One of the most important international events for Ukraine, which was long awaited by aviators, was the signing of the Common Aviation Area Agreement with the EU, which provides for mutual access to air transport markets with a level playing field under the same European rules. How to avoid mistakes and reduce the time of implementation of the regulatory framework and what needs to be done for the development of aviation was discussed in an interview with the President of the Association "Airports of Ukraine" Civil Aviation (AAUCA) Petro Lipovenko to the Ukrainian national news agency Ukrinform.
MPLEMENTATION OF THE OPEN SKY AGREEMENT: TASKS AND DESIRED RESULT
- Mr. Petrо, how do you assess the advantages and possible disadvantages of signing and starting the implementation of the Common Aviation Area Agreement (or as it is also called "open skies") with the EU? Is it profitable for all participants of our air market - airlines, airports, UkSATSE, other business entities, as well as passengers?
- The industry has been waiting for this agreement for almost ten years. When in 2011 or 2012 the talks about the possibility of signing the document moved to the practical level (in general, negotiations on the CAA were conducted for almost two decades. - Ed.). we hoped to conclude an agreement for a maximum of 2-3 years. But time dragged on. (First - due to disputes between Britain and Spain over participation in the "Single European Sky" program at Gibraltar airport, then - given the active phase of Russian aggression in Ukraine. - Ed.). And here the document is signed in 2021.
Why did we wait so long for it? First, the new arrangements will allow dozens of airlines from around the world to fly to Ukraine - without bureaucratic procedures, additional government regulations, intergovernmental arrangements and without any quotas. In Europe, all these issues have long been regulated by the market. It is clear that equal competition between its participants will benefit the people of the country, airports, and the same UkSATSE. Because in the air market everything depends on the number of takeoffs and landings, on the number of passengers who arrived and departed, on the scale of passenger traffic. There is both an aviation component and a non-aviation one: traveling passengers arrive to look at something, to buy something. They need to spend the night somewhere and eat something. And that's all - the money that remains in the region where they flew. These are advantages for the country. As well as safer and more efficient use of space and air traffic control.
It is important for passengers that competition leads to lower prices, as well as to improved quality of service, because airlines are more active in fighting for the customer. You see, it used to happen that Ukrainian airlines remained de-facto monopolists for a long time and operated flights to Europe and other parts of the world at high prices, which were beyond the means of most of our compatriots. This has hampered travel - not only tourism, but also business.
- That is, the benefits for the state, airports and citizens are obvious. And what about airlines? You said that until recently they were monopolists, so they could set prices and earn a lot. Now the "price appetites" will have to be limited, which, obviously, not everyone likes.
- It is clear that the owners of airlines, who once had preferences, now think: how to live? Now the company must worry that the passenger chooses it, and not think that because of the lack of alternatives, he will not go anywhere. There are reserves. For example, low-cost carriers can transport a person from Paris to Kyiv or vice versa for 100, 20 or even 10 euros. Whereas 4-5 years ago the ticket cost from 400 to 600 euros ...
- Will joining the agreement contribute to the emergence of new airlines in Ukraine, in particular low-cost companies and the rapid development of the national air carrier, which was initiated at the highest level?
- I think the number of domestic airlines will increase. Competition will intensify, transportation costs will fall. But it will not happen at one time. The priority is to legislate on issues related to the implementation of the Common Aviation Area Agreement. We have a lot of problems with regulations and regulations in this area. Plus the need for modernization and reconstruction of airports, which will require considerable funds.
- Can there be any problems with the incorporation of European norms in this area into domestic legislation?
- Having made efforts, we will solve all problem questions quickly. First of all, we have been talking about some standards, directives and regulations of the European Union concerning the aviation industry for a long time, so we have some work to do. Suggestions on how to do it better and faster AAUCA together with partners prepared in 2015-2016. The state leadership has repeatedly appealed to the state, proving that the implementation of European norms (even before the signing of the agreement) will quickly yield results - both in price and quality. And at the same time we will be recognized in Europe and the world. The signing of the agreement forces Ukraine to accelerate these steps.
HOW THE MARKET WILL HELP AIRPORTS TO MAKE MONEY, CARRIERS - TO COMPETE, UKRAINIANS - TO FLY
- Among the main issues to be addressed in the implementation of the agreement - the approval of the conditions of formation and size of airport fees. Most of the participants of the Economic and Legal Aviation Forum focused on this issue.
It is clear that in the coming years the state will not be able to finance from the budget all the expenses necessary for the modernization and reconstruction of Ukrainian airports. Airports themselves should earn both for day-to-day operations and modernization, and if possible, be able to attract loans for investment activities. It depends on the fees that are handled at the airports. And the Soviet system of regulation in this area, which still operates in our country, needs to be changed. It is time to implement the sectoral European directive, as the participants of the aviation forum said.
Agreed position: airport administrations, which serve up to 5 million passengers a year, should determine the amount of airport charges themselves. Some are afraid of responsibility: what if I am pressured? And suddenly someone does not understand me? But you are a leader, a manager. You have to prove to the carriers that you have to pay for the opportunity to fly safely and comfortably to a convenient airport.
The use of accumulated funds should be as transparent as possible. The priority of their direction is the development of airport infrastructure and improving the quality of services.
Take, for example, Kyiv Sikorsky Airport. It is necessary to expand and lengthen the runway, make new platforms, buy equipment... All of this is a considerable expense. And where to get money? The ability to regulate airport fees will help to attract resources. And not only directly, but also through interested investors who will see that by investing money today in the development of airport infrastructure, it will be possible to make good money tomorrow.
I always say the same about the need to incorporate into the domestic legal field a directive of the European Union regulating groundhandling at airports. According to it, the airport, which serves up to one million passengers annually, organizes such a service independently and makes money on it. At airports with a passenger traffic of 1 to 2 million, airlines can self-service their aircraft, with a passenger traffic of more than 2 million: ground handling is organized on market terms, through a transparent competition, which can be attended by any specialized companies, including - and the relevant airport services. This does not mean that the airport will have any advantages in the eyes of the tender commission. The European directive stipulates that it must have a subsidiary that will compete on an equal footing with all willing handlers (specialized aircraft ground handling companies. - Ed.).
- Can you at least simplify to explain to readers at the expense of what airports earn?
- There are four main fees: for takeoff and landing, for passenger service, for aviation safety and for excessive parking of aircraft. And the Ministry of Infrastructure has a task to develop and approve the most transparent and clear formula for calculating all these fees in accordance with European norms and rules. We hope that next year such a methodology will be approved.
- During the aviation forum, proposals were made to speed up the procedure of adopting a resolution of the Cabinet of Ministers and an order of the Ministry of Infrastructure, which will regulate the issues of airport fees. To do this, AAUCA specialists are ready to lend a hand - to help as consultants and even to test the new model at several airports.
- We will continue to insist on this. The sooner the new rules take effect, the sooner airports will have the resources to modernize and develop. We also have questions about the text of the provisions that are being prepared. One of the ten AAUCA committees is the Economic-Law Committee. There are practitioners with extensive experience in aviation and economics. They have to draw conclusions. And we send wishes and recommendations to the Ministry of Infrastructure.
- One of the tasks in this regard is a careful analysis of the level of airport charges in the EU countries, in order to eventually synchronize with them the tariffs of domestic airports. But we understand that the financial capabilities of our airlines are generally worse than European ones, and the level of wealth of the average passenger is much lower. How to look for the middle ground and an acceptable option for everyone?
- All of us in general (and the aviation industry in particular) are going through difficult times. It is no secret that civil aviation is on the list of industries most affected by the pandemic. Now we are slowly recovering. Air transportation resumed by about 75-80% compared to 2019. The market is slowly winning back. I believe that this will continue to be the case.
From now on, the market will regulate this sphere in Ukraine as well: if one company does not want to fly from one or another airport, then another will fly. The airspace of our country is now open to carriers from anywhere in the world. And any taxes paid by them (at home) and fees at our airports are compensated by increasing the number of passengers. If there is a better quality of service, lower ticket prices, passengers will be "drawn" to them. And so, you will be able to find the golden mean you are talking about.
- That is, a normal airline will not rush to transfer the cost of airport services to a conditional passenger, who traditionally uses its services, and will try to find two more new passengers...
- Exactly. I am convinced that only with the number of customers can the carrier solve all its problems, and even help the airports - because they will also have additional, including non-aviation, revenues from passenger service.
- A representative of Turkish business, which has an airport in concession, spoke at the aviation forum. He reminded of the unwritten world rules, according to which aviation should bring the airport 40% of profits, and non-aviation - the remaining 60%. Are we close to this and in general: can any of the Ukrainian airports, except for "Boryspil", count on such a ratio?
- It all depends on the number of passengers who were served at the airport for departure and arrival. Because they use shops, restaurants, food outlets located in the airports. Parking lots are also an important source of income for non-aviation activities. But so far we have a ratio of aviation and non-aviation revenues far from the mentioned world standards. Somewhere between 70 and 30%. That is, the aviation component is more than twice as prevalent.
- The main thing: to fly, and how to fly, it does not matter...
- So. This is one thing. And the other thing is that in the past, airports always had some preferences "for their own". These entrepreneurs, for example, signed contracts for 10-15 years and worked quietly, without changing anything, without caring about the quality of service. After all, there was no competition and struggle for the passenger's attention. Now it's all changing. For example, I like the approach proposed by the new management of Boryspil International Airport, which took all parking lots for service at the airport. Whereas before they were rented out, on which the airport earned almost nothing: all the profits went into the pockets of intermediaries. And this is almost 25 million hryvnias a year.
THE WAY TO SUCCESS: UPDATING THE GAME RULES AND BUILDING INFRASTRUCTURE
- Now, after the signing of the Agreement on the Common Aviation Area, when the attention of the authorities and society to this topic is increased, it is probably time to initiate and solve a number of other problems in the aviation industry. For example, the forum discussed the need for a radical update of sectoral legislation. In particular, the adoption of the framework law "On Airports and Airport Activities" and the approval of a separate Aviation Transport Strategy.
- 15 years ago it became clear that Ukraine needs such a law. We even developed his project by the Association. However, support for our initiatives by the State Aviation Service and the Ministry of Infrastructure has not yet been found. Although the laws on airports and airport activities are in almost all countries in Europe and the world. Most civilized nations also have separate aviation transport strategies. I think Ukraine needs such a document as well. Mention of aviation in the National Transport Strategy for the period up to 2030, I believe, is not enough. We need to specify where we are going, what to do with airports, with airfields, with terminals, which companies, what aviation industry in the country should be. We have an aviation state, we can perform almost the entire cycle - from the construction of the aircraft to its testing and commissioning.
- Assess how our airport infrastructure has changed in recent years. What is the most iconic? Maybe you will name the airports where you are especially pleased to fly, where the level of aviation and service is quite high?
- Undoubtedly, the preparation of the country for Euro-2012 gave a great impetus to the development of airport infrastructure. At that time I was the Deputy Head of the State Aviation Administration, responsible for airports. And we developed a program that was implemented before this event. Much has been done to develop terminals, upgrade runways, and build platforms. We have more or less improved the infrastructure at five airports. Unfortunately, Donetsk Prokofiev airport, our former pride, was captured by the aggressor and is now destroyed.
As for the rest of the airports, the decision to include the development of the airport infrastructure in the country in the program "Large Construction" gave a new impetus. We are already seeing results. Renovation of the aerodrome at the airport "Odessa" - at the finish line. And the runway, and steering lanes, and platforms are almost new. The terminal is built. I think in a year or two this project will be fully completed.
For a long time we could not deal with the airports that seem to have been leased in 2010: Dnipro and Ivano-Frankivsk. For more than a decade, almost nothing has been done at these airports, it seems that no one has invested a penny in their development. Now the situation is changing. Dnipro already has a project and a contractor, and preparatory work is underway. I think that next year a new terminal will be put into operation at the airport and at least the infrastructure of the airfield will be put in order to use the existing runway without any problems.
- And what about the regional airports, for the reconstruction of which funds have been allocated in this year's budget? If I'm not mistaken, these are "Vinnytsia", "Rivne" and "Kherson".
- The work continues. For example, in Vinnytsia, the reconstruction of the runway has begun. In Kherson, the airport is closed for passenger and freight traffic. Active reconstruction is underway. This issue is taken care of by a proven contractor - the company "Avtomagistral". By the way, it is also a member of our Association.
But I can't say anything about Rivne yet. Formally, some processes seem to be taking place, but the results are not visible yet. Although it is hoped that after the recent appointment of a new director, work will accelerate.
- The forum also discussed plans to test the possibilities of public-private partnership in airport management in Kherson, in particular on the terms of a concession. Many were interested in the presentation of a representative of the Turkish airport "Dalaman", who spoke about the experience of implementing such programs in their country. These figures are impressive: in 10 years, Turkey has earned almost $300 billion...
- We will also support such forms of cooperation between the state and business and attract investment in the aviation industry. Because the budget "will not pull everything". Businesses need to be attracted and encouraged to invest in relevant projects. About what the representative of the Dalaman airport told. This is how they work in many EU countries and throughout Europe.
We proposed to both the previous government and the current one to create a special company under the Ministry of Infrastructure, which would manage the airports, look for investors for them, on favorable terms, giving them a temporary right to manage airport facilities - both terminals and runways. And the forms of such cooperation are different - rent, concession, outsourcing. The main thing is that the project benefits the country and its people.
- And what, in your opinion, are the main tasks for the development of airport infrastructure in Ukraine next year? Given that, we hope, adequate funding for the development and modernization of regional airports will be provided in the 2022 budget, and a separate line will provide funds for the airport "Dnipro", and with appropriations to improve air capabilities of Transcarpathians will be fine.
- I think the process of building an airport in the Dnipro will not stop. As for Transcarpathia, the region falls under Article 96 of the Air Code "On socially necessary air transportation". The airport in Uzhhorod, which has not been operating for more than three years, has resumed operations. It can now accept small class aircraft. Preparations are underway for the construction of a new airport, as such a remote region must have a stable and permanent connection with other parts of our country.
I am convinced that the inclusion of the airport infrastructure in the "Large Construction" program and the modernization, reconstruction and construction of new facilities envisaged by it will contribute to the rapid growth of passenger traffic. And with Ukraine's accession to the Common Aviation Area, the number of companies that will fly not only to other countries, but also between our regions, will increase. Which will have a positive effect on the cost of air transportation.