The ghosts of public rants past – Saakashvili and Odessa Airport

September 3, 2015

On 26th June, during a deliberately very public rant and accusations of protecting “oligarch interests” – in the case the interests of Ihor Kolomoisky – Governor Saakashvili tried to remove Chairman of the State Aviation Service of Ukraine, Denis Antoniuk, from the Odessa administrative scenery.

In short Governor Saakashvili accused Mr Antoniuk of deliberately monopolising the distribution of air routes for Mr Kolomoisky’s aviation company.

The public message, of course, was the new brush will sweep clean.

To be fair to Governor Saakashvili, Mr Antoniuk prima facie has always been seen to be a “Kolomoisky man” having worked for many years for the aviation company Mr Kolomoisky owns, and Odessa Airport being almost (but not entirely) serviced by that same aviation company both for domestic and international flights – with historical pricing being far beyond “reasonable”.

Following the much publicised rant, Mr Antoniuk was duly suspended from office on 1st July by Decree of the Cabinet of Ministers of Ukraine of 1.07.2015 №658-P whilst an official investigation was launched.

Mr Antoniuk took to social media and legal redress over damages to his reputation (which to be blunt is not particularly held in high esteem anyway).  Damages to be claimed cited at approximately $100,000.

As of a few days ago, 31st August to be exact, Mr Antoniuk has resumed his duties as Chairman of the State Aviation Service of Ukraine.

Oh dear!  It seems the Governor’s brush has not exactly swept clean.

Further, as of yet, there does not appear to be many, if any, new operators in and out of Odessa Airport either.  However, whilst the “scandal” was headline news, Mr Kolomoisky’s aviation company did indeed lower some ticket prices, although it claimed the high prices was due to the high price of aviation fuel at Odessa airport.

Odessa APT

Mayor Trukhanov rode the  PR tide and began trying to undo his odious predecessor’s sale of the majority shares of Odessa airport to Messrs Kauffman and Granovsky (the owners of the very recently (a week or two) renamed Finbank as locals will know it – now Platinum Bank) in a dubious privatisation deal.    Indeed the Mayor managed to get a few million Hryvnia in dividend for the city from its retained 25% shares.

The usual murky corporate structures have of course been employed to take ownership of the airport.  Ukrainian company OOO Odessa Airport Development (registered in Kyiv) is owned by UK company Odessa Airport Development Limited, whose shares are owned by Valafichita Holdings (Cyprus) and Letnon Ltd BVI.  Behind those sit Messrs Kauffman and Granovsky.

It would seem the Governor has either moved on to other things delegating the “airport issue” to others who have accomplished nothing, or he has struck a deal with Kyiv regarding insuring an opening of Odessa airspace regardless of Mr  Antoniuk keeping his job or not, or he has another plan as the existing structures are too entrenched to take on and beat swiftly enough for his political time frame.

The Governor may yet have success, in full or in part, regarding competing carriers to and from Odessa Airport.  It is too soon to say.  Whatever the case, Odessa Airport can certainly cope with more than a single flight per hour – and there is certainly room to build two new runways.  In fact there is more than enough room.

If the Governor is eventually successful then presumably prices will come down and stay down through a competitive market, which to be charitable was certainly a “limited market” if not the monopolised market due to nefarious vested interests between Messrs Kolomoisky and Antoniuk as charged.  Likewise whatever scams exist to drive the cost of aviation fuel far beyond the costs of aviation fuel in Kyiv will certainly then be curtailed.

The return of Mr Antoniuk is likely to wrangle the ego of Mr Saakashvili – regardless of whether the Governor was way off with his accusations (unlikely to be blunt), or whether a grubby deal was struck in Kyiv to keep Mr Antoniuk in his role – a lost skirmish to win a bigger battle, or a significant defeat for the Governor remains to be seen.

It may embolden those that have toned down their illicit activities, quietly watching from the shadows.  Perhaps it will also cast doubt upon the Governor’s ability to actually combat corruption amongst the “institutional ranks” close to Kyiv with the Odessa constituency too.

From the goodness of their hearts, it appears that Messrs Kauffman and Granovsky have graciously offered up their airy and natural light blessed modern foyer at what was until very recently Finbank HQ (now Platinum Bank), situated next to the Odessa Oblast Administration building to house the Governor’s One-Stop-Shop.

A far nicer working environment than a cold and dank Soviet bunker in which to one-stop-shop the creation of your new business empire.  How terribly generous and public spirited of Messrs Kauffman and Granovsky to offer that space when the Governor was coincidently publicly ranting about Odessa Airport – quite how grubby whatever deal was struck is, perhaps time will eventually tell.

But what is the Governor’s Plan B should  Mr Antoniuk continue to allegedly favour the company of Ihor Kolomoisky?  If that aviation company continues to charge unreasonably high prices?  If the aviation fuels scams continue?  If Messrs Kauffman and Granovsky continue to mismanage Odessa Airport?

Does he have a Plan B – or perhaps an alternative Plan A?

Situated about 90 kilometers north of Odessa is an abandoned/unused Ukrainian Air Force base in the middle of nowhere – that middle of nowhere is called Limanskoe.

As usual, the ever-leaky Governor’s Administration would seem to indicate that Governor Saakashvili has the idea (or has been fed the idea) that this would be a suitable place for Odessa Airport – or more precisely another Odessa Airport.

The fact it would require major investment not only in immediate airport infrastructure but also road infrastructure from the middle of nowhere to the city of Odessa is seemingly a mere detail.  Likewise the fact it would take approximately 90 minutes to reach the city from that location if a decent road existed.

In 2 hours, for a $50 taxi fare, it is possible to be at the Moldavian capital Chișinău and hop on a flight to Milan for €86.  Far cheaper than the existing Odessa Airport prices and the pain of changing flights at Kyiv, and if the alternative Limanskoe airport goes ahead, not much difference in travel time to and from  Chișinău or Limanskoe airports by car.

It has to be recognised that there would be gains for the Governor to carry out such a plan.  Firstly he is not Mayor of Odessa city, but Governor of the entire Oblast.  His duty is to the oblast, not only the city as the Mayor is duly tasked.

Building a new road to Rine (and on into the EU) instead of refurbishing the existing E87 that runs into the EU and on to Turkey, is clearly a deliberate development/reinvigoration choice despite the obvious financial additional costs.

An airport outside the city does not generate revenue for the city, but revenue for the oblast.  It also means more money from Kyiv for the oblast infrastructure (beyond that apparently promised for the new road to Reni).  It creates jobs.  It creates opportunities for international FDI/partners/privatisation.  It created development/rejuvenation opportunities for Limanskoe and the sparse surrounding pockets of humanity.  It creates the opportunity to compete with the existing airport if the entrenched interests at the existing airport simply cannot be undone by a Governor with limited powers.

However, Limanskoe is not a 15 – 20 minute drive to the city centre.  It is certainly not as “tourist/traveler” friendly, or that friendly for the business orientated visiting Odessa for the day.  It is not a logistics hub – yet anyway.

It is certainly not going to be anywhere near as cheap to develop, nor as convenient for most flying to Odessa, as putting two more runways at the existing airport and forcing the existing airport operation to handle more than a single flight an hour (of which it is more than capable even now).

Thus whether the Limanskoe idea is a stick to threaten vested interests with at Odessa Airport, or whether it is a very expensive Plan B – or alternative Plan A is difficult to say – although it does seem that the Limanskoe “project” certainly has legs amongst the “Governor’s people”.

Naturally media attention will be concentrated upon the return of Mr Antoniuk as Chairman of the State Aviation Service of Ukraine and Governor Saakashvili’s attempt to oust him – but the other issues behind the curtain briefly outlined above are going to be far more important as time marches on.


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