The second part of an exclusive interview with the head of the Board of Directors of Kiev International Airport Denis Kostrzhevskiy

-  At the end of May 2019 “Kiev” International Airport opened the terminal “A” after its reconstruction, expanding it by 9.5 thousand square meters - up to 23.7 thousand square meters. How did this affect the performance indicators of the airport?
- Indeed, at the end of May we completed the reconstruction of the additional building to the terminal “A” increasing the terminal’s capacity almost twice. Thus, we have doubled the number of check-in counters, passport control booths and security checkpoints. The number of passengers that the airport can serve has doubled. Accordingly, the costs of maintaining this terminal have also increased. Now we need twice as many people to serve it. In addition, we provide more heat and more lighting.
Moreover, passengers have three times more choice where they can have a meal before flight, the number of stores has increased and the space in the waiting rooms has increased significantly.
Thus, answering the question of how the reconstruction affected the operation of the airport we can say that the level of comfort for passengers has grown significantly.

- Do you expect the entry of the new airlines?
- We are in constant dialogue with the airlines. Both with those who work with us and those who don’t work in Ukraine. The airport “Kiev” constantly takes part in international exhibitions, symposia, conferences attended by airlines. Everyone knows about us, we are in correspondence and in dialogue with everyone. Each of the airlines has a list of its wishes and requirements under which they will come to the airport “Kiev” and we are developing our plans for improving the airport based on these dialogues and opinions of the airlines.
All airlines set only two requirements: the first is to improve economic components, the second is to improve technical specifications.

- Do you have plans for building a business center or a hotel?
- In order to build something else, we need to fill in at least what we have now. Any investment implies economic feasibility. These are only very large and rich businessmen whom I mentioned earlier (meaning the state - IF) can afford to invest inefficiently. Therefore, before starting to build something we will conduct a detailed in-depth economic analysis and evaluate the prospects. As of today, I don’t see the prospects of building any facilities in the territory adjacent to the territory of the airport “Kiev”.

- What is the share of business aviation at the airport?
- In the primary income of the airport “Kiev” income from business aviation is about 10%. There is a segment, the business aviation, which operates in the Kiev aviation hub. Probably, 80% of business aviation that flies at the Kiev aviation hub flies from the airport “Kiev”.
There are two things that should be noted: the first is that there is practically no business aviation in Ukraine. We talk about business aviation tolerantly - there are business jets used by rich businessmen and politicians. Politicians don’t use it now, because ... don’t use ... Businessmen don’t use because now it has become unfashionable. Thus, there is practically no business aviation in Ukraine. We must be clearly aware of it. Business seems to be, but business aviation seems not to be.
The second lies in the fact that business aviation is not a super profitable segment for any airport. That is why when there is a large number of commercial flights, a large load of terminals, a large load on the runway; business aviation becomes more of a hindrance. Because it is one thing to launch an aircraft with two hundred passengers and another – to launch a small aircraft with three passengers which takes time on the runway and on taxiways. Moreover, while regular aircraft fly according to the schedule, business jets don’t. Accordingly, business aviation is not such a factor that airports are chasing.
Due to our flexibility, nevertheless, we meet the interests of business aviation as well. Our runway is not so busy and we don’t have as many flights as the neighboring airport. Accordingly, we can afford a more flexible approach to the wishes of business aviation customers. Well, our big plus is that we have a business terminal. We created there excellent, comfortable conditions for both passengers and crews. The matter is that business aviation crews are quite demanding to the conditions. In the business terminal there are lounges for crews, a dining room and there are even two hotel rooms provided for the crews to have the opportunity to relax and spend the night, if necessary.

- To which extent is the airport profitable in general?
- I prefer to operate in other categories. The airport is a major employer; it provides about ten thousand workplaces. What is the profit the airport brings to shareholders? I can answer this question very simply. As a shareholder, I earned at the airport less than any yard keeper who works here. Because for 10 years at the airport the shareholders haven’t even returned the originally invested funds. I haven’t returned my funds as well.
The airport has large credit indebtedness to banks. 10 years ago loans were taken for the construction of terminals and they are still not repaid, because the funds received from the airport activity are not enough to repay the loans. We pay all interest. We repay loans. Half of the amounts that were taken have already been paid off. But the huge amount denominated in foreign currency Dollars and Euros, has not yet been repaid. Accordingly, until the loans are repaid, shareholders can’t make a profit and dividends. I’m not even talking about profit; shareholders can’t even return their funds invested there.
The credit conditions were the following: the shareholder invests 30% of his own funds, 70% of the funds are provided by the bank within a loan. After that, you need to start working, return the bank loan, and then return yours (funds - IF). So, we haven’t yet returned a bank loan. It means that we haven’t even earned that money to say that the airport is profitable. Yes, it brings money. But all this money goes to pay off loans and invest in new projects: reconstruction of the terminal, construction of aprons, reconstruction of the runway.

- Regarding the transport infrastructure connecting the airport with the city. Are you planning to launch new modes of transport to the airport?
- Organization of traffic flows is another component but it depends on the Kiev city authorities.
Eight years ago we completed construction of the first terminal, preparing for “Euro-2012”. At the same time, the obligations of the city authorities to “Euro-2012” included construction of a road connecting Medovaya Street with Krasnozvezdnyi Avenue (now Valeriy Lobanovsky Ave.) to provide high-speed access to the airport facilities and construction of interchanges at the entrances to the airport “Kiev”. Then there wasn’t enough time. “Euro-2012” passed and everything stopped.
Currently, a huge need for Kiev is the completion of the road connecting Medovaya St. and Valery Lobanovsky Ave. Firstly, more than 60% of the funds have already been invested and the road is almost built. And now this money is simply disappearing. If construction is not completed, due to precipitation, wind and temperature changes everything that is built will be destroyed. Therefore, the primary task of the city authorities is to complete the construction of this road. This will provide an opportunity not only for passengers to come to the airport, it will allow to unload Vozdukhoflotsky Avenue, which is unpassable today at peak times.
Well, in the long run or maybe in short terms our plans concern the extension of the metro line to the airport “Kiev” and to the circular road. It is also included in the plans of the “Metropoliten” and certainly in the projects. I don’t know on which stage this project is now but the construction of the road and construction of the metro line would be a very significant contribution of the city authorities to the development of both the airport “Kiev” and engineering and transport infrastructure of the city in this area.
Regarding organization of bus routes. This is the competence of the city authorities and probably it can be solved within a month. There are plans to organize some charter carriers who want to transfer passengers to the airport. It is also planned to organize parking lots for intercity buses. We are working over it and we will do all we can in our competence.

- What passenger traffic do you plan to have at the end of 2019?
- The plans of airlines regarding regular flights are quite conservative and long-term. Currently, we already know the carriers’ plans for spring-summer navigation up to October 2020. Therefore, due to our forecasts by the end of the year we will be able to estimate exactly how many passengers will fly. I won’t say that we have a catastrophic decline in growth rates. Compared to the previous year when we transported nearly 2.8 million, this year we expect to service 2.6 million passengers. That means that the decrease in passenger traffic will be about 8%. I won’t even call it a fall, it’s a correction. In 2018 the airport “Kiev” showed explosive growth by 52% compared to 2017. This year there will be a drop in passenger traffic. This is not a catastrophic fall. Next year we expect passenger growth.

- In your opinion, does Kiev Oblast need another airport? For example, in Gostomel.
- In order to make a full-fledged airport out of the airport “Gostomel”, due to my estimates it is necessary to invest about EUR500 million, of which EUR200 million should be invested in the airdrome in order to meet technological requirements that exist now. About EUR100 million should be invested on terminal facilities and about EUR200 million should be invested in organization of access roads to the airport.
But in order to invest EUR500 million you need to understand how to refund it. The investor investing this money should understand how these funds will be refunded and bring more profit. The only way to refund this money is to provide the necessary passenger flow. From my point of view, the passenger flow that currently exists at the Kiev aviation hub mainly at the airports “Borispol” and “Kiev” is barely enough to ensure functioning of these two airports. Where can I get a passenger providing a return of funds invested at the airport “Gostomel”? 
If a decision is taken to build “Gostomel”, then you probably need to close one of the airports. Then those passengers who fly will probably be transferred to the airport “Gostomel”. Perhaps they won’t go there; perhaps they will go to the remaining airport.
This is a question requiring detailed calculations and most importantly, a predictable and long-term state policy in the aviation industry. In order to develop any airport you need to attract an investor. And an investor, especially a large one, investing so much money in infrastructure and low-profitable business, needs to have a guarantee for a long period of correct and fair rules of the game. An investor who decides to invest a lot of money in the Ukrainian economy must be provided, for sure, with stable and understandable business rules.
Now, looking at the situation which is present in the aviation industry, looking at how government decisions are made towards the airport, which is the property of the state, not a single investor will invest his money. At the legislative level a decision should be made that the “rules of the game” remain unchanged. There is no need to regulate the prices on airport fees, the market will regulate them.
Therefore, until fair economically-guaranteed rules of business conduction in the aviation sector are spelled out, there is no reason to say that the airport “Gostomel” will develop.

- What are your forecasts regarding development of the aviation industry in Ukraine in the mid-term?
- Let’s start then with global trends. Aviation world-wide is now developing at a very rapid pace. I recently attended the Global Airport Development conference in Dublin, Ireland. All major investors, airports and airlines gather there and discuss the trends toward which global aviation is heading. The average forecasts mentioned there are: 5-8% growth per year, which has been confirmed for several years.
In Ukraine the market is underestimated and underdeveloped due to low purchasing power. And accordingly, Ukraine has greater potential for growth. We have slowed down for a long time and now we have to catch up with the world figures for the number of flying citizens. All this is closely related to state policy. If the economic and political situation in the country allows us to say that business and the economy are developing steadily, population incomes are growing, respectively, aviation growth will be large. If all this continues in the form of stagnation and political instability, of course, aviation will develop less.