Armavia

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25002
Company name	Armavia Airlines
Country	Armenia
Sector	Transportation and Warehousing
Environmental category	B
Department	Infrastructure
Status	Pending Signing

Date SPI disclosed	January 30, 2007
Projected board date	March 1, 2007
Previous Events	Approved: May 29, 2007

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

ARMAVIA Aviacompany (Armavia or the company) is the leading passenger carrier in Armenia. It started commercial operations in 2001 with flights to Moscow and Istanbul.

The company plans to expand its fleet and to improve the level of its safety and service standards. As part of this expansion program, the company plans to lease western aircraft to service more routes and increase frequency in existing routes.

Anticipated development impact of the project

The project will benefit the small land-locked country in its expansion of trade and tourism, and secure a greater access to foreign markets. Through the proposed IFC Loan, Armavia will improve its levels of safety, comfort and convenience for the passengers.

IFC's expected development contribution

IFC’s primary role in the project is the provision of long-term financing that is not otherwise available to Armavia. This will also be IFC’s first infrastructure sector investment in Armenia. IFC has assisted the company with introductions to some world class aviation consultants such as SH&E and MBA to help the company source and negotiate several regional jets on lease and hire new Commercial and Finance Directors with Western qualifications and experience. Finally, IFC’s technical consultant has audited the company’s operations along with safety and security standards and has recommended several measures in this regard. IFC plans to mobilize technical assistance to part-finance the implementation of safety and security measures recommended by the consultant.

Environmental and social issues - Category B

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

The review analyzed potential environmental, social, health and safety impacts including Armavia's management capacity to address these issues, aircraft operations safety, hazardous materials, emissions to the environment including noise, exhaust and liquid effluents, waste management, labor and occupational health and safety. The review was largely based on IFC technical consultant's assessment of Armavia's operations and documents provided by Armavia in support of its environmental and social performance.

The identified environmental, social and health and safety impacts which require ameliorative measures are summarized in a Corrective Action Plan (CAP) that Armavia will implement as part of IFC’s Loan Agreement. Upon successful implementation of the agreed mitigation measures, the proposed project is expected to comply with local laws and regulations as well as applicable World Bank/IFC environmental, social and health and safety policies and guidelines.

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