Armenian Airlines was established shortly after independence in 1991 from Aeroflot's Armenia directorate, and was the sole carrier in Armenia until 2002, when private companies Armenian International Airways and Armavia began to compete with it.

Profitable until 1997, Armenian Airlines began a decline in 1998 which executive director Arsen Avetisian blamed on the 1998 Russian financial crisis. Additionally, technical problems with its sole Airbus A310 helped lead the company towards financial problems. The company began to join forces with Belgian operator VG Airlines (later renamed Delsey Airlines); but the Belgian carrier had to file for bankruptcy on November 5, 2002. Armenian Airlines was reported to be looking for cooperation with Armenian International Airways to continue or restart its flights into Europe. When Armavia (which was owned by Siberia Airlines) entered into an agreement with the Armenian government and was granted most of Armenian Airlines' flight rights, including the lucrative Yerevan to Moscow route, Armenian Airlines was unable to recover, and officially declared bankruptcy on April 15, 2003.

On May 3, 2006, it was widely reported that an Armenian Airlines Airbus A320 had crashed in the Black Sea. The reports were evidently mistaken, since the airline had ceased operations in 2004. In fact, the airline involved in the crash was Armavia, the successor of Armenian Airlines. All 113 passengers and crew on board died.

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