Competition on the domestic passenger airline market is stifled and may get even more stifling, with government delays in reaching an open skies accord with the European Union.
The result: higher air fares and fewer low-cost carriers for travelers.
At issue is a March 11 decision, announced by Deputy Prime Minister Borys Kolesnikov, in which Ukraine pledged not to ink an open skies deal with the European Union until Ukrainians are granted visa-free travel to the 27-nation bloc.
Our airways are not ready for competition like that.
– Deputy Prime Minister Borys Kolesnikov
An open skies agreement would liberalize air travel and open more routes to competition, leading to cheaper tickets. Such a prospect has long been the goal of travelers, the tourism industry and foreign airlines.
“Our airways are not ready for competition like that,” Kolesnikov said. However, Kolesnikov said, the government is nearing open skies deals with Russia and Israel, countries where Ukrainians can travel without visas.
Ukraine may be trying to bargain tough with Brussels. But in doing so, Kyiv’s leadership is keeping top foreign passenger airlines out of the market.
On the international market in Ukraine, Aerosvit and Ukraine International Airlines are the dominant Ukrainian airlines flying to foreign destinations. On the domestic side, Donbasaero and Dniproavia are leaders.
Foreign passenger airlines complain that it is hard to get access to routes. In the words of John Stephenson, vice president of Wizz Air, the first low-cost airline on the Ukrainian market, “getting access to routes is the biggest issue in Ukraine.”
Many travelers are disappointed.
“I was hoping that when the [open sky] deal is signed, I will be able to afford flying inside the country to visit friends,” said Yuriy Kovalek, a programmer from Kharkiv. “But for now, I need to continue using trains to catch low-cost flights further to Europe. And when I get to Kyiv, the destinations offered [by low-cost] airlines are few.”
Yevhen Suslov, a parliament lawmaker in the opposition Bloc of Yulia Tymoshenko, said government should pay less attention to defending airlines owned by billionaires and more to making airfare affordable.
Kept at a distance
Wizz Air, Hungary’s low-cost airline, tried in recent years to offer a broad range of domestic flights between Kyiv, Odesa, Lviv and Kharkiv. Later the flights were scaled back, leaving only the Kyiv- Simferopol route open. Wizz Air continues, however, with regular flights between Ukraine and foreign destinations.
But it stands largely alone as the only major low-cost airline from abroad.
Ukraine International was founded 18 years ago; Aerosvit 15 years ago. During all this time they had exclusive routes and benefited from high ticket prices. If they didn`t buy more planes and get better off during that time, they probably never will.
– Myronenko, the founder of the avianews.com
If purchased at least one month in advance, a round trip flight on Wizz Air between Simferopol and Kyiv costs $130. A comparable Dniproavia flight costs almost $200.
The difference between what low-cost airlines such as Wizz Air and leading Ukrainian airlines is even more striking on international routes. Flying roundtrip to Stockholm from Kyiv on Wizz Air costs a little more than $100.
Flying on the same route and dates, also roundtrip, in an economy seat on Aerosvit costs $288.
The expansion of foreign companies, including low-cost carriers, is also hampered by Ukrainian bureaucracy, where getting operating permission usually takes more than one year.
Market monopolies
Experts say the situation amounts to a monopoly. “There is a duopoly on the market,” said Oleksandr Myronenko, an aviation expert and founder of the avianews.com website.
Billionaire Igor Kolomoisky is reported to control Aerosvit, Donbasaero and Dniproavia.
Aerosvit offers tickets to Odessa for $267 one way. A Dniproavia ticket to Odesa for the same day costs $279. It is the same plane, same flight, same owner and the price is practically the same. So they create an illusion that there is a competition while there is not.
– Orest Bilous, from ‘Makemytrip’
Through these airlines, Kolomoisky corners an estimated 48.5 percent of the market. Insiders and reports suggest that Kolomoisky also controls another airline, Windrose. If so, he holds a commanding 60 percent share of the domestic market.
On international routes, Ukraine International Airlines controls 30 percent of the market and is run by a company called Capital Investment Project. It has exclusive rights for Western European routes with prices as high as $560 (Kyiv – Barcelona), $450 (Kyiv-Berlin) and $590 (Kyiv – Paris).
Aerosvit is reportedly owned by Israeli businessman Aaron Mayberg and flies exclusively to Athens, Budapest, Prague and Warsaw.
The competition isn’t much better for domestic flights, experts say.
“Aerosvit offers tickets to Odessa for $267 one way. A Dniproavia ticket to Odesa for the same day costs $279. It is the same plane, same flight, same owner and the price is practically the same. So they create an illusion that there is a competition while there is not,” said Orest Bilous from Makemytrip, a budget trips planning company.
Kolesnikov does not deny there is a monopoly. “Ukrainian passengers pay 22 euro for 100 kilometers (of flying) while, for instance in Germany it is twice less. The reason is monopolization of the market,” Kolesnikov said last year.
However, the Antimonopoly Committee in December ruled that the monopolization law is not being violated.
Empty new terminals
Ukraine has been overhauling its dilapidated airports ahead of the Euro 2012 soccer championship to be co-hosted with Poland. The improvements include two new terminals at Kyiv’s Boryspil International Airport and several more in other cities.
But with air travel unaffordable for many, a brand new terminal that recently opened in Kharkiv, Ukraine’s second largest city, only services 3-4 flights daily. Still, fears remain strong that an open-skies agreement would provide too much competition for the entrenched Ukrainian airlines.
“European giants simply have more money and more planes,” said Oleksandr Kava, head of Political and Economical Analytical Centre.
Others, however, argue there is no point in protecting uncompetitive private companies.
“Ukraine International was founded 18 years ago; Aerosvit 15 years ago. During all this time they had exclusive routes and benefited from high ticket prices,” said Myronenko, the founder of the avianews.com website. “If they didn`t buy more planes and get better off during that time, they probably never will.”
Kyiv Post staff writer Svitlana Tuchynska can be reached at [email protected]
