In Re (#11 November 2019)

Development of Aviation Industry in Ukraine

Rostyslav Nykitenko

Aviation is a very promising area of ​​infrastructure development currently undergoing reform in Ukraine. Considering the favorable territorial position of the country, the aviation industry is an important element of public policy aimed at sustainable economic development.

The first steps to establish air transportation on the territory of Ukraine were made in 1923. The first Ukrainian airline, called Ukravozduhput, was created.

According to the official data of the Ukrainian Infrastructure Ministry, in 2018 domestic flights were operated by 34 airlines operated by 100,300 commercial flights (93,000 flights in 2017), while the number of passengers carried increased compared to 2017. 18.7% and amounted to 12,529 thousand people, which indicates a steady upward trend in demand. Analyzing the statistics, we can conclude that in recent years the air transport market in Ukraine has been developing dynamically: since 2016, the number of passengers using the services of Ukrainian carriers has increased annually by a quarter.

Passenger transportation was carried out by 21 domestic airlines, whose leading positions were held by:

— Wind Rose;

— Azur Air Ukraine;

— Yanair;

— Bravo;

— Ukraine International Airlines.

Such an increase in passenger traffic has led to an improvement in the status of both national and regional airports. According to the Ukrainian Infrastructure Ministry, repair works are currently underway at the airports of Kyiv, Poltava, Zaporizhzhia, Uzhgorod, Odessa, etc.

Ukraine is also actively taking part in international aviation activities. For example, a group of Ukrainian military aircraft will participate in Sanicole Airshow 2019, an international aviation show held in Belgium. In general, aviation show guests include aviation representatives from 13 countries.

State bodies regulating the aviation industry in Ukraine

Civil aviation is an important segment of the infrastructure of any state, which also plays a role in shaping the country’s international politics and economy. Therefore, the functions of management of the aviation industry are within the competence of a number of state bodies, which in their entirety form an extensive system of regulators. They include:

— Ukrainian Infrastructure Ministry — the central body of executive power, which ensures the formation of state policy in the transport field;

— The State Aviation Service of Ukraine is the central executive body responsible for the implementation of state policy in civil aviation (authorized body for civil aviation);

— National Bureau of Investigation of Civil Aviation Events and Incidents — a specialized expert institution that investigates aviation events and incidents with civilian aircrafts of Ukraine and foreign civilian aircrafts of facts of violation of the order of use of Ukrainian airspace;

— Ukrainian Infrastructure Ministry — carries out direct coordination, reform and control over the aviation industry.

According to the Regulations on the Ukrainian Infrastructure Ministry, this state body coordinates and controls the activity of 17 enterprises of the aviation industry, the main ones of which are:

— State Enterprise Boryspil International Airport;

— State Enterprise Lviv International Airport;

— Ukrainian State Design and Technology Research Institute for Civil Aviation Ukraeroproject;

— State air traffic service company of Ukraine.

The State air traffic service company of Ukraine is the basis of the national air navigation system and the United Civil-Military Air Traffic Management System of Ukraine. This organization carries out a number of activities on a regular basis related to the organization and management of airspace, the development of Ukraine’s air navigation system, and conducts large-scale international work. Recent achievements in this field are:

— 2018. The State air traffic service company of Ukraine and the European Aviation Safety Agency (EASA) have signed a Contract for the certification of State air traffic service company of Ukraine as a national air navigation service provider in accordance with European Union standards;

— November 2018. An Agreement between the State air traffic service company of Ukraine and Eurocontrol on coordination procedures and emergency response while ensuring the flexible use of airspace was concluded;

— December 2018. According to an audit conducted by the European Aviation Safety Agency (EASA), the State air traffic service company of Ukraine received a certificate of compliance with EU regulations;

— January 2019. The State air traffic service company of Ukraine took part in the development of an action plan for the implementation of the NATO Regional Airspace Security Program (RASP).

In addition to the system of state bodies, an important role in the aviation industry of Ukraine is played by international organizations our country is a member of.

The International Civil Aviation Organization (ICAO), established in accordance with the 1944 Chicago Convention on Civil Aviation, is a specialized agency for the organization and coordination of international cooperation between States in all aspects of civil aviation. About 190 countries are members of the ICAO. Ukraine joined ICAO when it was part of the USSR.

Two ICAO European Regional Training Centers currently operate in Kyiv:

1. Aviation Security Center (based on Boryspil State International Airport and National Aviation University) — since 1996.

2. Center for the Training of State Aviation Safety Inspectors and State Aviation Inspectors for Civil Aircrafts (based at National Aviation University) — since 2001.

The presence of such an extensive system of regulatory bodies guarantees comprehensive assistance and control by the state on the activity of the subjects of the aviation industry market in Ukraine.

Regulatory framework of the aviation industry in Ukraine

The issue of legal regulation of the aviation industry in Ukraine is represented by a large number of legal acts of different legal force, among which there are a number of major international and national documents that have the greatest impact on the condition of aviation in Ukraine.

The international regulatory framework is represented by 28 multilateral aviation law documents, including:

— The Convention on International Civil Aviation (Chicago Convention), Ukraine became a party of the convention in 1992;

— Transit Agreement for International Air Services;

— The Codified Convention for the Unification of Certain Rules for International Carriage by Air, which since 2009 has replaced the so-called Warsaw System in Ukraine (the latter consists of a series of documents later incorporated into the General Convention);

— The Montreal Protocol of 1971, covering various aspects of aviation security, combating the illegal seizure of aircraft.

The domestic regulatory framework is represented by the following documents:

Air Code of Ukraine;

— Aviation Rules of Ukraine “Procedure for granting and cancellation of rights for operation of air routes”;

— Aviation Rules of Ukraine “General rules of flights in the aviation space of Ukraine”;

— Ukraine’s aviation transport strategy for the period up till 2030, etc.

The current condition of the legislative framework governing the legal relationship in the aviation sphere in Ukraine is at a fairly good level. In recent years, Ukraine has implemented all the important European standards of quality and service in the air transport market, which brought us much closer to signing the Agreement on a Common Aviation Area with the EU.

Reforming aviation industry as part of infrastructure reform in Ukraine

The reform of the aviation industry in Ukraine is an important element of infrastructure reform undertaken by the Ukrainian Infrastructure Ministry. The main objectives of the aviation sector’s reform are to improve the efficiency of its management, to modernize its aviation infrastructure, to improve its security and to comply with EU standards.

According to the Aviation Transport Strategy of Ukraine till 2030, the following ways of development of the aviation industry in Ukraine can be distinguished:

— deregulation and liberalization of the aviation market: the government seeks to create conditions for free development of the industry, broader access to the private operators market (first of all — “low cost”), introduction of concession procedure of airport terminals in order to improve the quality of transport services, create conditions for attracting private terminals and airfield infrastructure;

— reconstruction and development of the national network of regional airports through the development of terminal passenger and cargo complexes with multimodal technologies at the expense of their owners and public-private partnership;

— signing and implementing the Agreement on Common Aviation Area (SAP) with the EU for Ukraine to become a transit state. At the moment, an active negotiation process is under way within the framework of the agreement; the parties have started preparations for the second meeting of the Transport Dialogue 2019 in Brussels, an important component of which will be a forum on infrastructure business.

Taking into account the impact of the SAP Agreement on the Ukrainian air transport market, the Infrastructure Ministry states that the liberalization of the market between Ukraine and the EU within the SAP Agreement will have the following positive effect:

— access of Ukrainian airlines to the EU market — increase in passenger and cargo flows;

— realizing the transfer potential of Ukraine (development of an international hub at Boryspil Airport);

— development of regional airports of Ukraine, increase in  level of employment;

— attracting low-cost carriers to the Ukrainian market;

— an increase in the number of flights served by the State air traffic service company of Ukraine.

There have already been some positive developments in the reform process. Thus, the Ukrainian market has attracted the world’s leading airlines, including low-cost operator Ryanair.

In 2018, passenger traffic at Ukrainian airports exceeded 20 million passengers. 28 new international routes for foreign airlines and 20 international and domestic routes for Ukrainian airlines have been opened.

The development of regional airports has begun, as works in Mykolayiv and Uzhhorod have been resumed and a new runway is being built at Odessa Airport.

The development of the project International multimodal transport hub at the base of Bila Tserkva Airport was initiated. Today, there are positive developments in reform of the aviation sector, but only stable development and increase in the volume of air transportation will lead to high economic performance of the aviation industry in Ukraine.

Negative aspects of current state of aviation industry in Ukraine

Analyzing the current state of the aviation industry in Ukraine and the conclusions of experts on this subject, we can identify a number of points that need improvement:

— Actual monopolization of the air transportation market. Airports (which are naturally monopolists for the provision of terrestrial maintenance services) have traditionally been entrusted with the administrative function of regulating and coordinating access to terrestrial maintenance services by other service providers and airlines. In other words, there is a combination of actual market management and actual stay on the market, which creates conditions for abusing an airport. This situation is the subject of constant oversight by the Antimonopoly Committee of Ukraine. The solution to this the division of airport activities into infrastructure management and ground handling, i.e. so-called “unbundling” An example of successful reform is EU Directive 96/97, which regulates access to the terrestrial maintenance service market.

— Unrealized transit potential. Territorially, Ukraine is located at the intersection of important transport links, but does not fully make use of its own capabilities. An important step in this direction will be the signing of the SAP Agreement, which will give Ukrainian carriers access to European transfer routes. Today, the Agreement is still under discussion, and the economic situation of Ukrainian carriers is much lower than European ones, which in the case of the Agreement will put them in tough economic competition conditions.

— Absence of a stable state position on the air transportation market. The aviation industry was not paid proper attention to for a long time, and there was no clear course of development for this transport segment within the Infrastructure Ministry. The lack of stable state support and reform have led to stagnation on the Ukrainian air transport market and it is lagging behind European countries. It’s only in the last 5 years that the aviation industry in Ukraine has begun to develop actively. The Ukrainian Infrastructure Ministry has taken a number of successful steps to support the air transport market in Ukraine and developed the Aviation Transport Strategy of Ukraine till 2030, which foresees concrete positive steps in aviation.

Based on the above data and the regulatory framework governing this range of relationships, we can draw the following conclusion. Ukraine has great potential in the field of air transportation, which has only recently been implemented through the implementation of state reforms. A stable state position aimed at developing the aviation industry is leading to a gradual improvement of the position held by Ukrainian aviation. The introduction of international standards and the course for signing the Common Aviation Area Agreement with the EU are important positive steps towards building stable, cost-effective relations with the EU in the aviation sector, which will have a positive impact on the aviation industry in Ukraine.

Rostyslav NYKITENKO is an advocate / barrister

 

Subscribe
The Ukrainian Journal of Business Law

Subscribe to The Ukrainian Journal of Business Law right now and enjoy the most relevant issues on doing business in Ukraine on your device or in print.

All this for just USD 9.99 a month.

 

Subscribe now