UARU
Why Europe’s Biggest Airline Backed Out of Ukraine
14 July, 2017
371
4031ad61c23a54317
Photo credit: EPA/ARMANDO BABANI

The European Union had just approved visa free travel for Ukrainians. A new airline was supposed to chart an affordable path West for Ukrainians, but then the predictable happened: On July 11, Irish low-coster Ryanair announced it was no longer coming to Ukraine. Kyiv’s Boryspil airport had refused to meet the company’s conditions for entering the Ukrainian market.

“We regret that Kyiv Airport has demonstrated that Ukraine is not yet a sufficiently mature or reliable business location to invest valuable Ryanair aircraft capacity,” David O’Brien, the company’s chief commercial officer, said.

The news sparked widespread anger in Ukraine. Many felt that entrenched business interests had once again blocked international competition, with insiders protecting their own interests to the detriment of the broader public.

Ryanair’s pullout was one more disappointment on Ukraine’s path to the EU. Hromadske takes a look at how it happened.

Big Plans

Discussions about Ryanair entering the Ukrainian market began five years ago. But until this year, there were no real prospects, according to Ukrainian Infrastructure Minister Volodymyr Omelyan.

Then, in March 2017, Ryanair and the Ukrainian Ministry of Infrastructure announced that the airline would launch its first flights to Kyiv and the western Ukrainian city of Lviv in the autumn.

Four flights would connect Kyiv with Eindhoven, Netherlands; Stockholm, Sweden; and London and Manchester, United Kingdom. Another seven flights would connect Lviv with Eindhoven; Berlin and Memmingen, Germany; Krakow and Wroclaw, Poland; Budapest, Hungary; and London, U.K.

Ukrainian Infrastructure Minister Volodymyr Omelyan (right) and Ryanair's chief commercial officer David O’Brien (left). Photo credit: Volodymyr Gonatr/UNIAN

The airline managed to negotiate and come to a mutually satisfactory agreement with the Lviv Airport. The problems arose in Kyiv.

Ryanair wanted a uniform $7.50 airport service fee for each passenger, regardless of how full the flights were. It also wanted thirty-five percent of duty free income, clearly defined parking spots for its planes, and a package of free services from the airport — air navigation, registration stands, taxi parking, advertising space, the right to rent parts of the terminal, a baggage claim system, ticket offices, and land for building a hotel. In return, Ryanair promised to bring an additional 150 thousand passengers to the capital’s two airports.

The Ministry of Infrastructure agreed and pressed Kyiv International Airport and Boryspil International Airport to come to an agreement with Ryanair. It should have been a normal negotiation.

Privileged Position

Not everyone was happy with Ryanair’s demands. Ukraine International Airlines — abbreviated as MAU in Ukrainian — actually appears to have taken offense at the idea of giving the Irish low-coster such an advantageous position.

Co-owned by Ukrainian oligarch Ihor Kolomoisky, MAU holds an absolute monopoly as the main airline at Boryspil, exercising significant control over the routes and airport policy. This means it received significant discounts on airport taxes, according to an Anti-Monopoly Commission report published on June 16.

MAU appears to have taken measures to preserve that position, although it vehemently denies this.

Photo credit: Volodymyr Gonatr/UNIAN

In April, the State Aviation Service abruptly granted MAU the right to operate flights on several of the same routes Ryanair planned to open. That would have created a particular problem with the Eindhoven flight. Kyiv’s treaty with the Netherlands only allows one airline to operate flights between Ukraine and Dutch cities. If MAU planned to fly to Eindhoven, then Ryanair could not.

Then, this month, Boryspil airport requested 360 million hryvnia ($13.8 million) from Ryanair to enter the Ukrainian market. It also alleged that several of the airline’s demands are not in compliance with Ukrainian law.

However, two Ukrainian experts in aviation law, Andriy Huk and Oleksandr Kava told Hromadske that this is simply not true. Not only were these demands legal, they were also not ultimatums, the experts said. It was all standard for business negotiations.

Finally, with negotiations bogged down in a quagmire of disagreements, Ryanair announced on July 10 that it was cancelling its planned entry to Ukraine. In a press release, the company accused the Kyiv airport of protecting high-fare airlines like MAU.

Public Reaction

In the wake of the announcement, Ryanair rocketed to the top trending topic on Ukrainian Twitter and Facebook.

The company’s decision was not simply a business news story for Ukrainians. To many, it represented Ukraine’s “unwillingness to change,” as Maxim Eristavi wrote in an op-ed for The Washington Post earlier this week.

Photo credit: EPA/ARMANDO BABANI

A successful deal between Ukraine and Ryanair would have demonstrated that the country is open for business and a safe place to invest money. After the EU opened visa-free travel to Ukrainians, Ryanair’s arrival would have made flights to Europe — often prohibitively expensive for Ukrainians — more affordable.

For this reason, the arrival of foreign companies in Ukraine “represents the freedom of choice we are so often deprived,” Eristavi wrote.

What's Next?

After Ryanair’s decision, Prime Minister Volodymyr Groysman announced that the country would start new negotiations with Ryanair. He also called on the Anti-Monopoly Committee to investigate the previous negotiations.

So far, however, it’s unclear whether the company is still interested. “We will only reconsider flights to or from Ukraine should our agreements be honored,” a spokesman for the airline told Reuters.

Ryanair is well known for the aggressive negotiating style that it uses to extract its desired concessions from airports. The company also has a reputation for relishing in negative publicity. As a result, this might just be the first round in negotiations that will eventually bring the airline to Ukraine.

But, for now, the company is working to pay refunds to customers who made plans to fly Ryanair to or from Ukraine.

Photo credit: UNIAN

/by Matthew Kupfer, @Matthew_Kupfer