You're reading: Ukraine International Airlines ousts Swissport from Ukraine (UPDATED)

A Kyiv commercial appeals court ruling on March 27 allowed the transfer of a 70 percent stake in Swissport Ukraine, the nation’s largest airport cargo handler, to Ukraine International Airlines for $433,000, giving the airline a combined 100 percent stake and control over a business worth an estimated $25 million.

Prior to the court ruling, Ukraine International Airlines had a 30 percent stake in Swissport Ukraine as part of a joint venture formed in 2006 with Swissport International Limited.

Zurich-based Swissport, the now former parent company of the Ukrainian subsidiary, called the ruling a “disappointment in the Ukrainian law system and courts. The loss of ownership is the unfortunate consequence of a successful hostile raider attack (by) Ukraine International Airlines and its main shareholder (and chairman Aron Mayberg),” said Mark Skinner, senior vice president of Swissport. “We’re 100 percent sure the judges were paid off, everything was planned beforehand and bribery was the name of the game.”

In a March 29 news release, Ukraine International Airlines said the price it paid for the 70 percent stake “was based on an asset valuation approved by Swissport International and under terms and conditions pre-agreed by the parties. The applied mandatory buyout mechanism had been pre-agreed and either party had an opportunity to apply it under certain conditions.”

Ukraine International Airlines failed to specifically address allegations that it had conducted a “raider takeover” of Swissport Ukraine through Ukraine’s courts.

Meanwhile, Skinner told the Kyiv Post that Swissport has informed its customers in Ukraine that it’s no longer a shareholder in its former Ukrainian subsidiary and that it is doing “everything we can to take away the brand.” Spinner said the March 27 ruling will be appealed to the High Commercial Court but that he has “lost all trust in the legal system of Ukraine” and that the “damage has been already done in a very non-transparent way.”

The airlines said “we expect Swissport Ukraine to carry on operations regardless of the changes of its shareholders structure.”

In June, Ukraine International Airlines took Swissport to court, arguing that its minority rights were violated. In a Jan. 31 letter addressed to the Kyiv Post, Ukraine International Airlines president Yuri Miroshnikov said Swissport had threatened to “deprive the airline of its legal business quota” in a share dilution measure that it had proposed, but which never took place.

The airline’s March 29 news release reiterated the claim of minority rights violations.

Miroshnikov, furthermore, said the airline was once locked in a three-year service contract with Swissport “with no right of early termination and price terms significantly exceeding market value.”

The airline president argued that Swissport had acquired a portion of its 70 percent stake “at a symbolic price of $12,000 per 1 percent.”

“We have repeatedly tried to negotiate with our (Swiss) partners to resolve the conflict amicably,” Ukraine International Airline supervisory board member Aleksandra Nikitina told Komsomolskaya Pravda in a Nov. 26, 2012 interview. “Unfortunately, we failed to get into a constructive dialogue with the Swiss party and were forced to seek justice (in) court.”

In a letter that the Kyiv Post obtained, Swissport stated that the joint venture with Ukraine International Airport had seen positive development since 2006, when it was formed. It was addressed to the International Air Transport Association and dated Nov. 5, 2012, signed by Swissport executive vice president of global cargo John Batten and Johannes Spindler, executive vice president general counsel and general secretary.

But things went sour, alleged the letter, when Israeli citizen Aron Mayberg became the airline’s owner in 2011.

Little is known about Mayberg, but he was the founder of AeroSvit in the 1990s, a Ukrainian airline that recently filed for bankruptcy. He was Aerosvit’s director general until December 2008.

“However, over the recent past, since UIA’s takeover by Mr. Mayberg last year (2011), Mr. Mayberg and UIA have been conducting a so-called ‘hostile corporate raider attack’ against Swissport International and Swissport Ukraine, by alleging a (baseless) violation of his/their minority rights, in an attempt to force SPI to forfeit its shares in Swissport Ukraine,” reads the letter.

When Mayberg took over Ukraine International Airline, the airline terminated its handling contract with Swissport Ukraine, in which it has a 30 percent stake. The airline instead chose Aerohandling, an airport handler once owned by Mayberg, in a tender for which Swissport had also bid.

Asked to address the arguments, Skinner told the Kyiv Post that the airline had the first option to buy a portion of the shares that Swissport eventually bought for the same price but it had opted not to.

Regarding the service contract, Skinner said Swissport gave the airline a 10 percent discount from the first day it went into force and a further price reduction once the airline’s passenger volumes increased: “the (service) contract was never forced upon UIA. It was a bilateral agreement UIA was very happy to enter into.”

Concerning Swissport’s proposed share dilution, Skinner said that because the company needed to invest additional money to sustain double-digit growth in Ukraine, it had proposed that each stakeholder contributes a percentage related to the share in the company. He said UIA wasn’t able or willing to contribute their portion, so Swissport offered to invest 100 percent and dilute  the airline’s company shareholding.

Skinner estimates that Swissport has invested nearly $20 million in Ukraine since 2006 and that the subsidiary is worth $25-$30 million, “100 times more than” what the airline is claiming.

He added that Swissport Ukraine handles some 50 flights a day for Kyiv’s Boryspil International Airport and has operations in the capital’s Zhyliany Airport and Kharkiv Airport. By this summer, the company had planned to hire an additional 200 people, to reach 1,000 employees in Ukraine.

Kyiv Post editor Mark Rachkevych can be reached at [email protected].