Ukraine's leading English-language newspaper since 1995

Deceptive promotion methods are being used

Dear editor,

I read with interest the article by staff writer Alina Pastukhova (Kyiv Post, Sept. 25, “More low-cost airlines expected in October”) on the flood of low-cost airlines seeking to break into the Ukrainian market. Well, I’m one of those experts who likes to criticize the so-called “low-cost” airlines and here’s why.

First off, the advertising style used until recently by the majority of low-cost airlines in Europe has just been outlawed by the European Union as dishonest and misleading to the public. Wizz Air used the same style in Ukraine, where they are not dishonest – yet.

Next, I believe that all good business deals should have a mutual benefit to both parties. So what is the mutual benefit to Ukraine of the influx of so-called cheap flights? The politicians initially claimed that they were bringing cheap flights to the people. Now they are saying, well, they are cheap if you book them two months in advance. But that has been true of almost every airline in the world for decades.

The low-cost airlines claim that you can get real bargains and, in some cases, you can, so long as you book months in advance, don’t read the small print, don't expect a confirmed seat or don’t have the audacity to carry luggage.

The fact is that the cost of running a Boeing or an Airbus is the same, irrespective of who is flying it. They come from the same factories, are leased from similar companies, the fuel costs are virtually the same and so are the landing charges and airport taxes. So how can they offer such low prices? The answer is they can’t.

It’s a con: If you take the cost per seat spread over one month, then the average price per seat is the same for low cost carriers as it is for the more traditional carriers. It’s just a marketing ruse based on highly questionable advertising, and here’s an example.

Wizz Air advertising stated in big bold letters that the price of a ticket to Simferopol was Hr 79. This summer that ticket price peaked not at $100, as your journalist illustrated, but $313 one-way or $626 return, which is as much as you would pay Aerosvit to fly to Thailand and back. The economics are simple. You cannot charge less than cost and expect to make a profit. So where do the low-cost airlines in Ukraine plan to save money?

Simple again. They don’t set up real operations in the country. They don’t have their servicing or maintenance done here. They don’t employ that much local labor and, most importantly of all, they don’t pay taxes.

So, on the one hand, we have a government supporting low cost airlines who are marketing offers that, at best, are questionable, while on the other hand it’s costing them tax revenue and foreign earnings, while at the same time the tax police and customs are fleecing the rest of us for all they can. To put this into perspective: Ukraine International Airlines, in which the government owns a 61 percent share, have paid over $1 billion in taxes and profits to the government since their inception and are now 29th in the league of top Ukrainian export earners. Perhaps the government should forfeit the taxes from Ukrainian airlines on the condition that they provide the public with really low-cost flying? At least it would be honest...

Now we hear that foreign low cost airlines have been granted the right to fly to London, Dortmund and Milan by the Ukrainian government.

The British Government, and I dare say the Germans and Italians, will not be quite so accommodating, insisting that the Airlines comply with international law, which states that the beneficial interest of the airline should rest in the country from which the flight originates. They are not being difficult; they are, unlike the Ukrainian government, simply protecting their domestic airlines in line with international laws to which Ukraine is a signatory.

The beneficial interest of Wizz Air Ukraine does not reside in Ukraine, unless of course they set up a real operation. It resides in an offshore company registered in the Netherlands. Under this registration they can maybe fly from Amsterdam to London but the interconnect flight to Kyiv would have to be on an airline legitimately registered in Ukraine.

Should we really care? Well, yes, as no government should be supportive of any business venture that is founded on the basis of misleading the public and depriving the exchequer of much needed revenue.

If foreign airlines, low cost or otherwise, want to set up in Ukraine, let them do so, but on the same terms as local airlines. Make them pay taxes just like the rest of us. And let them compete on a level runway and not under some corrupt myth of bringing low-cost travel to the people.

Martin Nunn resides in Kyiv and serves as Chief Executive of Whites Communication, which has provided communications consultancy to companies within the Ukrainian aviation industry and their partners.