13 / 07 / 2018
Media about IEV
Denys Kostrzhevskyi: "We Showed that It’s Possible to Work with Government Effectively, as a Follow– on we Received a Conflict"

A conflict of NABU with the "Kyiv" International Airport attained a boiling point. Yesterday the company told us that in the day of the crash of the plane of the “BRAVO” Air Company, officers of the bureau came with a rummage that lasted for 19 hours. As a result, the airport appeared to be blocked and could not prevent rolling of plane out of the line. The NABU shrugged off the accusations and called them an effort to shift responsibilities. An exclusive interview with Denys Kostrzhevskyi, the head of the board of management of the airport will tell you about essence of the reciprocal claims and consequences of the conflict. 

Since 2011 the "Kyiv" International Airport is controlled by two companies – cognominal communal enterprise and the “Master– Avia” Ltd. In practice, it is in private influence. Who controls what?

The "Kyiv" International Airport was never transferred to be controlled by private companies. When Ukraine gained the right to realize EURO 2012, UEFA announced the condition – there must be two airports in Kyiv, so that the city would have an ability to accommodate all teams and fans. It was in 2010, the “Kyiv” Airport was in a very dire state. Then, the city council of Kyiv decided to find an investor and announced a competition for the right to take lease of property of the complex. The "Master-Avia" Ltd. became the winner of the competition. 

(Airport is a complex of constructions, which includes airfield, airways terminal, other buildings, that serve to receive and to send aircraft, maintenance of air transporting and having necessary equipment for these goals.
Airfield is a part of the ground or the water area with buildings, constructions, equipment which is placed on it, which serves for flying– off, alighting, managing and stationing of airborne vehicles – Editorial Note.)

The airfield is an air– strip, taxi strips, lighting facilities, platforms – it was and remains in control of the communal company. Buildings and constructions, which are old terminal complexes, fuel and lubricant depot, hotel, garage – were transferred to the investor in a rent for 49 years under the condition of accomplishing all investment obligations.

Денис Костржевський: Ми показали, що з державою можна ефективно працювати, а натомість отримали конфлікт

Which investment obligations exactly?
Cancellation or restructuration of creditor indebtedness of the “Kyiv” IA CE over the bank. At the moment of realization of the competition the indebtedness met a sum of 22 million hryvnias. Building of modern international terminal, with a carrying capacity of more than 500 passengers per hour. Recruitment of the staff and saving core business of the company. 


On this competition the “Master-Avia” offered a 6% rent of the net worth value, at the same time the other candidate offered a 15% rent. How it happened that the city missed out on money?
The results of the competition were affirmed by the city council of Kyiv. With the same decision the rent fee of 6% of net worth value was settled. As of today it is about 7 million hryvnias a year. I was not a member of the competition committee, so it is hard for me to comment on other requests. I can say that the documents of  the "Master-Avia" fully suited the requirements. There was an agreement of the Antitrust Panel for conclusion of a lease agreement and agreement of staff. Land parcel, which adjoined the territory of the airport, already belonged to the "Master-Avia" at that time. New terminals were built on this land by the "Master-Avia". We do not know where others were planning to built them. 
Beneficiary of the company, which offered 15%, was a Russian oligarch from the Russian Federation president’s entourage. Probably, it played some role in declining their request. Could the city earn more? Maybe. And it could receive a war not on Donbass, but in the very heart of the capital with the airfield prepared for military transportation aircraft. By the way, this company appealed against the decision later. Both courts supported the decision of the city council of Kyiv. Already after signing of rent agreement we turned to Baker McKenzie company from the Big Four because the bank insisted on it. The auditors concluded that the property of the airport was transferred legally. As for me, these facts are more than enough to talk about transparency of the competition. 

Was it not against the rules that  the "Master-Avia" was created right before the competition?
This question is frequently asked. The "Master-Avia" was founded on April 20, 2010, a month before announcing the competition. The law does not forbid to register a company even in half an hour before the competition. There are no such restrictions. The result is the main point and everyone sees it.

Денис Костржевський: Ми показали, що з державою можна ефективно працювати, а натомість отримали конфлікт
  
Isn’t 7 million a year a too small sum for the property of the international airport?
It is a percentage of net worth not of the whole property, but just that, what was given for renting. This sum absolutely does not fulfill the contribution, which these property imports in the income of the "Master-Avia". It simply does not exist. We received crumbling buildings, not intended for ministration the passengers by sanitary, fire, technological requirements. 
The terminal complex, built in the thirties, was absolutely inadaptable for these goals. Imagine yourself a fuel and lubricant depot with storage facilities of 13 thousand cubic meters, among which only several are suitable for maintaining kerosene and diesel. There was no water in fire hydrant at all. 
When "Wizzair" just entered the "Kyiv" International Airport, it refused to service the passengers in old terminals. An army tent was settled right on the apron and during a year, even in winter, passengers were serviced there. It lasted until we finished the building of the International Terminal A.
In addition to a dire state of the property, we had huge creditor indebtedness and unpaid wages.  

Which investment obligations according to the contract were fulfilled?
All of them, some were even overfulfilled. For 11 months before Euro 2012 we started the construction of the International Terminal A in urgent order, which nowadays is called the "Kyiv" Airport. We have built with the money that took on credit, and we are still paying this credit. Instead of 500 passengers per hour, as spelled out  in the contract, it serves 750 passengers, and it is only for departure. Investments in the construction of an international terminal are $ 37 million. In 2013, we  built a terminal for domestic flights, in 2014 –  a terminal for business flights. All these terminals were built on the land plot which belongs to the "Master-Avia" and are the ownership of the company.
Big money was invested in the purchase of the equipment –  10 modern buses, tugs, tractors, ladders, aircraft de– icing machines, inspection equipment. Another $ 10 million were spent on the construction of new aprons. Previously, there were only 4 parking spaces for modern aircraft. Now there are 13 of them, the total area of the aprons is about 50 thousand square meters.

(The apron is part of the aerodrome's airfield, designed for accommodating of the aircrafts for landing and disembarking of the passengers, loading and unloading of the luggage, mail and load, and other types of services too.–  Editorial Note.)

According to the "Master-Avia" contract, it is also obliged to keep the rented objects in proper condition. They are plannedly repaired, none of them is taken out of  the exploitation. Employees of  the "Kyiv" IA CE are employed and work either in combination or at their main place of the work. The credit debts of the communal enterprise are fully repaid.

How do companies distribute profit?
The "Master-Avia" administers incoming payments. Airlines conclude a contract with the "Master-Avia" and pay for take– off, passenger and security fees. The security fee and the passenger or terminal fee belong to the "Master-Avia". The fee for takeoff and landing is transferred to the communal enterprise in full. 
This fee is calculated based on amortization and operating costs for the maintenance of the airstrip.
In the summer it is watering, mowing grass at the aerodrome, in the winter –  cleaning snow, lighting of the airfield, routine repair and all procedures provided by the regulations. This is the area of the responsibility of the "Kyiv" IA CE.

Денис Костржевський: Ми показали, що з державою можна ефективно працювати, а натомість отримали конфлікт

What is the passenger flow and which airlines provide it now?
In 2010, before signing the lease contract, the airport served only 29 thousand passengers. In 2011, there were already 470 thousand passengers and the number was constantly increasing. 
Passenger traffic was undermined by the war and the annexation of the Crimea. We reached the pre-war level only last year –  1.8 million passengers per year –  i.e. 60 times more.
In addition to the "Wizzair", about 20 new airlines have entered the airport for these 7 years, including the 7 lowcosters –  the Spanish "Vueling", the Turkish "Pegasus Airlines", the Italian "Ernest Airlines", the Azerbaijani "ButaAirways", the Ukrainian "SkyUp", "flydubai" (UAE). We constantly negotiate with new companies and apply transparent models of pricing to everyone using the principle that the more you fly, the less you pay.

Are both companies that serve the airport profitable?
Prior to working with the "Master-Avia", the сommunal enterprise had been chronically unprofitable for many years. In 2011, the "Kyiv" IA CE stopped working in the negative, and in 2012 it became profitable. The communal enterprise has increased salaries several times, pays for the land as much as all the airports in Ukraine do not pay, because the land tax rate in the capital is the highest. In addition, it pays taxes, including profit and dividends. The company is now in the top three of the largest taxpayers in Kyiv. For these years, the "Kyiv" IA CE has paid about $ 300 million to the city.
The reverse side of the coin is the "Master– Avia". Because of the high credit load, it still works at a loss.
The company took 50 million dollars on credit at 12.5% per annum from 2011 to 2013. This is only percents of $ 6 million per year. Everyone understands what happened with the currency loan in 2014. We took 400 million hryvnias at the rate of 8, and return 1 billion and 250 million hryvnias at the rate of 25 UAH.
Now we have to pay off $ 28 million left from these 50 million. When we pay, we can talk about profits. This may take other 2-3 years with stable operation. Although originally we planned to recoup investments in 5 years.

Yesterday, the airport site published a statement about the search by the NABU staff. How did it go?
The whole procedure seemed really confusing. People armed with machine guns broke in. I was at the business– terminal at the moment, holding a meeting with direction managers. We were held in this room for about 20 hours. The detectives did not react to my proposal of revealing the necessary documents. Since there was not a single document in the room, detectives inquired about our personal phones. Without any sanctions for personal search or withdrawal, by the way. The phones were connected to equipment unknown to me which was doing something to these phones for all night long. Owners of the phones, which hacking was failed, were forced to reveal their personal correspondence and photos. In occasion of what they saw, snide comments were given. In general, they created really uncomfortable and humiliating atmosphere.
The search was held in all the administrative premises of the "Master-Avia" and the communal enterprise. All the head chiefs, including general directors and department chiefs, became fully isolated from the staff. In total, there were 88 offices blocked (with 133 people in) inside of three terminals and the administrative building.  I warned the detectives that their actions held a potential risk and a threat to the health and lives of people, because the airport was an object of increased danger. All the actions of detectives were fixed on the video, because they were continuously videotaping.

Денис Костржевський: Ми показали, що з державою можна ефективно працювати, а натомість отримали конфлікт

Was it just the day of an accident with a plane which turned back from Antalya?
Yes, it happened at 8:40 pm. The plane lost control, flew beyond the runway and drove on the fuselage 200 meters on the ground. There were 4 tons of kerosene on board, which began to leak. Luckily, the plane was built in an old way of construction, which means the engines were not located under the wings, like modern ones, but on the tail feathers, high above the ground. The engines did not hit the ground, so the ignition did not happen.

Was the search paused at the moment?
No. We had to convince the detectives for a few minutes at least to release the heads of the units coordinating the rescue services work. Two of them were allowed to leave the premises.

Was it possible to prevent the accident under regular conditions?
Yes, if the search had not taken place according to the force scenario. As a result, the documents were seized that we had provided many times to all controlling and law enforcement agencies in an usual working mode. There was no need to wave guns and to keep people locked up for 20 hours. Such actions of law enforcement officers almost led to a great tragedy. For all 94 years of existence of the airport, such events have never occurred.
In the conditions of carrying out searches and blocking people in the offices, depriving communication facilities, the technical and technological processes at the airport did not stop –  the passengers were registered, loaded on board, the planes took off. Still, throughout the day, the weather situation sharply deteriorated and, in normal mode, the responsible service managers report on the worsening of the weather conditions to the airport's general director who decides to close or continue the airport's operation. Such a decision was not adopted, because the information on weather conditions was not reported to the top management, and the lower link could not decide on the closure of the aerodrome.

What was the basis on which the search was carried out?
The detectives read out the ruling of the Solomianskyi District Court. Judging by the materials that were provided to us, the decision was made on the basis of a check of the audit service. It drafted an act on possible violations that could have occurred in the work of the "Master-Avia" and the communal enterprise.

When did this check take place?
At the end of 2017, this was a planned audit of the State Audit Service. The auditors spent about 2 months at the enterprise. Despite the fact that they had permission to verify the activities of companies for the period of 2014-2017, they checked from the very beginning –  from 2011. Although these checks had been already conducted in the past and had not revealed anything. Let me reinstate again that the act stated not the matter of finding violations, but possible violations.

For example, what kind of complaints were named to you?
There were 4 questions that bothered the auditors. The first one was the rental rate of 6% instead of 15%. The second one was the same fuel depot. The act says that the enterprise could receive income if it did not lease it.  What prevented it from earning during those 30 years, during which the warehouse was brought to an emergency condition? Now the warehouse is reconstructed, meets all fire and sanitary standards, brings profit to the municipal enterprise and the city. I believe that this claim is from the field of assumption.
The third one is connected with people who work at two enterprises in combination. I will give an example. Both the "Master-Avia" and the communal enterprise have their own aprons (parking places for aircraft –  Editorial Note). In winter they need to be cleaned from snow. Why keep two drivers if one manages it? He cleans the apron of one company during just a part of the working time, and teh second one –  during the other part. Accordingly, he receives a salary in two companies. This is absolutely legal and transparent. We have payroll sheets, timeboards that confirm this. The auditors thought that these people work only in the "Master-Avia" and receive money in the communal ennterprise. But if so, who in this case cleans the aprons and a runway, which, I recall, are on the balance of the communal ennterprise? Why do we need 70 units of equipment on the balance sheet of the "Kyiv" International Airport then, who operates them?

The fourth item concerns accounts payable of 22 million hryvnias, of which I have already spoken. This was the debt of the "Kyiv" IA CE to the bank during the contest. Six months passed from the moment of its announcement until the signing of the lease. The "Wizzair" flights have already started, the enterprise started receiving money and paying the debt, reducing it to 9 million hryvnias. This amount was paid by the "Master-Avia" as an investor at its own expense. What do we have in fact? The debt is repaid in full, but in the contract it is written "to repay or restructure the debt in the amount of 22 million hryvnias". To get out of this legal conflict, the "Master-Avia", on the recommendation of the audit and control department, signed an agreement on the restructuring of these 13 million hryvnias of difference, and we are still paying this sum. In total, we repaid the debt, but we also pay extra from above, although we should not have done this. Where is the damage for the city here?

The auditors have counted the damage of 119 million hryvnias. Do you disagree with this sum?
Each of our arguments is confirmed by documents that are fully provided to law enforcement.  Under procedural norms, everything seized during the search is either acknowledged as material evidence or not. This will be determined by the court. It will also determine whether there were violations or not.

Have you already calculated the airport's losses in this whole situation?
So far, the image of the country has suffered the most. Reconstruction of the airport was to become and, by and large, became an example of public and private partnership. If you look retrospectively, until 2011, it was a loss-making enterprise. Since then we have received three new terminals in 2 years, the growth of passenger traffic, salaries, tax deductions, jobs, and the airport has generated about 10 thousand of them. This is beneficial to all –  the communal enterprise, the investor, and the city.
On the one hand, this is an example of the fact that it is possible to work with the state, on the other hand, there is an act and a criminal proceeding created out of thin air. Do you have questions you want to ask us? Request for the documents and explanations. We live in a civilized country, after all!

Do you assume a political context in this matter?
I can say for sure that this whole story is accompanied by a pre-planned information campaign against the airport in the media. However, there is no direct or indirect indication of the customer. Perhaps, someone has interest in the land or an efficiently operating enterprise. There can be many theories. In response to these public accusations, we decided to voice our position. Everything we say is true. It is easy to verify if you study our documentation. 

 

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