2019/07/02 – 19:01 •
Article by: Olena Makarenko
SkyUp is a small personal Ukrainian low-cost airline. Its first flights took off in 2018, the yr after the EU visa-free regime with Ukraine was introduced. While it appeared that circumstances have been favorable for low-cost airlines, their route into the Ukrainian market has turned out to be stonier than anticipated.
The rationale for this revolves around the de-facto monopoly on air journey held by Ukrainian International Airlines (UIA) whose co-owner is oligarch Ihor Kolomoyskyi. Just lately, a court scandalously disadvantaged SkyUp of its license. State officials spoke out in help of the low coster. Numerous specialists noticed Kolomoyskyi’s trace in the scandal. To date there isn’t any proof of the UIA being involved. Nevertheless, the incident once again revealed the issue of monopoly within the Ukrainian market.
Throughout its yr of operation, SkyUp has had its ups and downs. 14 June of this yr was undoubtedly the latter. On that day, the Baryshivka district court of the Kyiv Oblast suspended SkyUp’s license for passenger transportation. A plaintiff complained of flights being delayed and the company not honoring its commitments in the direction of its shoppers. Later, the journalists revealed that the plaintiff was not actual: the ladies who allegedly appealed to the court stated she had never been SkyUp’s shopper and did not attraction to the court.
The company filed an attraction towards the court’s determination. Nevertheless, the absurd occasions did not stop there. Oleksandr Alba, co-owner of SkyUp, described that the lawyer of the pretend plaintiff attended the Kyiv Court of Attraction listening to.
“About the plaintiff who did not file a lawsuit and did not fly. This lawyer asked to disqualify the judge, in order to play for time. Why? This is an interesting question. Whose interests does this lawyer actually protect and where did he receive the plaintiff’s signature? These questions are no less interesting. However, you do not need to be a lawyer to understand: it’s a fake.”
To date, the corporate operates as regular.
The government’s position
State officials have been supportive of the new airline since its launch. On this event they’ve supported it too, sharing society’s sense of shock.
The Prime Minister Volodymyr Groysman referred to as on the Minister of Infrastructure Volodymyr Omelian to cope with the state of affairs when it comes to the regulation and make every part potential for the company to have the opportunity to perform in accordance to the regulation. He also utilized to the Ministry of Justice to prepare corresponding letters relating to comparable incidents to all of the bodies of the judiciary which are liable for it and in addition to President Volodymyr Zelenskyy.
Omelian, in his flip, referred to as the decision of the Baryshivka district court “more than strange” which was “outside its jurisdiction.” The Minister also talked about that his staff developed a mechanism which might permit airlines to operate with out stress for the passengers and the airlines itself.
“What is going on is a clear attempt to intervene against mechanisms of free competition created by us. This is for sure not a competitive method of competition. It will again lead to an aviation monopoly in the sky,” stated Omelian.
On the question of the 5 Kanal journalist on whether the UIA and Kolomoyskyi have been involved, the Minister answered not directly.
“At this stage, I do not have any particular evidence. However, I think that such evidence should appear in law enforcement agencies because even the mini-investigation we conducted by ourselves shows that it was for sure a plot by particular people.”
Why is everybody blaming the UIA?
Two months before the incident. SkyUp began promoting tickets from Kyiv and Kharkiv to Paris and Nice. Before, it was only the UIA that flew from Ukraine to Paris. In March, Ukraine and France liberalized the airline route between the 2 capitals and elevated the number of flights. This resulted in SkyUp turning into a competitor to UIA on the route.
Other developments on the Ukrainian market created other problems and rivals for the UIA, particularly, all the low-cost carriers.
For example, in 2017 the UIA contributed to the problem of Ryanair getting into the Ukrainian market. Within the spring of 2017, Ryanair introduced it was coming to Ukraine, solely to declare in July of the same yr that it was leaving it earlier than even starting to operate.
Among the reasons have been disagreements on the circumstances with Ukraine’s most important airport Boryspil, Ryanair’s fame of being a troublesome negotiator, and the UIA which was believed to be a third celebration in the state of affairs. Boryspil and the UIA have been suspected of collusion.
“We discovered that the state-owned Boryspil Airport gave an 80% discount to the UIA. This amount raises a logical question: what should the profitability of the airport be for it to be able to offer such a discount?” MP Yuriy Derevianko requested on the time.
Also, Serhiy Hyzhnyak, an professional in the aviation business didn’t predict a vibrant future for UIA.
“The main opponent to Ryanair, which is now entering the Ukrainian market, is the UIA. They realize that if the low-cost airlines come to Kyiv under current conditions, probably in 3 years the [UIA] airline will go bankrupt,” stated the skilled in 2017.
Finally, Ryanair did enter the market, and not alone.
“According to analysts’ prognosis, 2018 had to become a year of low-costers for Ukraine. As we saw, it did happen,” says the report Characteristics and Analysis of Improvement of Low-Value Airlines in Ukraine.
Also in accordance to the survey, during 2018 a total of 21 Ukrainian corporations transported passengers. Of those, 5 are leaders, together with the UIA in fact. Regular worldwide flights have been operated by 10 local airlines to 46 nations of the world. In the course of the yr Ukrainian airways opened 17 new routes. Also, 5 worldwide corporations started to function often in Ukraine. Totally, in 2018, 38 worldwide airlines have been flying to Ukraine from 37 nations of the world.
In accordance to liga.internet, in 2018 the UIA transported 8 million individuals – twice as many as in 2014. Two-thirds of all passengers using Boryspil Airport arrived by way of UIA flights. On the similar time, the losses of the airlines amounted to greater than $100mn.
A minimum of this is what the corporate declared. However truly, stating losses may be a technique to avoid paying taxes.
Previously, Euromaidan Press wrote that demonstrating that it has no cash, the corporate ceased paying the state-owned Ukraerorukh that gives navigation service and is liable for the work of dispatchers.
“In court, UIA claimed that the tariffs requested by the state were too high and unfair, although all other companies pay the same amount. What is more, UIA requested compensation from the state for the previous years (2016-2017) when it paid “inflated” tariffs. UIA already owes the state 500 million UAH, however the first court selections lean in the direction of the corporate’s curiosity and oblige the state to provide navigation service additional. Additionally, UIA does not pay the aviation payment that quantities to $2 per passenger.
The elephant in the room
Plainly whether or not the federal government likes it or not, it can have to cope with the UIA troubles ultimately. Yuriy Myroshnykov, the UIA president within the interview to liga.internet already spoke about attainable government help.
Masking the difficulty, the media was expecting that to a big extent the case would depend upon who turned president. Its interlocutors pointed at the important instruments of how the government can affect the activities of an airline:
- By means of the State Aviation Service which decides the questions on the access to strains, the rights of worldwide corporations for the night time parking, licenses and so forth;
- Via taxes (for instance, for gasoline);
- Via Ukraerorukh, the company chargeable for navigation;
- Via the Antimonopoly Committee.
Additionally, the management over state airports allows unequal circumstances to be created for various players and necessary legislative selections are lobbied in the Parliament and the Ministry of Infrastructure.
“We say the UIA, but think Kolomoyskyi. We can suggest that a new president loyal to the business of the oligarch a priori will allow the airlines to have additional preferences in may UIA’s problems related to the high cost of the fuel and high stakes on air navigation,” the media quoted Viktor Logvinenko, the ex-head of the Aerosvit and the UIA. Nevertheless, on this case, the other players may demand the identical circumstances.
The media names two attainable situations for the federal government relating to the UIA:
- to depart it as it’s which may lead the company in the direction of chapter and potential grounding;
- to bail it out, which could value billions.
Liga.internet’s interlocutors agree that no one is focused on a UIA bankruptcy. According to Logvinenko, a minimum of $150-$175 million are needed to exchange at the very least part of the UIA’s volumes in this case.
The company’s management in its flip can comply with one among two potential methods – hold competing out there which is turning into increasingly competitive or to depart it. The second story already happened in Ukraine in 2013, that point the corporate Aerosvit went bankrupt and left the market. Of notice is the id of one among its shareholders – Kolomoyskyi.
Edited by: Michael Garrood
Tags: airways, Kolomoiskyi, SkyUp, travel, UIA