Kazakhstan, where they prefer to develop their strong flagship companies Turkish Airlines or Air Astana. However, it is unlikely that their experience can be applied in Tajikistan. Tajik aviation does not have enough economic and managerial resources.
For example, the state airline Tajik Air, which enjoys the preferences of the authorities and is exempted from paying for airport services for several years, has not come out of the financial crisis.
Another alternative is the privatization of state-owned airlines with inefficient and non-transparent management, but with the state retaining a controlling (50% + 1) or blocking stock of shares (25% + 1). For example, Tashkent refused to privatize Uzbekistan Airways, deciding to reform the company and transfer it to the management of a foreign company.[25]
Improving management efficiency and company rating while maintaining ownership is a scenario that can be applied to Tajik Air. In civil aviation, there are examples of successful state airlines: Etihad Airways, Emirates Airlines / FlyDubai, Qatar Airways.[26] The state fully controls the Polish LOT, AirBaltic, AirMalta, Nordica, Belavia (all 100%), almost all Chinese airlines, Scandinavian SAS (75%), Singapore Airlines (56%), Finnair (56%), Aeroflot ”(53.8%), Turkish Airlines (49.12%).[27]
Now it seems that the Tajik aviation authorities have decided to leave everything as it is and do nothing. This is a policy of maintaining monopoly. It took Kyrgyzstan almost 15 years to overcome the resistance of the aviation lobby and introduce an “open skies” regime. Over 15 years, there have been no significant improvements in the industry and national airlines. An open sky has a chance to bring the aviation market to a new qualitatively better level, provided that other measures are taken.
Conclusions
The liberalization of airspace and the market for passenger and cargo transportation in Tajikistan should become one of the tasks of the government in 2020.
If the open skies policy in Uzbekistan and Kyrgyzstan is successful in the post-coronavirus period, then Tajikistan will also be forced to liberalize its aviation industry and allow other players to enter the local market. However, this will be done already at the positions of the lagging player. Otherwise, the expanded opportunities in neighboring republics to fly cheaply and in many directions will encourage Tajik citizens and foreign tourists to increasingly use the airports of Tashkent and Bishkek.
If there will be no “open skies”, then one can lose it. A similar dilemma in our conditions does not seem to suggest other effective measures.
This material has been prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project. The opinions expressed in the article do not reflect the position of the editorial board or donor.
[1] World Bank, Tajikistan Macro Poverty Outlook – Spring 2020. Source: http://pubdocs.worldbank.org/en/636741492011112521/mpo-tjk.pdf
[2] Mullodzhanov P., Economics of coronavirus: What a pandemic will turn out for Tajikistan. Source: https://asiaplustj.info/ru/news/tajikistan/economic/20200327/ekonomika-koronavirusa-chem-obernetsya-pandemiya-dlya-tadzhikistana
[3] Karaev S., Tourism Committee: Tajikistan was visited by 1.2 million tourists, a quarter of them from Uzbekistan. Source:
[4] World Bank. Want to develop tourism in Tajikistan? Start with the internet. https://www.vsemirnyjbank.org/en/news/opinion/2019/12/03/how-to-develop-tourism-in-tajikistan?fbclid=IwAR11saGBmEIavj1Op4_CxgiKUwAhdj7lFKRfKc2pJ335Pqo1J1CL0JO1
[5] Rajab R., Land to Migrants. Source: https://fergana.agency/articles/116433/
[6] Bondarenko K. Removing administrative barriers will help tourism development in Tajikistan. Source: https://cabar.asia/ru/konstantin-bondarenko-snyatie-administrativnyh-barerov-pomozhet-razvitiyu-turizma-v-tadzhikistane/
[7] Namazaals M. “The sky is open.” What will Kyrgyzstan get, Bishkek, 2018
[8] Bondarenko K. Removing administrative barriers will help tourism development in Tajikistan. Source: https://cabar.asia/ru/konstantin-bondarenko-snyatie-administrativnyh-barerov-pomozhet-razvitiyu-turizma-v-tadzhikistane/
[9] Bondarenko K. Removing administrative barriers will help tourism development in Tajikistan. Source: https://cabar.asia/ru/konstantin-bondarenko-snyatie-administrativnyh-barerov-pomozhet-razvitiyu-turizma-v-tadzhikistane/
[10] Bondarenko K. Removing administrative barriers will help tourism development in Tajikistan. Source: https://cabar.asia/ru/konstantin-bondarenko-snyatie-administrativnyh-barerov-pomozhet-razvitiyu-turizma-v-tadzhikistane/
[11] Khasanova S. Remittances of labor migrants in Kyrgyzstan and Tajikistan: a contradictory effect and “pitfalls”. Source: https://caa-network.org/archives/9341
[12] Sputnik Kazakhstan, Why Tajik Airlines Fly Through Shymkent. Source: https://ru.sputniknews.kz/society/20200123/12605168/tadzhikistan-aviakompanii-shymkent.html
[13] Namazaals M. “Open Sky”. What will Kyrgyzstan get, Bishkek, 2018
[14] Namazaals M. “Open Sky”. What will Kyrgyzstan get, Bishkek, 2018
[15] Sooronbaeva A., Kyrgyzstan “opens the sky”. What does it mean? Source: https://cabar.asia/ru/kyrgyzstan-otkryvaet-nebo-chto-eto-znachit/
[16] Mirzabaev F., What is open sky politics and who needs it. Source: https://cabar.asia/ru/chto-takoe-politika-otkrytogo-neba-i-komu-ona-nuzhna/
[17] The rhythm of Eurasia, Uzbekistan introduces an open sky regime. Source: https://www.ritmeurasia.org/news–2019-08-22–uzbekistan-vvodit-rezhim-otkrytogo-neba-44451
[18] Ergasheva Z., Tajikistan is not ready to “open the sky”. Source: https://asiaplustj.info/ru/news/tajikistan/economic/20131125/tadzhikistan-ne-gotov-otkryt-nebo
[19] Kravchuk P., Kulchitskaya E., Myths and realities of the open sky: what will change for Ukraine the common airspace with the EU. Source: https://www.eurointegration.com.ua/eng/articles/2017/12/14/7074981/
[20] Team of authors, Analysis of the regulatory impact of the draft Law of the Kyrgyz Republic “On Amending the Air Code of the Kyrgyz Republic”, 2018
[21] Namazaals M. “Open Sky”. What will Kyrgyzstan get, Bishkek, 2018
[22] Mirzabaev F., What is open sky politics and who needs it. Source: https://cabar.asia/ru/chto-takoe-politika-otkrytogo-neba-i-komu-ona-nuzhna/>
[23] Spot, why Uzbekistan’s “open skies” have so far failed to attract foreign airlines. Source: https://www.spot.uz/ru/2020/01/29/opensky/
[24] A. Mukashev, Realization of the Open Skies policy in the countries of Central Asia. Source: https://cabar.asia/ru/realizatsiya-politiki-otkrytogo-neba-v-stranah-tsentralnoj-azii/
[25] Forbes Uzbekistan, Uzbekistan Airways want to transfer to the management of a foreign company. Source: https://forbes.uz/process/economy/uzbekistan_airways_hotyat_peredat_v_upravlenie_zarubejnoy_kompanii/?fbclid=IwAR0AUf7m9NgqHXq16SEiagL6foIFCdXwGfhSZGBAQzZ0Pk7eqzzezrze
[26] Spot, Will privatization solve the problems of Uzbekistan Airways? Expert opinion. Source: https://www.spot.uz/ru/2018/06/25/nak-privatization/
[27] Spot, Will privatization solve the problems of Uzbekistan Airways? Expert opinion. Source: https://www.spot.uz/ru/2018/06/25/nak-privatization/