Yevhen Dykhne on Plans to Remain at the Boryspil Airport: Dialogue with the New Director Lies Ahead

In an interview with the CFTS portal, the Boryspil international airport’s acting general director discusses his desire to continue the work he began at the airport, the key performance indicators set by the minister of infrastructure, the “Soviet past," and the prospects for development of the country’s main airports.
Olga Bystritska 27 December 2016 14:59

We met with Yevhen Dykhne the day after the Ministry of Economic Development & Trade announced the results of the competition for the post of general director of the Boryspil international airport. Dykhne did not give the impression that he was concerned that he might have to look for a new job... He consciously decided not to participate in the competition for the post of general director of the airport, saying that he had already fulfilled his task as a technical manager and that the post was too political. However, he does not hide the fact that he likes working at the Boryspil international airport and that he would not like to leave the airport.

We asked Dykhne whether he would remain at the airport and discussed the procedures for the competition for the post of director of the airport, the key performance indicators that Minister of Infrastructure Volodymyr Omelian set for the new head of the airport, and the airport's plans for 2017

Are you staying or not?

I want to stay...

One gets that impression but...

The Nomination Committee has selected the new director of the airport, and it is for him to decide whether he sees me ... in the important role that I play in the airport today because I have my own position and understanding of the processes. A dialogue with the new director lies ahead, after which I will be able to say whether I am staying or not.

Do you know him?

No.

Let us take a step back. Why did you fail to win the competition in the past?

You know what Zhvanetskyi said, "What you call oil is not oil." What you call a competition was not a competition. Therefore, let us not confuse concepts. At that time, it was a procedure that was incomprehensible to me and a procedure in which victory for a certain candidate was predetermined.

"What you call oil is not oil." What you call a competition was not a competition. Therefore, let us not confuse concepts

Was the latest competition the same?

I cannot assess this procedure because: a) it was different; b) it was less public in my opinion; c) I did not participate in this competition.

Why did you not participate?

I was invited to the company as a crisis manager. I performed that task. Having clearly realized that this post has a political component, I made an absolutely conscious decision not to participate in the next competition. Moreover, it is no secret that I was not the most comfortable head of the Boryspil airport for the Ministry of Infrastructure and all the other players on the market.

If not Boryspil, what will you do next?

I am very interested in working at the Boryspil airport. The totality of my life and professional experience was realized here. My business skills and years of experience in management and administration have been useful. On the one hand, I am convinced that I am capable of contributing many useful and good things to the work of the airport. On the other hand, before the Boryspil airport I had many years of experience on the railways, where I also managed to achieve good results. Surely, there are still many other interesting areas and businesses where efficient managers are needed.

Revolutionary methods of reform, optimization, and improvement will not work here because the Boryspil airport is still a Soviet enterprise

Have you seen Pavlo Riabikin’s presentation?

Not yet, but I will definitely take a look at it. It is important for me to know the extent to which the vision of the new general director coincides with my philosophy and plans. It is also necessary to understand how deeply the new general director understands the problems of the Boryspil airport and whether he really needs my help.

What three pieces of advice would you give to the new general director?

The Boryspil airport is still a Soviet enterprise and revolutionary methods of reform, optimization, and improvement will not work here. I encountered this problem two years ago. I would advise him to move clearly according to plan while developing the company evolutionarily. As the saying goes, "eat the elephant one bite at a time." Secondly, he should be less distracted by political issues and media attacks. This really obstructed my work, and I very much hope that things will be easier for him in this respect. Thirdly, his management of the airport should be guided by business logic as much as possible. The Boryspil airport is in constant competition with other airports, especially in our selected strategy of becoming a hub airport. I hope that the new director will continue the constructive work that I started with our base airline.

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Have you seen the KPI (key performance indicators) that Minister of Infrastructure Volodymyr Omelian published for the new general director? Which one of them will be most difficult to achieve?

All the tasks set by the minister are difficult to fulfill. That is specifically why they are valuable. However, not all of them are tasks that depend on the director of the airport. Many of them are products of the combined work of the director of the airport, the Ministry of Infrastructure, the Cabinet of Ministers, the Ministry of Transport...

What would you say about bringing low-cost airlines within six months?

This is a difficult task, but the most important thing for the airport is to formulate its tariff policy in such a way that it will be more attractive to low-cost airlines. The airport cannot do more than that because airports do not generate passenger traffic. They are directly dependent on the purchasing power of the population. However, in the area of tariff policy, yes, it may become more attractive. However, this task is tied to many other tasks, including the second task that Omelian set: increasing the airport’s non-aviation revenues to 40% of total revenues.

This task should be fulfilled within two years...

They are all interrelated. It is impossible to formulate an attractive tariff policy for low-cost airlines without increasing the airport’s non-aviation revenue because it is necessary to reduce aviation revenues without compromising the airport's revenues. The next question here is outside the scope of competence of the director of the Boryspil airport: non-aviation revenues are directly dependent on who controls them, that is, on the State Property Fund. I absolutely support all the targets that were published, but the targets cannot be broken down in chronological order: attraction of low-cost airlines followed by corporatization...

This is a task not only for Riabikin, but also for Mr. Omelian, Mr. Groysman, and Mr. Dubnevych

Omelian has vision and a deep understanding of many processes, although I cannot say that he pays as much attention to the airline industry as he pays to the railroad industry, for example. That notwithstanding, these are specific tasks. However, this is a task not only for Riabikin, but also for Mr. Omelian, Mr. Groysman (Prime Minister Volodymyr Groysman), and Mr. Dubnevych (the parliamentary transport committee’s Chairman Yaroslav Dubnevych).

Tell us about the experience you acquired. What are your failures and successes?

For myself, I will say that I have gained very important experience with a large but still a "Soviet" collective. I gained experience of working clearly in accordance with a plan and making changes only in an evolutionary way. The tasks that I faced at the end of 2014 and the tasks facing the management of the Boryspil airport today are radically different. At the end of 2014, I needed to bring the company out of a crisis and find ways of beginning repayment of the so-called "Japanese" credit, on which the tax holiday has already ended, in 2015. The main objective was to optimize technological processes. To save funds, it was necessary to unite all the enterprise’s business operations within a single terminal and start making savings through transparent procurement mechanisms and financing the enterprise based on the sufficiency principle. If the enterprise had developed based on this principle in the past 10 years, we would have very different tariffs for airlines today.

If the airport’s tariff policy is not reformed quickly, it may lose the opportunity to work with budget airlines

Would tariffs for airlines be lower if the enterprise had previously developed based on the sufficiency principle?

I would very much like the Boryspil airport to have a tariff that is equal to half of the current tariff. This would make the airport more competitive and attractive. This task is very important because only a competitive market produces results from the right balance of price and quality. Reform of the airport’s tariff policy must not be delayed. The opportunity to work with budget airlines may be lost if this is not done promptly.

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What about your failures?

I do not see any significant failures in my time at the Boryspil airport. We did not manage to completely solve all the problems involving ground handling. We currently have four private companies operating in this sphere, in addition to the airport itself. The Boryspil airport itself serves about 20% of the domestic market and I have serious doubts about the efficiency of the airport’s ground handling division. It clearly has too many employees: more than 400 people, who can allow themselves to play cards and choose who will go to service an aircraft. Moreover, the airport’s own ground handling division does not pay the fees that the private ground handling companies pay to the airport. The solution will be to separate our ground handling division into a separate business unit or a subsidiary. The positions of all market participants should be equal.

Not only is it an unprofitable operation for the airport, it is also an operation that is not mandatory for it to perform. Apart from ensuring flight safety, security, quality operation of infrastructure, etc., everything else can and should leave the market evolutionarily.

We will have an increase of either 1.1 million or 1.2 million in the number of passengers in 2016

How would you assess the current volume of passenger traffic through the airport? Why was such a low volume of passenger traffic initially stipulated in its financial plan?

The stipulated passenger traffic was realistic. We will have an increase of either 1.1 million or 1.2 million in passenger volumes in 2016. According to preliminary calculations, we will have an increase of 18%.

Let us talk about Ukraine International Airlines. When will there be a joint strategic development plan?

It already exits. It is the hub airport model that we are working on and developing. I do not hesitate to say that Ukraine International Airlines is our strategic partner. Ukraine International Airlines has a development strategy, but that strategy is completely dependent on the development strategy of the Boryspil airport. They cannot develop if we do not provide them with the necessary conditions.

How do you know about Ukraine International Airlines’ plans? From the media like everyone else?

I also know things that Ukraine International Airlines does not publish, for example, its five-year development strategy. This is because it cannot determine this strategy without coordinating it with me because they need to understand whether I can facilitate it. Therefore, I know significantly more about Ukraine International Airlines’ plans than many managers at the airline. However, it is true that our relations with our base carrier are not as simple as they seem. There are points on which we agree and there are those on which our positions differ. As in any business, they want things to be cheaper, but I cannot give them that… Sometimes it is difficult to convince them that we should remain within constructive positions because, naturally, they want many tariffs to be changed for them because they generate a large volume of passenger traffic...

One of the tasks we have set ourselves for the period of 2017-2018 is transformation of the dead-end Terminal D into a transit terminal

Which capital investments are planned for 2017?

There is complete understanding of what we need to do in order to provide airlines with everything they need to meet their operational requirements. One of the tasks we have set ourselves for the period of 2017-2018 is transformation of the dead-end Terminal D into a transit terminal. Unfortunately, we are unable to make major changes to the structure of the terminal because we are currently forced to ‘cut our coat according to our cloth.’ However, we can add 1,400 meters of additional space on two levels for the convenience of transfer passengers. In addition, we plan to expand the Platform D. the airport’s financial plan for 2017 allocates about UAH 200 million for financing this work. The entire project will cost about UAH 800 million. We also plan to add three more boarding gates, reconstruct and expand the baggage sorting system in 2017, thereby increasing the speed and volume of baggage processing. We have already signed a contract for implementation of this project with the Dutch company Vanderlande. We still have to complete the construction of a multi-level parking lot. The necessary funds are already allocated in the financial plan.

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Has the financial plan for 2017 already been submitted for approval?

Adjustments to the financial plan for 2016 will be defended at a meeting of the Cabinet of Ministers this week. Unsurprisingly, it is the end of the year and we are still adjusting the financial plan for 2016. The reason for this is the plans for implementation of the project: adjustment of the multilevel parking project and the design of the expansion of the apron, the transit zone, etc. If the adjusted financial plan is approved, then we will be able to start the design work this year and by the time the financial plan for 2017 is approved, we will have projects that are ready and we will be able to perform the procedure for selection of the general contractor immediately.

The parking lot at Boryspil was supposed to be the pilot concession project, but other facilities were later selected. Do you think this project should be implemented as a PPP?

The idea of granting an operating concession for the facility was appropriate for the airport at the end of 2014, when we did not understand the revenue prospects and wanted to use someone else's money to complete it as soon as possible. However, we have developed into a successful enterprise faster than the implementation of the project to grant an operating concession for the facility. We spent two years trying to grant an operating concession for the facility, but it was never granted. Finally, we told the ministry at the end of 2015, "Return the facility to us, we will complete its construction, and we have the money." Funds for this were allocated in the financial plan for 2017. However, we will build a parking lot for only 1,000 people. For a concessionaire the facility is not profitable because all the remaining 2,036 parking spaces are surplus for Terminal D. We have an upper limit, the maximum for the Boryspil airport at Terminal D is 3,000 passengers per hour. These calculations correspond to the need to build parking spaces for an additional 1,000 vehicles. This means that 2,000 parking spaces will not be needed at this terminal and this parking lot will be uncomfortable for passengers when the airport begins developing at the other terminals. Nobody wants to "stomp" about 2 kilometers to another terminal with a suitcase in hand.

I see no prospects for future use of Terminal B. In the long term, Terminal F will relieve the load on Terminal D during peak periods

What will happen to the terminals B and F?

I see no prospects for future use of Terminal B, which stands on the way of development of the terminal complex and which will probably be replaced eventually by a more modern terminal. However, I think this will happen when passenger traffic through the Boryspil airport exceeds 20 million. In the long term, Terminal F will relieve the burden on Terminal D during peak periods. It does not matter whether it will be a network or low-cost airline. In any case, it is necessary to understand that it is impossible to offer exclusive rates to a low-cost airline just because it is called a "low-cost” airline. Otherwise, all the other airline companies will come to us and say, "How are they better than us?" Therefore, we are again bumping against the issue of tariff policy. It must be the same for all air carriers, of which we have about fifty today. If we can develop the right tariff policy that will be attractive to low-cost airline companies, they will come to the airport and they themselves will choose the terminals from which they want to fly. They are likely to say that they want to fly from Terminal D and not Terminal F. If they fly in off-peak periods, then what is the point of launching a new terminal when Terminal D operates at 30-35% capacity in off-peak periods?

The country has no active transport development strategy and there is no aviation component for this transport strategy. I believe that the absence of a strategy is the aviation industry’s disease

In summary, how would you assess the development of the aviation industry as of today?

The global aviation market is developing dynamically. The most important inhibiting factor in Ukraine is the low purchasing power of citizens, which continues to fall. However, there is a huge pent-up demand on the national aviation market. There are great prospects for development of the market as well as great risks because the pent-up demand may ultimately not be met by the infrastructure of airports. The country has no current transport development strategy, there is no aviation component for this transport strategy, and, accordingly, there is no airport development program. I believe that the absence of a strategy is the aviation industry’s disease.

An aviation committee was recently created for these purposes within the Ukrainian Chamber of Commerce, and I was asked to head the committee. The committee includes representatives of the Ukrainian aviation industry’s associations and leading enterprises, which have teamed up to make the air transport market more comprehensible and efficient.

In conclusion, what legacy are you leaving for the new director?

The main legacy is that the airport’s indicators at the end of 2014 and 2016 are radically different. Today, the Boryspil airport is a successful airport with clear prospects and one of the largest taxpayers in the country. At least, the new director will have to "uphold this standard" and, at most, reach new heights.

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