British Airways Throws in the Towel

The Georgian Messenger
23 March 2004

British Airways throws in the towel

By Allison Ekberg
Despite an announcement in February that after a one-year break in service,
British Mediterranean would restore air traffic between Tbilisi
and London in March, senior managers from the carrier were unable to
finalize the resumption of services during a visit to Tbilisi last week
and have announced that the company will not return to Georgia. “In spite of
the ongoing and resolute efforts of the British Embassy in Georgia, the
British government, the new Georgian government and British Mediterranean
Airways to resolve this situation, the Georgian Civil Aviation Authorities
[CAA] remained determined to obstruct the resumption of air services between
Georgia and the United Kingdom by British Mediterranean Airways,” reads the
statement issued on Monday. British Mediterranean Airways (BMed), which
operates under a
franchise agreement with British Airways argues that the reasons given by
the CAA over the past year for denying their permit have constantly
changed and that most recently they demanded “an exceptionally high number
of documents including some that are not permitted under the Air Service
Agreement (ASA).” The ASA is the International Treaty that governs air
services between countries. The British carrier also objects to requests for
a commercial agreement with Airzena arguing that under the recently
negotiated Air Service Agreement “there is no
requirement for us to enter into commercial cooperation in any form.”

While British Airways states that it would be willing to discuss mutually
beneficial cooperation with Airzena after flights are resumed, they
“will not however cooperate in a manner that financially and commercially
disadvantages our company.” “These facts have been communicated to the
Georgian government at the highest levels,” says British Airways. Despite
the fact that a decree was signed by the
current Speaker of Parliament Nino Burjanadze when she was interim
president, the return of the airline remained the subject of controversy.
Opponents maintain that local companies are short-changed by this agreement,
though others note that the issue is of political and economic importance to
Georgia and that resolving it in this way is in the strategic interests of
the country and its future economic development, including attractiveness to
investors. The new government has repeatedly stated its interest in
re-establishing relationships with foreign companies. “I am not afraid of
lobbying for British Airways and Turkish Airlines because I believe that
settling this issue is crucial for our integration into Europe,” Parliament
Speaker Nino Burjanadze told journalists in February. The speaker told The
Messenger that while she already signed the decree, she would fully legalize
it by passing it through Parliament as well. The outgoing Parliament failed
to approve the decree this year due to the lack of a quorum. In March 2003,
British Airways and Turkish Airlines (Turkish later re-turned) were forced
to discontinue flights to and from Tbilisi when the Parliament voted not to
extend their flight permits. The reason for this was complicated but
included disagreements over the
nature of Commercial Agreements and observation of the “parity principle”
between foreign and domestic companies. According to this principle, if
Georgian Airlines did not carry out as many flights as a foreign carrier,
the latter was obliged to pay financial compensation.
Some Georgian authorities also alleged that the British and Turkish
companies received extra privileges and as a result Georgia did not
collect the tax revenues it should according to international practices.

It was also reported at the time that BMed had problems with the Georgian
Tax Department. On Monday the companysaid that the taxation is-sue raised by
the previous government “never had any substance.” The company adds that
through meetings with the Ministry of Finance and Tax Department “we have
agreed to a satisfactory resolution of this issue.” Reached at the time for
comment, Temur Tetradze, Head of the Transportation Department of the CAA
told The Messenger, “we are following the decision of the
Parliament.Parliament issued the order to restrict the flights.” Just last
week the former head of the Civil Aviation Administration Zurab Chankotadze
was sentenced to three months pre-trial detention in connection with
charges that he exceeded his official duties, is guilty of mismanagement and
stole over GEL 750,000 from
the state budget. British Airways claims that due to many years of
continuous difficulties with the Georgian Civil Aviation Administration it
has been unable to increaseits investment in Georgia where it previously
operated three flights a week compared to seven flights a week to Baku.
While it would consider resumption of services if there are “positive
changes in the Civil Aviation Administration,” it adds that “if the business
environment does not significantly change, it is unlikely that we will
resume flights between Tbilisi and London.

British Airway’s Tbilisi office will remain open through March 31, 2004
after which passengers should contact the British Airway’s office in