How to Revive Air Transport Operations in Ukraine: 7 Components of the New Market Model by Pyvovarskyi

Journalists from the CFTS portal met with Ukraine’s Minister of Infrastructure Andrii Pyvovarskyi to discuss the model of the aviation market to which the country is aspiring. The minister listed the seven components of this new market model.
Olga Bystritska 07 July 2015 09:44

The aviation market is currently trying to find a point of equilibrium. On the one hand, we cannot escape from the idea of having a base of the carrier. On the other hand, it is simply necessary to attract new airline companies and create competition. While the signing of the Open Skies agreement has been postponed, the Ministry of Infrastructure is trying to solve the problem in a targeted manner - after the experiment in Lvov, it decided to also open the sky in Odessa. However, last week ended with a scandal involving the governor of the Odessa region, Mikhail Saakashvili, who accused the State Aviation Service’s head Denys Antoniuk of having links to oligarchic structures and lobbying for the interests of Ukraine’s flagship carrier, UIA. As a result of this incident, Antoniuk was suspended pending an official investigation.

After such high-profile events, journalists from the CFTS portal met with Ukraine’s Minister of Infrastructure Andrii Pyvovarskyi to discuss the aviation-market model to which the country aspires.

1. The signing of the "Open Skies" agreement with the European Union

The issue of Gibraltar between Spain and the United Kingdom has still not been resolved, and Europe is currently the relevant holding negotiations without our participation. However, the position of the Europeans is quite tough - we should sign the Open Skies agreement in 2015.

We are currently opening the sky selectively. After the experiment in Lvov, we have begun opening the sky in Odessa and this week we will begin sending letters to those countries where there are bilateral restrictions, which we will try to remove.

We have three major airports: Boryspil, Lvov, and Odessa. All the rest account for less than 10% of the total passenger traffic in the country. We are developing the Boryspil airport as a hub while the Lvov and Odessa airports are regional centers that should attract tourists like a magnet. We understand how to attract people there, but this requires the airports to have very close cooperation with cities and the region.

2. Increase of the number of operators

The airline companies with which we communicate are constantly asking what we can do to enable them to fly. They want us to significantly reduce airport taxes and pay extra for passengers, as happens in many European airports. However, we currently have no legal ability pay extra for passengers.

I would not like to name the airline companies with which we are negotiating, but I think that the situation should change qualitatively ahead of the next summer season.

3. Reduction of fuel prices

If you look at the structure of fuel supplies to the Boryspil airport, there are currently several suppliers. The management of the Boryspil airport was tasked with diversification of fuel supplies, but, as the saying goes, this requires the airport to pack a gun. Then, an airline company will be able to order fuel from anywhere. The airport’s financial plan for 2015 provides for the relevant investment.

However, the problem of high fuel costs is much less in Kiev than at regional airports. It is no secret that Odessa has the most expensive fuel in Ukraine. The Antimonopoly Committee has already initiated an investigation into this issue. Given the fact that the cost of fuel accounts for 60% of the cost of transporting passengers, we will reduce the cost of tickets by reducing fuel prices to the market level.

"Given the fact that the cost of fuel accounts for 60% of the cost transporting passengers, we will reduce the cost of tickets by reducing fuel prices to the market level"

4. Support for the base carrier

We have a base airport in Boryspil and a base carrier in UIA, which accounts for more than half of the airport’s passenger turnover. If you look at similar airports, all base carriers always enjoy better conditions.

There cannot be a situation in which you transport 10,000 passengers and enjoy the same conditions as an airline that transports 5 million passengers and accounts for most of an airport’s transit traffic. I have gathered a group within the ministry to establish clear tariffs and regulate relations between the base airport and the base carrier. There will be one set of conditions if you transport 5 million passengers, a second set of conditions if you transport 10 million, and a third a second set of conditions if you transport 1 million.

5. De-monopolization of the market

The Atlasjet company was allocated many air routes on Friday. The company will not begin flying immediately because it needs to go through certain bureaucratic procedures. The company will be able to start operating international flights within 45 days and domestic flights within 30 days. That is, we will have an alternative Ukrainian carrier with a quality set of destinations by the winter season.

6. Rotation of the State Aviation Service’s management

I do not want to talk about the probability of Denys Antoniuk’s resignation. Decisions will be made if the commission determines that there were violations. He will remain in his post if the commission says that everything was within the law and the aviation regulations.

Practically all the personnel existing in Ukraine comes from AeroSvit or UIA. If we approach the issue in a way in which none of those that worked in these companies can hold a position in the State Aviation Service, it means that we need to look for a person from abroad.

This option is being considered. A person who is not from the industry can categorically not be selected because it is a question of security. It is not enough for the head of the State Aviation Service to be a good manager; he must also come from the industry and have some knowledge.

"Practically all the personnel existing in Ukraine comes from AeroSvit or UIA"

7. New rules for access to routes

I am not saying that the aviation regulations are good, but they have allowed the sky to be opened. The Baker & McKenzie company told us at the first stage of its work that the State Aviation Service should formulate aviation rules and we agreed. In the next stage, the company should say how this should happen in reality - I mean the best practices. If they say that it is necessary to change the aviation code, we will change it. If they say that it is necessary to change the aviation regulations, we will change them. Then, we will resolve all issues and have the best practices. However, it should not be in the same way as in Uzbekistan - where only one airline flies - but in a liberal and open market. I think they will be able to announce their position not before mid-July.

Tags: avia, Ukraine