Ukraine’s Infrastructure Minister Volodymyr Omelyan is keen on welcoming back Irish low-cost carrier Ryanair with an ambitious plan to purge the aviation sector of corrupt, anti-competitive officials.
Ryanair had planned to launch operations but ultimately pulled the plug on the plan after what Omelyan described as “sabotage” by a network of post-Soviet oligarchs and vested interests.
The controversy kept €19.99 airfares from the very people who need them most. Ukraine’s GDP per capita is the second lowest in Europe, behind only Moldova, and its local aviation sector is dominated by Ukraine International Airlines (UIA), which is controlled by the billionaire oligarch Ihor Kolomoyskyi.
UIA is peerless in the country as the closest thing to a competitor – Aerosvit Airlines – folded up four years ago.
While Ryanair called the fallout as proof that Ukraine is not a “sufficiently mature or reliable business location,” Omelyan is moving forward with his bold plan, with Pavlo Riabikin – the boss of Kiev Boryspil International Airport, the gateway that vowed to welcome Ryanair with open arms, before suddenly and unilaterally rewriting the terms of its invitation – square in his sights.
“It was sabotaged and unfortunately it was done in a very rude way, because Mr. Riabikin … gave me personal commitments,” said Omelyan
“He said by all means the contract will be signed. Recalling the whole story, I can easily say right now that it was fake from the very beginning … I do not see positive changes in Airport Boryspil authorities’ behavior, and I don’t believe that there could be fruitful compromise reached by the same people from the Airport Boryspil side. So that means that they should be replaced. You can’t make good reform with bad people,” Omelyan boldly stated.
Ryanair’s entry had been much anticipated by most in. The low-cost carrier, which is considered to be Europe’s largest and most price-competitive, disclosed four routes to Kiev and seven to Lviv, connecting the country with Berlin, Budapest, Eindhoven, Krakow, London, Manchester, Munich, Stockholm and Wroclaw.
Its long-term plan included up to nine domestic bases and three million passengers per year – no trifling amount in a country where just 5% of the population travels by air, and where tourism accounts for less than 2% of GDP.
“Ryanair entering Ukraine was clear win-win strategy for all sides,” Omelyan said. “For the government, for the president, for society, for the economy.”
The only body that had something to lose from liberalization was UIA, the post-Soviet flag-carrier that controls 69% of capacity at Boryspil Airport. On domestic flights in the vast country, UIA’s share rose to 84% thanks to the negligible presence of just two rivals (yet another of which, Dniproavia, is controlled by Kolomoyskyi).
As well as eroding its market dominance and lessening airfares, Ryanair would have weakened UIA’s hub model by opening up point-to-point links from secondary cities like Lviv.
Publicly, the flag-carrier’s response was litigation. After lowering ticket prices when Ryanair entered the picture – itself a sign that average fares had been artificially high – UIA sued the Ministry to take back what it considered to be lost revenue. Two more lawsuits demanded that both the Ministry and Lviv Airport stop communications with Ryanair.
Privately, UIA also has launched an intense lobbying crusade aimed at its partners in the aviation sector.
While hub airports and home-base carriers often work together closely, Omelyan observed something “artificial” in the identical stances adopted by Boryspil Airport and its main customer.
“There is huge pressure of Ukraine International over Airport Boryspil. It’s obvious. It’s clear,” he says. “Airport Boryspil forgets about the country, forgets about passengers. It’s only focused on the interests of Ukraine International … and the country loses a lot of money.”
The Minister considers Riabikin’s choice to leak confidential details about the talks after they collapsed, as misrepresenting some aspects (such as Ryanair’s alleged insistence on a $7.50 passenger charge; in fact, a higher figure was agreed) and exaggerating others.
“Boryspil claims that there were extraordinary or extravagant requirements from Ryanair’s side. It’s also fake,” said Omelyan. “It’s another attempt to explain why they didn’t close the deal, why they ruined all negotiations. [The true motive was] to keep Ukraine International ruling airspace in Ukraine.
“Everything could have been managed in the right way … There was a basic agreement, and there was wish-list of Ryanair. You simply sit at the table and you negotiate. There is no problem with tough or easy negotiations.”
As he gathers political support for new management at Boryspil Airport – encouraged by his recent involvement in railway and seaport parastatals – Omelyan is pushing hard with efforts to increase airline competition. EasyJet and Eurowings, two other sizable low-cost carriers, have been contacted about possible route launches. Unnamed foreign investors are communicating with the government about setting up a domestic carrier. And legislators are drafting adjustments to lift 20% VAT on domestic aviation-related services – a burden that Ukraine’s other airlines frequently blame for their lack of interest in domestic flying.
Asked if these measures amount to ‘Plan B’, however, the Minister answered with a laugh.
“If you reserve some power for Plan B, it means that you understand that you will lose Plan A. And I prefer to have only one plan,” he insists. “I want to have top companies of the world in Ukraine. Ryanair is top, number one in Europe. Why should I go for somebody else?”
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