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Ryanair’s decision to pull out of a deal with Ukraine in late 2017

will be a blow to the development of the country’s aviation
sector. Experience has shown that as long as the market
is dominated by Ukraine International Airlines, owned by
oligarch Ihor Kolomoyskyi, there is little chance for market
expansion. Nevertheless, there is some hope for 2018.

Russia’s annexation of Crimea in 2014 opened a dark chapter in the history of

Ukraine’s civil aviation sector, lighting a fuse that would see Donetsk International
Airport razed to the ground and Malaysia Airlines Flight 17 shot out of the sky.
Though hostilities rumble on in the eastern Donbas region, life has gradually re-
turned to normal for most Ukrainians. The number of passengers carried by local
airlines grew 22 per cent in 2016 to reach 5.7 million – just shy of pre-conflict lev-
els – thanks in large part to the flag-carrier Ukraine International Airlines (UIA)
which has stepped up its role as a transit carrier linking Asia with Europe. Kyiv’s
Boryspil International Airport, UIA’s home base, accommodated more than ten
million passengers last year and expects 20 million by 2023.
However, market dominance by UIA – which provides 67 per cent of capac-
ity at Boryspil, and a whopping 83 per cent of domestic seats nationwide – is an-
tagonising Ukraine’s pro-western government, whose lawmakers are desperate
to inject foreign competition and disempower the post-Soviet oligarchs. Enticing
Ryanair, Europe’s largest (and cheapest) low-cost carrier, to enter the Ukrainian
market has become an obsession for Volodymyr Omelyan, the country’s 38-year-
old infrastructure minister.
74 Opinion and Analysis Ukraine’s aviation fiasco, Martin Rivers

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I spoke with Omelyan about his vision for Ryanair lifting business confidence in
the country, awakening Ukrainians’ appetite for all things European and building
Kyiv’s reputation as a major tourist destination.
“I do believe that Ryanair is an icebreaker for the country,” he told me. “It is not
simply a company coming from somewhere to carry passengers. It is a clear signal
to the West that, yes, Ukraine is a normal country. It will be a kind of guiding light
for all other investors and foreign companies to come here and to work.”
“The second issue for me, and maybe it was even the prime issue, is to let
Ukrainians travel,” Omelyan emphasised. “By travelling they change their minds,
they change their attitudes towards reforms and towards being European. Right
now, we have only four or five per cent of Ukrainians travelling with air carriers. It
is a very modest sum, and we would like to increase it to 25 or 30 per cent. But it is
only with low-cost carriers – like with Ryanair – that we can make this happen fast.”
“The third issue for me is to bring foreign tourists. Sometimes, in the West,
Ukraine is linked with corruption, with bad management, with some other chal-
lenges. Ordinary tourists would never pay 500 dollars for an air ticket to discover
Ukraine … but if there is an option to fly with Ryanair, to pay five or 40 dollars,
they can easily make this choice.”
Omelyan’s wishes seemed to have come true in March 2017 when Ryanair signed
a Letter of Intent to launch four routes to the Kyiv Boryspil Airport and seven to
the western city of Lviv. Flights were to be operated from Berlin, Budapest, Ein-
dhoven, Kraków, London, Manchester, Munich, Stockholm and Wrocław in the
coming winter season with one-way fares starting at 20 euros. However, despite
accepting bookings for the routes, Ryanair nixed its plans in July as a result of fierce
opposition from vested interests in Ukraine’s aviation sector.
Chief among the airline’s detractors was none other than Pavlo Riabikin, Bo-
ryspil’s own director general, who accused Ryanair of exerting “pressure” on the
airport to accept unreasonable terms in its Letter of Intent – which he duly shred-
ded and tried to replace with a standard airline contract.

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Riabikin justified his actions by leaking details of Ryanair’s wish list which in-
cluded requests for discounted passenger fees as well as tax exemptions and various
other benefits. He said he is duty-bound to offer all airline customers “equal terms”
and that financial modelling had shown that Ryanair’s proposal would cause the
Ukraine’s aviation fiasco, Martin Rivers Opinion and Analysis 75

Photo: Vasiliy Koba (CC) commons.wikimedia.org

Kyiv’s Boryspil International Airport, home to Ukraine International Airlines, accommodated

more than ten million passengers last year and expects 20 million by 2023.

airport to lose money. He also claimed that Boryspil made known its objections last
March by refusing to sign the Letter of Intent (both Ryanair and the infrastructure
ministry insist that Riabikin raised no such objections).
“We cannot establish unequal conditions,” the airport boss emphasised. “Charges
or the principles of discounts application must be equal for both the low-cost and
the legacy carriers.” Boryspil’s stance was enthusiastically endorsed by Yuri Mi-
roshnikov, UIA’s president, who accused Ryanair of fuelling “scandal” in order to
barge its way into the market. UIA subsequently filed three lawsuits against the
Ministry and Lviv Airport, attempting to block further talks with Ryanair while
also – somewhat remarkably – seeking financial compensation for its own deci-
sion to launch a ticket sale.
This attempt by the flag-carrier to recover lost earnings after Ryanair dangled
cheap fares in the market left David O’Brien, the Irish carrier’s chief commercial
officer, dumbfounded: “That is absurd, at least to the ears of anybody on this side
of the continent,” he told New Eastern Europe. “It says a lot about the perspective
of the airline making the claim, that [they believe] there’s an entitlement to high
fares, and that there’s an entitlement therefore to rip consumers off.”
76 Opinion and Analysis Ukraine’s aviation fiasco, Martin Rivers

Omelyan’s interpretation is still more damning. He accuses the flag-carrier of

mounting a “bloody public campaign against me” using the courts, local media and
law-enforcement agencies to stain his reputation. Crucially, he places the blame
squarely on Ihor Kolomoyskyi, the billionaire oligarch whose Privat Group controls
almost all of Ukraine’s aviation sector through its stakes in UIA and Dniproavia
(another local carrier). Kolomoyskyi also has a strong hand in Ukraine’s energy,
finance, media and real estate sectors, making him a prime target for the govern-
ment’s crackdown on oligarchs.
“Kolomoyskyi’s main goal, as Ukraine International, was to not let Ryanair fly
to Ukraine, by any means,” the minister said. “It was sabotaged. And unfortunately
it was done in a very rude way. I don’t want to say there is a hidden deal between
Riabikin and Ukraine International, but it is a kind of strange synergy going on
between the position of Boryspil Airport and Ukraine International … There is
huge pressure of Ukraine International over Boryspil. It is obvious. It is clear. The
airport forgets about the country, forgets about passengers. It is only focused on the
interests of Ukraine International Airlines… and the country loses a lot of money.”
Omelyan accepts that Ryanair came to the negotiating table with a long list of
demands, but says there was nothing “extraordinary or extravagant” about them
and that both sides made compromises. He rejects Riabikin’s claim that lower
passenger charges would harm the airport financially, and argued instead that
increased traffic volumes and retail spending would more than offset any losses.

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Asked about suggestions from some quarters that Ryanair should leave Kyiv
out of its Ukrainian network, or that it should wait for a new low-cost gateway
to be built at the capital’s Gostomel Airport, which is currently used by aircraft
manufacturer Antonov, the minister is equally dismissive.
“We cannot tell Ryanair, ‘Okay, we will welcome you to this airport in two years’
time, but we first need to construct a runway, build a new terminal, and only after
that you can fly!’” he replied. “To have Gostomel operational, we would need to
invest at least 100 million US dollars in infrastructure, roads, bus connections and
so on. We would have to invest at least 50 million dollars in a passenger terminal
and air navigation infrastructure. What for? Boryspil Airport is two-thirds empty.
Zhuliany Airport [the capital’s second airport] is half empty.”
O’Brien says Ryanair has already “moved on” from the debacle, shifting capac-
ity to other markets and focusing on its pilot-rostering crisis. Himself a former
resident of Kyiv, he retains a soft-spot for Ukraine and believes that Ryanair will
Ukraine’s aviation fiasco, Martin Rivers Opinion and Analysis 77

one day return. When it does, he sees the long-term potential for ten gateways and
ten million passengers a year.
But the airline executive stopped short of optimism, stressing that all talks have
ended and “our confidence in doing business in Ukraine has been dented by the
Kyiv experience”.
Whatever side one takes in the dispute, most agree that Ukraine’s existing air
connectivity is sub-standard. Despite being the largest country by area in Europe,
Ukraine has no point-to-point domestic links that bypass Kyiv – a consequence of
UIA’s strategy of routing all traffic through the capital. Internationally, none of the
eight other Ukrainian cities with scheduled flights are connected to Russia, Britain,
France, Scandinavia or any long-haul markets. Travellers have better options when
flying from Kyiv, with six Asian points south of Russia served by UIA (Almaty and
Astana in Kazakhstan; Bangkok in Thailand; Beijing
in China; Colombo in Sri Lanka; and Delhi in India). Most agree that
However, New York and Toronto are its only markets Ukraine’s existing
in the Americas, and Cairo its only one in Africa. air connectivity is
Empty skies are partly a consequence of low wealth:
Ukraine is the second poorest country in Europe, with
sub-standard.
GDP per capita of just $2,200. But it also has a large population (45 million peo-
ple) and it is rich in natural resources. Comparisons with Poland, a neighbouring
EU state with a population of 38 million, make for depressing reading. Polish and
Ukrainian carriers transported roughly the same number of passengers in 2016.
Yet foot-traffic at Polish airports during that time surpassed 34 million (46 per
cent of which was in Warsaw), whereas in Ukraine the figure was below 13 million
(76 per cent in Kyiv). A low penetration by foreign carriers – particularly low-cost
carriers – supports Omelyan’s claim that protectionism is hurting the sector. But
fixing this is difficult when, by his own admission, oligarchs behave like “a kind of
small monarchy, or another small country inside the country”.

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Even as Ukraine’s flag-carrier battles to keep foreign competition out of the

country, Yanair, a privately-owned scheduled and charter operator based at Kyiv’s
Zhuliany Airport, is actively trying to bring rivals into its home market. Alexey
Yanchuk, Yanair’s owner, has invested in Zhytomyr Airport, a regional gateway 130
kilometres west of Kyiv, that was recertified in 2016 after 25 years of inactivity. The
airport presently functions as a maintenance base for Yanair’s six-strong fleet, but
it will branch into passenger traffic as soon as runway work has been completed.
78 Opinion and Analysis Ukraine’s aviation fiasco, Martin Rivers

“As of now we do not have enough runway, so we cannot invite Ryanair to op-
erate from Zhytomyr Airport,” Yanchuk told New Eastern Europe. “But we plan to
make this runway long enough for them. In fact we are open not only for Ryanair
but any other airline … Any low-cost carrier who wants to operate from Zhyto-
myr Airport will have equal conditions with other companies and we are happy
to invite all of them.”
Asked about the difficulties that Ryanair encountered last year when trying to
launch flights into the capital, Yanchuk was diplomatic in his response. “We really
hoped this Ryanair launch [would succeed], because it
Yanair, a private tells the world that Ukraine is ready for healthy com-
charter operator petition, for having a lot of different air companies, not
only domestic ones,” he said. “It would be a really great
based at Kyiv’s step for the image of Ukraine. It is a real secret why
Zhuliany Airport, it didn’t [happen]. We think maybe the negotiations
is actively trying were made in a kind of rush, and that’s why it was not
properly thought through.”
to bring rivals into As well as inviting foreign carriers, Yanair is also
its home market. planning its own growth. The airline currently deploys
two Boeing 737 – 300s and two 737 – 400s from Kyiv
and the southern city of Odesa, operating scheduled flights to Tbilisi and Batumi
in Georgia and Tel Aviv in Israel. Two Airbuses are also marketed to wet-lease part-
ners. With the fleet undergoing rapid change, Europe is now on the carrier’s radar.
“Europe is very interesting for us, especially taking into account the no-visa
procedure that we have right now,” said Yaroslav Agafonov, the chief executive of
the six-year-old airline. He is eyeing up secondary points like Kraków in Poland
and Paderborn and Frankfurt Hahn in Germany, as well as unspecified markets
in Cyprus, Italy and Romania. Yanair will also start flying from Lviv in June, and
eventually from Zhytomyr when conditions permit.

New hope for 2018

Elsewhere, initiatives to foster domestic competition with foreign help have

struggled to gain altitude, with Hungary’s Wizz Air and Russia’s UTair both clos-
ing their Ukrainian subsidiaries during the Donbas conflict (Wizz Air still bases
three planes in the country under its Hungarian licence). AtlasGlobal Ukraine, a
subsidiary of the Turkish carrier, survived the crisis but only serves routes between
the two countries. A new domestic airline, SkyUp, will also launch this year, though
initially just as a charter operator.
Ukraine’s aviation fiasco, Martin Rivers Opinion and Analysis 79

Omelyan thus remains convinced that only low-cost carriers from abroad can
invigorate the market. Italy’s Ernest Airlines became another feather in his cap this
winter when it launched five routes to Kyiv Zhuliany and Lviv from Milan Bergamo,
Naples and Venice. EasyJet and Eurowings are both now in the ministry’s sights.
But it is Ryanair – with its demand-catalysing fares and huge economies of
scale – that would have the most transformative effect. Undeterred by recent
events, Omelyan is confident of welcoming it back in 2018.
“I want to have the top companies of the world in Ukraine. Ryanair is top, num-
ber one in Europe. Why should I go for somebody else?” he asked. “They are very
active in Eastern Europe right now, and we should use this momentum to have
real competition in the Ukrainian market, to keep prices low and quality higher.
Ukrainians cannot pay triple price just to please some oligarchs to make another
billion or two,” the minister concluded.

Martin Rivers is an air transport journalist who has written for

The Economist, the New York Times and the Guardian.