ALMOST one year ago to the day, Ryanair, Europe’s largest low-cost carrier, announced plans to begin serving Ukraine. The eastern European country had been a glaring hole in the airline’s route network, deliberately avoided because of the anti-competitive advantages afforded to Ukraine International Airlines (UIA), the flag carrier based in Kiev, the capital city. A new infrastructure minister, Volodymyr Omelyan, brokered the deal between Ryanair and Boryspil Airport, Kiev’s main gateway and home base of UIA. But it collapsed within months. Now, Ryanair, the government and the airport are trying again.
On March 23rd Ryanair announced that it will launch ten routes to Kiev and five to Lviv in October. The most recent move marks a scaling up of Ryanair’s original plan. The airline never lost interest in serving Ukraine, but said its business confidence was “dented by the Kiev experience”. As Gulliver previously reported, that experience comprised of Boryspil Airport amending its contract at the eleventh hour, UIA filing lawsuits to block the low-cost carrier’s entry, and both companies’ management denigrating Ryanair in the local press. “It was sabotaged and unfortunately it was done in a very rude way,” Mr Omelyan recalled at the time.
UIA’s opposition to Ryanair was entirely understandable. The flag carrier is owned by Ihor Kolomoisky, an oligarch who has near total control of the country’s aviation sector. Opening the market to low-cost competition will take money directly out of Mr Kolomoisky’s pockets. But Boryspil Airport’s opposition was more perplexing. Its boss, Pavlo Riabikin, claimed that the discounted user charges promised to Ryanair would cost his airport money.
Yet the success of Ryanair’s business model elsewhere in Europe suggests otherwise. Its demand-catalysing low fares have been shown to create widespread benefits: for passengers, who can travel more freely, for governments, whose economies grow more rapidly, and for airports, whose retail shops, restaurants and car parks bustle with activity. Mr Omelyan directly accused Mr Riabikin of pandering to UIA, his main customer, at the expense of the country. He called for the airport boss to go, insisting: “You can’t make good reform with bad people.”
What has changed this time around? Nothing has shifted at the top level of Boryspil Airport’s management structure. Mr Riabikin, who remains in charge of the facility, was sitting side by side with Michael O’Leary, Ryanair’s chief executive, as the new deal was signed. But the political pressure on him has ramped up markedly. Last time, Mr Riabikin and Mr Omelyan gave differing accounts of the commitments and objections voiced by Boryspil Airport when the deal was inked. This time, Petro Poroshenko, Ukraine’s president, stood beside the airport boss as he put pen to paper. Another change of heart by the airport would not simply be an affront to the infrastructure ministry, it would be a public act of defiance against the country’s top leaders. Even close friends of oligarchs cannot get away with that.
Category: Business and finance, Gulliver