Tajik Air, the largest state-owned air company is on the verge of bankruptcy due to economic pressure and competition created by foreign companies. The company’s largest problems are an artificial deficit of tickets, high prices, a low standard of service in the air and on the ground, and bribery.

There is an urgent need for a reorganization of the company, for which substantial funding and a significant number of adequate specialists is necessary. The company’s management is desperately searching for solutions, but so far they have come up with no particular solutions. Meanwhile, the presence of more advanced companies including Turkish airlines and Aeroflot is increasing economic pressure on Tajik Air.

There are various opinions on who or what caused the failure of the company. One of the main reasons for the company’s failure is the lack of proper management. Since 1992, within a period of 15 years, the management of the company was changed four times. Out of four General Directors, two of them – the second and the present are not professional airmen.

The other major reason for its problems is a disagreement between Tajik Air and the EBRD. In July 2005, the company signed a credit agreement with the EBRD according to which a program on the transformation of the airline for the use of other types of aircrafts was developed. This was proposed by the EBRD and subsequently approved by the government of Tajikistan. According to the agreement, the Bank provided US$5 million for the development of the aviation sector, in particular the modernization of Dushanbe airport. During the early stage of the agreement, Tajik Air signed a contract with Ernst and Young for US$670,000. Yet according to the present Head Manager, the agreement was disrupted because of allegedly unsatisfactory services provided by Ernst and Young. Tajik Air apparently thinks that it was charged too much by the consulting company for services they could do without them.

Referring to the agreement, the EBRD declares that in the absence of the expert estimation from the consultants, the Bank will not provide any money to further continue the process of transitioning the airline to other aircraft types.

The other reason is that prior to the end of 2008, based on World Bank requirements, the Tajik airline must be reorganized. Though this issue was brought up a long time ago, it was accepted by the government only in 2006 when a final decision was made concerning reorganization. Accordingly, the airline must be divided into: strictly airline itself, “Tajik Air”, the airport, and the air traffic control.

This division is another reason for EBRD to stop its funding, because after the division of the company into different sectors, it will not be possible to demand the repayment of loans from different organizations.

Tajik Air is the only Tajik company which is competing with 23 other foreign companies operating in the country. The Tajik airline is not sustainable in comparison with local Central Asian companies, not mentioning Western Companies. Therefore, urgent decisions are vital in order to prevent the absolute disintegration of the airline. It is extremely important for the company to purchase – either by buying or leasing – new modern aircraft which can match international standards. Yet so far, the company is failing to acquire new machines that hold up to international standards.

There are several reasons preventing the company from such purchases. First, Tajik Air can not afford the prices of buying modern aircraft by cash, because the sums are substantial. Second, the cost of leasing aircraft increase every day, due to the growing demands of global movement of people. Other former Soviet airlines are also in desperate search for new aircraft, leading to an increase of prices in leasing markets. Thirdly, there is the emergence of new, more powerful, and well established companies introducing fast and heavy competition. Tajik Air tried to block access for other foreign companies for a significant period of time, a method which is not accepted in the present-day era. Simply refusing access to other companies to operate in Tajikistan is the most primitive method which brought more negative results than positive ones, as if Tajik Air wants to operate internationally, then it should allow other companies to use its airspace.

Finally, the company is very slow in terms of introducing new changes which are critical to its future. The company was under heavy criticism in a letter written in 2006 by representatives of the UN, the Asian Bank of Development, the World Bank, the EBRD, the European Union, and the embassies of France, Sweden, Switzerland, Japan, Turkey, the UK and the U.S., which was published in local media. As a result of such criticism, the then-head of the company and his assistant were removed, and the present Chief of the company was appointed by the government.

The purchase of new aircraft and the complete reconstruction of the airport are big issues that require large investments. Yet improving service on the ground depends on good management rather than funding. There are always complaints by customers about corruption of airport staff responsible for checking passengers. Passengers have to wait for hours to get their luggage, which in most cases is handled with no care. A complete disorder in the airport, and the significant number of uniformed police, do not add a pleasant dimension to customers’ impression, especially those who visit the country for the first time. Customer service is one of the main aspects of success of companies dealing with people on daily basis, and Tajik Air – in line with many other Tajik companies – need urgent investment in training professionally qualified staff that can deal with a customer professionally.

The failure of the airline is the result of two negative issues that hold the Tajik economy from moving ahead. First is the lack of a proper system of privatization. In most developed countries, transportation companies are privatized and run by individuals with good management capacity and proper qualified specialists. The government only regulates the proper system of taxation which allows the company to grow and at the same time to contribute to the prosperity of the country. The companies are totally free to choose whoever they consider applicable for the management of that company. Second is the problem of passenger satisfaction, which secures the success of any company. Therefore Tajik air needs investment to keep its customers happy.

It is imperative for the company to develop a long term strategy, to identify internally and on the international level the causes of its failure, and also the possibilities based on which the company could survive.