Or years, for­eign air­line com­pa­nies have strug­gled to do busi­ness in Ukraine. Ukraine In­ter­na­tional Air­lines, owned by bil­lion­aire oli­garch Ihor Kolo­moisky, has ex­ploited its priv­i­leges in air­port ac­cess and the most lu­cra­tive flight slots and routes to s

Kyiv Post Legal Quarterly - - Contents - By bermet@kyiv­post.com

New ar­rivals An­driy Guck, a part­ner at Ante law firm, be­lieves that the end of UIA'S dom­i­nance isn’t far over the hori­zon. Since Ukraini­ans were granted visa-free travel to the Euro­pean Schen­gen Zone in June and ID card-only travel with Tur­key, for­eign car­ri­ers have started to cir­cle Ukraine’s tempt­ing mar­ket of more than 40 mil­lion peo­ple.

Ac­cord­ing to the State Bor­der Con­trol Ser­vice, over 355,000 Ukraini­ans have trav­eled to the Euro­pean Union in the six months since the visa-free regime was in­tro­duced. “It only seems that there’s no com­pe­ti­tion," Guck said. Ukraine In­ter­na­tional Air­lines "will have to face an open mar­ket,” he said.

A num­ber of for­eign air­lines be­gan fly­ing to Ukraine in 2017 — the world’s top air­line, Qatar Air­ways, among them. More­over, af­ter years of ab­sence, Ge­or­gian Air­ways and Slove­nia’s Adria Air­ways re­turned. Italy’s flag car­rier Al­i­talia, Azer­bai­jan’s low cost Buta Air­ways and Italy’s Ernest Air­lines were new ar­rivals as well.

In­fra­struc­ture Min­is­ter Volodymyr Omelyan, speak­ing on Dec. 14 at the of­fi­cial launch of Skyup, a new Ukrainian bud­get air­line, said the govern­ment en­cour­ages fair com­pe­ti­tion, and 2018 will be a year of cheaper air travel for Ukraine, with more new car­ri­ers com­ing to the coun­try.

Air Malta has added Kyiv to new des­ti­na­tions in its sum­mer 2018 sched­ule, which starts on March 26.

Tur­key’s ma­jor low-cost air­line, Pe­ga­sus, is con­sid­er­ing set­ting up a sub­sidiary in Ukraine, Forbes re­ported in mid-novem­ber, cit­ing the car­rier’s sales and net­work plan­ning di­rec­tor, Emre Peke­sen.

And Skyup will take to the skies in April, of­fer­ing af­ford­able char­ter flights from four Ukrainian cities to 16 for­eign des­ti­na­tions in Tur­key, the United Arab Emi­rates, Spain, Italy, Egypt, Al­ba­nia, Bul­garia and Cyprus.

Ukrainian-born Is­raeli cit­i­zen Aron Maiberg, con­firmed that the air­line’s ul­ti­mate ben­e­fi­ciary is Kolo­moisky.

Once the num­ber of flights be­tween two coun­tries is set, air­lines com­pete to gain rights to op­er­ate them.

Guck said that the cur­rent or­der by the State Avi­a­tion Ser­vice of Ukraine, which sets out a point-based eval­u­a­tion pro­ce­dure, makes it nearly im­pos­si­ble for smaller car­ri­ers to com­pete with UIA. The air­line is a well-es­tab­lished em­ployer and a ma­jor tax­payer, with a fleet of more than 30 air­craft and a 10-year lease on the only hangar in Kyiv where tech­ni­cal main­te­nance of air­craft can be car­ried out.

As a re­sult, UIA holds the rights to op­er­ate the busiest and most lu­cra­tive routes. And it’s pre­pared to go to court to de­fend them.

Two years ago the Ukrainian sub­sidiary of Tur­key’s air­line At­las­jet sued UIA and the State Avi­a­tion Ser­vice, de­mand­ing the right to fly from Kyiv and Odesa to Is­tan­bul. It lost the case.

“UIA is per­fectly aware of how avi­a­tion busi­ness works,” said Guck, who rep­re­sented At­la­jet in court. “UIA knows that the only way for any new com­pany to grow is to op­er­ate on the busiest routes, and it blocks them.” en­try­way — Kyiv’s Bo­ryspil In­ter­na­tional Air­port. Some be­lieve the air­line gets ad­van­ta­geous treat­ment be­cause the air­port’s di­rec­tor, Pavlo Ryabikin, used to be a mem­ber of UIA’S ad­vi­sory board. An­other con­tribut­ing fac­tor is that Bo­ryspil’s main ground han­dling ser­vice provider, In­ter­avia LLC, is 100-per­cent owned by UIA.

UIA also has a his­tory of abus­ing its priv­i­leged po­si­tion. In 2014–2015 the com­pany failed to pay Hr 147 mil­lion ($5.4 mil­lion) in oblig­a­tory fees to the State Avi­a­tion Fund. The fee was re­quired from all air­lines and was to be in­cluded in the ticket price.

“UIA charged its clients an (ex­tra) fee for the fund but didn't trans­fer the money to the fund,” the Na­tional Anti-cor­rup­tion Bureau of Ukraine stated in 2016 on the open­ing of a crim­i­nal case against the air­line into em­bez­zle­ment. There are also claims that the air­line owes a mul­ti­mil­lion-hryv­nia debt to Bo­ryspil In­ter­na­tional Air­port.

All the same, the air­port con­tin­ues to pro­tect its main cus­tomer.

Ear­lier this year, Europe’s lead­ing low-cost air­line, Ryanair, gave up its plans to en­ter the Ukrainian mar­ket. Bo­ryspil In­ter­na­tional Air­port was in talks with Ryanair but then can­celed the deal.

The Ukrainian air­line then filed mul­ti­mil­lion-dol­lar law­suits against Ryanair, the Min­istry of In­fra­struc­ture and

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