14 / 07 / 2021
Denys Kostrzhevskyi: About Development Strategy Of Aviation Industry And "Open Sky" With The EU. Blog

The government-adopted Ukrainian aviation industry development strategy is inextricably linked to the overall economic growth: people's welfare and income, more intensive business and tourism as such.

The aviation industry is growing as the economy is growing and falls when the economy is falling.

Also, when we talk about industry development, we cannot only mention domestic factors. After all, international flights depend on the domestic economy and the integration of Ukraine into world trade.

Aviation industry development strategy has three components:

  • - air, i.e. the development of air transportation as such,
  • - development of ground-based airport infrastructure,
  • - a combination of ground and air transport.

Air transportation can quickly "turn on" or "turn off" whether they are demanded or not. And the sharp market fall is followed by its rapid growth.

It's not the same about the infrastructure. The development of ground infrastructure is a very expensive and very lengthy process.

And that's why we can't observe such a correlation: passenger traffic has increased dramatically and we have airports.

The airport infrastructure should be developed systematically, purposefully, and routinely. And the first thing to be figured out and understood:

  • - how many airfields are needed;
  • - how far should they be placed from each other;
  • - what is the potential of passenger and air transportation, that is, how busy airports should be.

After that, to design road and rail connections with airports from localities, railway and bus stations, considering infrastructure development prospective at least 20 years from now.

If we take Europe as an air transportation reference, then, in my opinion, since we do not have such a population density, there is no such traffic intensity as in Europe, the distance between airports should not be closer than 300 km. And we are talking not only about airports of international importance but also about airfields that connect cities located at a distance of less than 200-300 km. At such distances, it is about 3-4 hours by car or train. In other words, the time spent on traveling will be the same, but there is less comfort because there is aviation security, baggage restrictions, possible transfers, and so on. And airfares are higher.

Therefore, from an economic point of view, the development of domestic air transportation at a distance of 300 km or less is impractical.

Today there are 8 major airports in Ukraine: Odesa, Lviv, Kharkiv, Dnipro, Zaporizhzhia, Kherson, and two in Kyiv. They are trying to develop Uzhhorod, Chernivtsi, Vinnytsia, and Zhytomyr. Now we have 2 fairly large airports in the Kyiv aviation hub, which can process up to 40-50 million passengers in total. Perhaps the Kyiv aviation hub will develop so quickly that one day there will be a need for the 3rd airport, within a radius of 300 km.

About Open Skies

Open Skies Agreement with EU is a no less resonant issue today.

As for me, at first glance, this agreement is favorable for Ukrainian consumers. Most likely, this will lead to cheaper fares and an increase in the number of routes.

But this is only at first glance.

This Agreement will harm Ukrainian manufacturers. Domestic air companies will struggle to compete with more sophisticated European ones: newer fleet, access to cheaper loans allowing them to buy new proper quality planes. Therefore, Open Skies might improve aviation consumer services and make them cheaper at first, but in the long run, that may lead to the expansion of foreign airlines, the bankruptcy of Ukrainian ones, and, as the result, job cuts in Ukraine.

That is why, in this matter, the development of Ukrainian airlines must be a priority.

And when Ukrainian airlines are equal in financial and technical capabilities with European ones, then it will make sense to say that we should open up markets for European airlines. This is provided that European markets will also open up to Ukrainian airlines. It is then that the Open Skies will be beneficial to Ukraine.

Ukrainian automotive industry is an example of possible negative developments, it simply could not survive in the competition.

However, we all know the example of China, a country that has opened up to high-tech manufacturing. And foreign companies that wanted to sell in China had to open subsidiaries there.

Ukraine could also follow that path, but legislative changes are needed. At one time, some powerful low-cost airlines have already opened subsidiaries in Ukraine. However, VAT on fuel, VAT on spare parts, Ukrainian legislation has put these companies in a less favorable position than if they worked in Ukraine as foreign parent companies.

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