Welcome back to the Deep Dive. Today we're doing
something, well, a little different. Yeah, this
one is interesting. We are essentially reconstructing,
maybe not a literal crime scene, but definitely
a corporate autopsy. I like that, a corporate
autopsy. Yeah, we're looking at a stack of documents,
financial reports, crash investigations, all
of it centering on one defunct company, Armavia.
And if you're listening and thinking, why should
I care about an Armenian airline that stops flying
back in 2013? Just hold that thought. Right.
Because this isn't really a story about planes.
No, it's not at all. It's a story about post
-Soviet identity. It's about the incredibly dangerous
gap between ambition. and reality. And honestly,
it's a masterclass in how not to run a logistics
business. It's almost Shakespearean in a way.
You have the rise, the hubris, the tragedy, and
then the fall. So looking at our sources today,
we're covering the timeline from about 1996 to
2013. We've got ownership battles, fleet data,
which is a total mess, by the way. Oh, we'll
get to that. And the official accident reports.
And the mission for this deep dive is to figure
out what actually killed Armavia. Was it bad
luck? Was it the Russians or was it just the
brutal economics of trying to be a flag carrier
for a small nation? Let's start right there with
that term, flag carrier, because that sets the
whole psychological stage. It does. Armenia wasn't
just a business. It was supposed to be the face
of Armenia to the world. Right. And that is a
heavy, heavy burden. You have to remember the
context. This is the 90s. The Soviet Union has
collapsed. And every newly independent state
wanted two things. A seat at the U .N. and their
own airline. It's a sovereignty thing. You want
to see your flag on the tail fin at Heathrow
or Charles de Gaulle. Exactly. It says, we've
arrived. But Armavia's start was, well, sluggish
is putting it mildly. The papers were signed
in 96. Yeah. But I was looking at the flight
logs. They didn't actually move a paying passenger
until 2001. That's five years of just nothing.
A paper airline? They had the license, but not
the medal. And when they finally did start, it
was strictly regional. Flights to Russia, flights
to Turkey, the easy stuff. But the real story
kicks off in 2002. This is where the plot thickens.
We see a major foreign player enter the game.
That's Seven Airlines. Which stood out in the
corporate history immediately. This is a Russian
giant, formerly Siberia Airlines. Not a player.
And very aggressive. So in 2002, S7 buys 50 %
of Armavia. Right. And then... Just a year later,
2003, they bumped that up to 68%. So effectively,
Armenia's national airline was two -thirds Russian
-owned. Yeah. Which, if you know the geopolitics
of the Caucasus, isn't that surprising? Yeah.
But commercially, it was a fascinating move.
S7 basically used Armenia as a feeder system.
Okay. They wanted to dominate the routes between
Yerevan and the major Russian cities, Moscow,
Sochi. It gave Armenia stability, you know, access
to S7's maintenance, their booking systems. But
it turned them into a subsidiary. A vassal state
airline. Essentially. And for a country trying
to assert its independence, that's an uncomfortable
dynamic. You've got the Armenian flag on the
tail, but the decisions are being made in Moscow.
Which has to explain the massive pivot in 2005.
This is the first big turning point. The big
brother exits the chat. And a local entity, Mika
Armenia Trading, buys out S7 completely. Led
by Mikhail Bagdasarov. And this is crucial context.
Bagdasarov was a tycoon, very well connected.
Mika Trading wasn't an aviation company. They
were into oil, cement, finance. So it's the classic
oligarch buys a sports team trope. But instead
of a soccer club, he bought an airline. And now
it's 100 % locally owned. The timing here is
wild because the previous national carrier, Armenian
Airlines, had just gone bankrupt in 2003. So
Armavia just steps right into this massive vacuum.
They inherited the crown. And the strategy shifts
immediately. Oh, completely. Under S7, it was
cautious, calculated. Under Bagdasarov, it was
just aggressive expansion. They wanted to be
the player. The numbers back that up. I was looking
at the passenger growth charts. In 2005, they
moved about 513 ,000 people. Five years later,
2010, they're over 800 ,000. Which is huge growth
for a country with a population of just under
3 million. Explosive. But, and there's always
a but, when you grow that fast, you need the
infrastructure to support it. And this is where
I want to talk about the fleet. The Frankenfleet.
Because when I looked at the list of aircraft
they were flying, I honestly thought it was a
typo. It's a zoological garden of airplanes.
It's such a mess. Okay, let's list this out.
You've got Airbus A319s and A320s. Fine. Standard
workhorses. Yep. Totally normal. Then you have
Boeing 737s. Okay. So now you need two different
sets of pilots, two different sets of mechanics,
two warehouses full of parts. Exactly. Yeah.
Then Bombardier CRJs for the short hops. And
then a Yakovlev Yak -42D, a Soviet trijet for
VIPs. Don't forget they also leased ATRs at one
point. It's the definition of a mixed fleet.
So why is that a problem? For the listener who
doesn't run an airline, why can't you just mix
and match planes like cars in a garage? Because
in aviation, complexity is the enemy of profit.
It's the fastest way to burn money. You lose
all economy of scale. Completely. Look at the
most profitable airlines in history. Southwest,
Ryanair, they fly one type of plane. Southwest
only flies the 737. Ryanair, mostly the 737.
Armavi was flying a Noah's Ark fleet. Two of
everything. It just suggests they were desperate
for capacity, grabbing whatever leases they could
find without thinking about the operational nightmare
they were building. It sounds like they were
patching holes rather than building a foundation.
Yeah. And speaking of ambition outpacing reality.
We have to talk about the Los Angeles connection.
Ah, the Holy Grail. I saw this in all the press
clippings. They were obsessed with flying nonstop
from Yerevan to LAX. Of course, because of Glendale,
the massive Armenian diaspora in California.
It's practically the second capital of Armenia.
The demand is there. The cultural connection
is there. Yeah. But look at that fleet we just
talked about. They didn't have a single plane
that could make that flight. Not even close.
An A320 is not getting to California from the
Caucasus. You'd need a wide body. A Boeing 777,
an Airbus A330. But they kept promising it. Kept
promising. It was a pipe dream. It was marketing
fluff to keep the public excited. But the physics
just weren't on their side. But they did try
to pioneer something else. And this is probably
the most interesting technical chapter of their
story. The Sukhoi Superjet. The SSJ -100. This
is where politics and aviation collide. This
was supposed to be the great Russian comeback
in civil aviation, right? That was the narrative.
The superjet was the first clean sheet design
from post -Soviet Russia. A modern fly -by -wire
jet meant to compete with Embraer and Bombardier.
It was Putin's pride and joy. And Armavia decides,
we'll take the first one. Launch customer, April
21st, 2011. Armavia becomes the first airline
in the world to fly the Superjet on a commercial
route. Yervon to Moscow. Sounds like a huge PR
win. First in the world. But being a launch customer
is not always a good thing, is it? It's basically
being a beta tester for a multi -million dollar
machine that flies. Okay, right. I mean, when
Singapore Airlines launches a new Airbus, they
have the engineering depth to absorb the teething
problems. When a small carrier like Armavia does
it, it's a massive, massive risk. And they found
bugs. They sure did. Within a year, the whole
relationship imploded. They'd ordered a second
jet, canceled it, then they returned the first
one. Why? They publicly cited reliability concerns.
What does that mean in plain English? It means
the plane was spending too much time on the ground.
Maybe it was software glitches, maybe waiting
for parts. But if you're Armavia, you can't afford
to have your shiny flagship plane sitting in
a hangar earning zero dollars. It feels like
there was political pressure to take that plane.
Almost certainly. It was a prestige project for
Russia. And Armenia is a close strategic ally.
But the economics just didn't work. It became
an anchor around their neck. So we have a chaotic
fleet, a failed experiment with a prototype jet.
But we can't tell the story of Armenia without
stopping at the darkest moment. No, you can't.
This is the event that defines the airline's
legacy, unfortunately. Flight 967. May 3rd, 2006.
An Airbus A320 flying Eurovan to Sochi. A routine
route. A short hop across the Black Sea. A flight
they had done hundreds of times. But the weather
was awful. Rain. Poor visibility. And the plane
never made it. It crashed into the sea. 113 people
died. Total hull loss. And the investigation
report. I mean, these are always hard to read,
but this one is particularly frustrating. Because
the plane was fine. That's the term CFIT, right?
Controlled flight into terrain. Correct. The
engines were turning. The computer was online.
The hydraulics were working. The pilots flew
a perfectly healthy airplane into the water.
How does that even happen? How do you lose track
of up and down so badly? It's a psychological
trap. Yeah. They were attempting to land in that
bad weather. The tower told them visibility was
below minimum, so they had to abort. Right. They
initiated a go around, pull up. Circle back.
Try again. Which is a standard maneuver. It is.
But it is high workload. It's stressful. And
this is where biology betrays you. The captain
likely suffered from something called somatographic
illusion. Somatographic illusion. It's a sensory
trick. When you accelerate quickly, like when
you gun the engines for a go around. Yeah. Your
inner ear detects that acceleration. Yeah. But
without visual references, remember, it's pitch
black. It's raining. Your brain confuses that
forward acceleration with tilting backwards.
So you feel like you're doing a backflip even
though you're flying straight. Exactly. You feel
like the nose is pitching up dangerously high.
So what's your instinct? Push the nose down.
You push the nose down to level off. But you
were already level. So now you're diving. And
that's what happened. He was making inputs that
sent the plane into the sea thinking he was saving
it from a stall. And first officer, why didn't
he stop him? That's the other tragedy here. It's
a failure of what's called crew resource management.
In many post -Soviet aviation cultures at the
time, the cockpit hierarchy was very steep. The
captain was God. The captain was God. The first
officer either didn't monitor the flight path
effectively or was too hesitant to intervene
and scream, Captain, we are diving. And the plane
itself, the computer must have known it was too
low. Oh, it did. The GPWS, the Ground Proximity
Warning System, was screaming, Pull UP! But in
that high -stress, disoriented state, they ignored
it. They were fighting their own safety systems.
God, that's just terrifying. Total sensory confusion.
It is. And even though Armavia kept growing after
2006, that crash breaks the trust. You can repaint
the planes, but the locals remember. It changes
the company culture from ambitious startup to
crisis management. So let's fast forward to the
end. We move from the tragedy of 2006 through
the super jet fiasco. We get to 2013 and the
wheels just come off. The financial depression,
as the reports call it. It really seems like
it happened overnight. One day they're flying,
the next day they aren't. Bankruptcy often looks
sudden from the outside, but it's a slow rot
from the inside. They'd been bleeding cash for
at least two years. Right. High fuel prices were
hitting everyone. But Armavia had that inefficient
Noah's Ark fleet. They were burning more cash
per seat. They were piling up debt with airports,
with fuel suppliers. I read the IATA clearinghouse
suspended them shortly before the end. And that's
the death knell. The IATA clearinghouse is the
financial circulatory system of the airline industry.
It handles money between airlines and travel
agents. So when IATA kicks you out... You can't
sell tickets effectively. You're cut off from
the global system. So on March 29, 2013, they
announced bankruptcy. April 1st. April Fool's
Day, ironically, operations stop. Just like that.
Gone. Imagine the scene. You're a passenger in
Paris or Moscow. You have a ticket home to Yerevan.
You show up at the counter and the lights are
just off. And because they had co -chair partners,
Air France, El Al, LOT Polish, this wasn't just
an Armenian problem. Right. Explain that. If
I bought a ticket on Air France, how does this
affect me? Well, you might book New York to Yerevan
on airfrance .com. The first leg is an Air France
jet. But the second leg, Paris to Yerevan, is
operated by Armavia. Suddenly, Air France has
hundreds of angry passengers stuck at Charles
de Gaulle with nowhere to go because their partner
airline just ceased to exist. It rippled through
the whole network. It's just such a stark ending.
No bailout, no government intervention for the
flag carrier. And that's the real surprise here.
Usually, the government steps in. They say, we
can't let the flag fail. But the Armenian government
essentially said, this is a private company.
Good luck. They let it burn. They let it burn.
It signals a real shift. It's not just a vanity
project anymore. If it doesn't make money, it
dies. So when we step back and look at this whole
arc, what's the big takeaway? Is this just a
story of bad management? I think it's a story
about the danger of what I'd call flag carrier
syndrome. Okay. Define that. It's the belief
that because you represent a nation, you are
immune to basic... Or maybe you try to do too
much. They wanted to be a geopolitical player
with a superjet. They wanted to span the globe
to L .A. without the right planes. They wanted
to expand with a Frankenfleet. Ambition without
foundation. Exactly. Aviation is a margins game.
It's actually quite boring when it's done right.
It's about standardization, safety, efficiency.
Or maybe it was exciting. It was dramatic. And
in aviation, exciting usually leads to bankruptcy.
It's a sobering reminder. Next time I'm at an
airport and I see a logo I don't recognize, I'm
going to think about the House of Cards keeping
that plane in the air. You should. Yeah. Behind
every single ticket is a massive web of debt,
leases, and geopolitical deals. We just usually
don't see it until the lights go out. Well, on
that cheerful note, we're going to wrap up this
deep dive. A fascinating, if tragic, look at
the rise and fall of Armadia. Thanks for having
me. And thank you for listening. We will see
you on the next deep dive.