Irish low-cost airline Ryanair’s withdrawal from Ukraine on July 10 dealt a blow to the nation’s reputation and investment climate, at a time when the country desperately needs to burnish both.
The decision triggered a backlash as Ukrainians’ hopes were dashed for cheap international travel, after receiving visa-free travel with the European Union on June 11.
Analysts differed on blame.
Pavlo Rjabikin, the CEO of Kyiv Boryspil International Airport, and tycoon Ihor Kolomoisky’s Ukraine International Airlines, which has a near-monopoly, are considered the main culprits by many.
However, Ryanair’s aggressive negotiating style also played a role.
Infrastructure Minister Volodymyr “Omelyan, Boryspil and Ryanair all face accusations,” said Timofey Milovanov, honorary president of the Kyiv School of Economics. “But in fact, in this situation, everyone is pursuing their own goals.”
Arrival, departure
Ryanair announced its entry to the Ukrainian market in October with four new routes from Kyiv to London, Berlin, Stockholm and Eindhoven, and seven from Lviv International Airport. It signed a contract with Lviv International Airport, but not with Boryspil airport and Kyiv Zhulyany International Airport.
Ryanair said on July 10 that Boryspil had not met its demands, and blamed the airport. It also canceled its contract with Lviv airport.
The airline accused Boryspil of protecting the interests of carriers, specifically Kolomoisky’s Ukraine International Airlines.
“On behalf of Ukrainian visitors and consumers, we regret that Kyiv (Boryspil) Airport has demonstrated that Ukraine is not yet a sufficiently mature or reliable business location to invest valuable Ryanair aircraft capacity,” said David O’Brien, Ryanair’s chief commercial officer.
Ryanair spokesperson Ronan O’Keeffe said that the airline would only reconsider flying to or from Ukraine when agreements are honored. “However, capacity will be allocated to other countries,” he added.
Omelyan said on July 11 that he would call for Rjabikin’s resignation. He also accused Rjabikin of protecting Ukrainian International Airlines’ interests, which Rjabikin denied.
The Cabinet of Ministers on July 11 decided to resume negotiations with Ryanair.
Prime Minister Volodymyr Groysman also said that the government had asked the National Anti-Corruption Bureau of Ukraine and the Anti-Monopoly Committee to audit the negotiating process.
Monopoly
Meanwhile, Ukraine International Airlines denied that it was to blame.
The airline denied having any connection to the negotiations and said it “is taken aback with the emotional and unreasonable rhetoric” of Omelyan. The company accused the minister of improperly attempting “to create preferences” for Ryanair.
Kolomoisky has been accused of using his clout and connections with top government officials to preserve the airline’s near-monopoly status.
In 2014 and 2015, Ukraine’s State Aviation Service was headed by Denys Antonyuk, an ex-top executive of Ukraine International Airlines. In 2015 he was charged with abuse of power by obstructing competitors.
Despite Ryanair’s exit, there will still be competition for Ukraine International Airlines.
Hungarian low-cost airline WizzAir said on July 11 it will expand. Other low-cost carriers operating in Ukraine include Flydubai, Atlasjet, Pegasus Airlines, AegeanAir, Vueling Airlines and AirBaltic.
Additionally, Qatar Airways said it will enter the market in August.
High connections
Rjabikin was head of Ukraine International Airlines’ supervisory board and a member of the supervisory board of another Kolomoisky-owned airline, Aerosvit, from 2005 to 2006.
He is also linked to President Petro Poroshenko and his associates. Rjabikin, who studied with Poroshenko at Kyiv National University in the 1980s, told the Kyiv Post that he was acquainted with him. He was also a deputy of Kyiv Mayor Vitali Klitschko, the leader of the Bloc of Petro Poroshenko party, from 2014 to 2015.
Rjabikin has also been at the center of corruption scandals linked to the allocation of land and municipal contracts. He dismissed the accusations as “nonsense.”
He said on July 10 that Ryanair’s demands were unacceptable.
According to Rjabikin, Ryanair demanded: 35 percent of duty-free income, a $7.50 per passenger tariff (as opposed to the current $13), tax-free aero-navigation, tax-free registration counters, tax-free parking space, allocation of land for construction of a hotel on the airport’s territory, arbitration of disputes in London courts and other conditions.
Ryanair style
Experts say that Ryanair’s loud withdrawal is typical. Ryanair has become the number one carrier and the most profitable low-cost airline in Europe by using scandals and threats.
Andriy Guck, an aviation lawyer at Ukraine’s Ante law firm, told the Kyiv Post that the Ryanair’s strategy is based on maximizing the number of passengers.
“They are confident they will bring thousands of passengers to the country. They say ‘We bring you passengers, you make money on them,’” Guck added.
Ryanair operates in 34 countries and carries 100 million passengers a year. The airline had said it would bring 500,000 passengers to Ukraine.
“That was also a typical Ryanair-style move. They withdraw from Lviv to get a powerful lobbyist in Ukraine. Now Lviv’s authorities will pressure Kyiv to accept Ryanair’s conditions,” Guck said.
Ryanair has made the risky move because it couldn’t push Boryspil to accept its main demand — an 80 percent discount on the taxes and duties on flights to London’s Stansted Airport.
Guck said that, despite Ryanair’s aggressive style, the company always leaves room for compromise.
However, Guck added that Boryspil is not ready to work with low-cost carriers.
“For that Boryspil needs to reorganize its work. The airport makes money on airlines, not passengers. It collects not only the passenger tariff but also a take-off and land tax. That is their model. But for Ryanair, it needs to change its policy,” Guck said.
Other countries
Ryanair has previously had many disputes in other European countries.
Business strategy expert Victor Haydin, director of Product Strategy at IT company ELEKS, who has been monitoring the Irish carrier’s business model for years, wrote on Facebook on July 11 that there are dozens of airports in Europe that have been in dispute with Ryanair.
Serbia’s Belgrade Airport failed to make a deal. France’s Airport Angouleme made a deal with the airline, by Ryanair later canceled it. Warsaw’s Chopin Airport in Poland managed to strike a deal with Ryanair, but forced the Irish carrier to accept higher tariffs than it had wanted. Germany’s Karlsruhe Airport had to submit to all of Ryanair’s demands after the airline won support from the local authorities.
“Boryspil is not a unique case on their list, it has just had more publicity than previous ones,” Haydin wrote.
