You're reading: MH17 shoot-down, fear of flying hurts airline industry in Ukraine

As if Ukraine has not suffered enough economically from revolution and war, the downing of Malaysia Airlines Flight MH 17 on July 17 will dent yet more commerce.

The international airline industry’s reaction to the loss of the Boeing 777 in hostile territory was swift. The Ukrainian air traffic control agency immediately informed its European counterpart, Eurocontrol, that it had closed air space over eastern Ukraine, including Donetsk and Luhansk oblasts, where armed Kremlin-backed guerillas and Russian mercenaries continue waging war. At the same time, a number of international airlines announced that they were either diverting flights away from Ukrainian airspace altogether or even cancelling flights to Ukrainian destinations.

Less popular or low-margin routes might be among the first long-term casualties of the new fear of flying. Already since the beginning of the year Ukrainian travelers have seen the cost of air travel rise in near proportion to the 40 percent devaluation of the hryvnia, so this new threat could tip the cost-benefit of flying. The additional costs of avoiding the anti-terrorist operation zone would be passed on to the consumer, upping ticket prices, says deputy director of the sales department of tickets.ua Victor Wojciechowski.

Flights heading south towards the Persian Gulf are now a rare thing, as no less than four air carries that service the Ukraine-United Arab Emirates routes declared that they will not fly to Ukraine until further notice. The Russian carrier Aeroflot, meanwhile, is a little braver, cancelling routes with Dnipropetrovsk for a month and Odesa for a week, but keeping its direct flights to Kyiv, the company announced.
These route cancellations are having a domino effect in the foreign tourism industry. The wholesale loss of flights to the popular United Arab Emirates means tour cancellations.

The use of Ukraine as a transit country for long-haul flights, called en-route navigation charges, and airports fees will suffer in the short term. Of course, Donetsk airport has been closed to all civilian air traffic since the onset of hostilities in March.

Eurocontrol determines the fees with a complicated formula that uses aircraft weight and distance traveled, and they vary from country to country, but the charge is thousands of dollars per flight. The Ukrainian Aviation Service did not respond to a Kyiv Post request for total losses.
And then there are the airport charges for planes and passengers alike.

Boryspil International Airport in Kyiv, by far the nation’s busiest and priciest airport, for example, charges $10.50 per 1 ton of maximum take-off weight (MTOW) and $17.00 per passenger for servicing. Considering the most common passenger jet to fly in and out of Ukraine is the Boeing 737 with an MTOW of 70 tons and passenger capacity of up to 200 plus crew, the loss comes to tens of thousands of dollars per flight.

Oleksandr Kryvonis, CEO of KRIS Group, which owns one of the largest consolidators in Germany says: “A lot of passengers from Europe and America for many years will bypass Ukraine, and Russia, let alone third countries.”

The reduction of routes should further concentrate market share amongst those airlines that remain. Ukraine is already poorly served with air carrier options after Aerosvit went bankrupt last year, leaving just Ukraine International Airlines (UIA) as a major carrier. “Passengers have been flying less – they just do not have the money, and so the market had fallen by about 30 percent before the crash,” says Serhiy Fomenko, executive vice president of marketing at Ukraine International Airlines. He added that the bowing out of the Arabian carriers should be a boon for UIA, since it is the exclusive carrier for the route Kyiv-Dubai.

Altogether this will lead to an increase in transportation costs, which should affect the rates for consumers, says tickets.ua’s Wojciechowski. However, airlines will incur additional losses on tickets that were sold prior to the expected price rise. However, assessment of potential losses depends on individual airlines, including passenger traffic, state and fleet optimization, cost of leasing, as well as other factors.

Hotels in Ukraine outside the war zone should not suffer badly, since the summer is a slow time for the business and the industry has already been hard hit by the combination of EuroMaidan Revolution and war. None of the hotels that the Kyiv Post contacted would admit to any decline in bookings. General manager of Opera Hotel in Kyiv, David Mohren, says that he has not noticed any change in room reservations. “We are still suffering from what is happening in the east,” Mohren says.

Kyiv Post business journalist Evan Ostryzniuk can be reached at [email protected].