Sorry, Europe, Kolomoisky gets a monopoly over Ukrainian skies

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Yuri Tkachev for Timer

The Ministry of Transport of Ukraine has developed a new set of regulations for airlines obtaining the rights to fly over Ukraine. The document was registered at the Ministry of Justice on November 18.

The essence of the new rules is the following. First, 50% of airlines conducting international flights, must be owned by citizens of Ukraine. Secondly, in order to obtain the right to operate international flights, the airline must first conduct domestic flights within Ukraine for a year.

But that’s not it. Besides these conditions, an airline must first win a tender conducted by the Ministry of Transport. It will take into account such criteria as a number of flights performed during the last three years, the fleet size and the amount of taxes paid.

The Ministry of Transport argued that the new rules came from the best of intentions: to protect the interests of domestic airlines and develop internal air routes.

Technically the officials seem to be telling the truth – though not all. It’s really about a protection of domestic business, but more precisely – very specific businessmen.

For example, in 2013, the share of domestic airlines in Ukraine accounted for 63.5%. Of that 49,8% belonged to “International Airlines of Ukraine,” owned by the oligarch Igor Kolomoisky. Another 5,6% belonged to the airline “Roza Vetrov”, which is also associated with Kolomoisky. He is also the owner of the airline “Dnepravia”.

In other words, out of 63.5 percent of the market owned by domestic airlines, at least 55,4% is owned by Kolomoisky. And this therefore means that the protection of the interests of ‘national carriers’ is 80% protection of Kolomoisky’s interest.

In addition, since 2014, the Ministry of Transport is headed by Denis Antonyuk, who previously worked for 11 years … at “International Airlines of Ukraine” owned by Igor Kolomoisky. What an amazing coincidence!

In terms of development of internal routes, the idea is the following: if a company wants to conduct international air travel to and from Ukraine, it should also take on “social commitments” and maintain several internal flights, which are not very profitable.

The idea seems sound, but not in combination with the paragraph on “support for domestic carriers.” Indeed, large foreign players, competing for the right to receive a share of international air market in Ukraine, in theory could maintain a number of unprofitable domestic flights. But (surprise!) – we are developing our own carriers, and foreigners are not welcome here. In other words, the offer to assume “social responsibilities” is presented to those companies, which even under more favorable conditions could scramble only about 8% of the airline market with great difficulty.

And even if some airlines decide to play by the new rules, after a year of conducting unprofitable domestic flights they will have to compete for a tender for international routes with the companies of Mr. Kolomoisky. The competition takes into account the scale parameters – the bigger the company the more chances to win. The quality of services is not taken into account, and it will be conducted by a former employee of Kolomoisky – the new head of the Ministry of Transport.

If usually a minus and a minus makes a plus, in this case we have the opposite – a plus and a plus gives you a minus. Each specific item of the new rules taken separately, would possibly help achieve the objectives. But the result is a chase of two hares. And both will be caught by Kolomoisky.

The new rules have caused concern among foreign operators who work in Ukraine. For example, a low cost operator WizzAir does not exclude that it may have to leave the Ukrainian skies. However, the Ministry of Transport assured: the current carriers are not in danger, the new regulations only apply to new routes. Existing routes can be operated without any problems.

But a fruition of the expected “bonuses” from the accession of Ukraine into “One Sky of Europe”  will become almost impossible thanks to the new rules. The signing of the new rules was scheduled for June 5, then postponed to June 27, and then postponed indefinitely. It was expected that with the new regulations, European airlines will receive free access to the Ukrainian market, reducing the prices of air travel. It is no longer the case. So much for European integration.

Translated by Kristina Rus

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