Archive for July 10th, 2017

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Ryanair ditches Ukraine

July 10, 2017

In an announcement on 10th July, low cost air carrier Ryanair ditched its plans to begin services to Kyiv and Lviv.  The Ryanair statement is particularly barbed in its prose:

“RYANAIR CANCELS PLANNED UKRAINE SERVICES AS KIEV AIRPORT FAILS TO HONOUR COMMITMENTS

Ryanair, Europe’s No.1 airline, today (10 July) announced that it has cancelled its planned entry into Ukraine following Kiev airport’s failure to honour a growth agreement reached at the Ministry of Infrastructure with airport officials and the current Airport Director General, Mr Riabikin, in March of this year.

Regrettably, Kiev airport has instead chosen to protect high fare airlines (including Ukraine International Airlines) and deprive Ukrainian consumers/visitors access to Europe’s lowest air fares and widest route network. As a result, Ryanair has no choice but to cancel 4 new Kiev routes and 7 new Lviv routes, which will result in the loss of over 500,000 passengers and 400 jobs.

Ryanair sincerely apologises to the many customers who have booked low fare flights to/from the Ukraine, all of whom will be contacted by email and refunded for their cancelled flights.

Ryanair’s Chief Commercial Officer, David O’Brien said:

“On behalf of Ukrainian visitors and consumers, we regret that Kiev Airport has demonstrated that Ukraine is not yet a sufficiently mature or reliable business location to invest valuable Ryanair aircraft capacity. Kiev Airport’s failure to honour commitments will result in the loss of over 500,000 customers and 400 airport jobs in the first year alone, which would have provided a significant boost to the Ukrainian economy. We regret also that Lviv Airport has fallen victim to Kiev Airport’s decision. 

Ryanair will now transfer this capacity to competing markets, such as Germany, Israel and Poland instead. Ryanair will grow from 130 million passengers this year to 200 million passengers by 2024 and retains the hope that Ukraine might participate in this growth at some point in the future.”

ENDS”

Blimey!  That slap is really going to sting some political faces in Kyiv.

The President, Prime Minister, and Infrastructure Minister Vladimir Omelian, having long since made attracting more flights in, out, and within Ukraine a priority and have regularly talked up the prospect in the media, (as well as drafting governmental plans to accomplish this policy goal).

Quite what was Ryanair demanding from Borispol Airport that CEO Pavel Ryabikin so spectacularly failed to deliver?

According to Mr Ryabkin, among the list of requirements within a 40 page contract were; free air navigation, free reception, free parking for taxis, free space for advertising, free rental space in the terminal, a free collection system for luggage, free offices for ticket sales, free land for the construction of the hotel, fixing parking areas for aircraft, free service offices for car rental, a flat rate per passenger airport tax for 4 years at a rate of $7.50, airport payment of 35% of revenues shops duty-free, and 60-day credit from the airport (albeit unclear if that is 60 days from date of invoice or 60 days from month end).

The accuracy of those requirements aside, it is surely better to cite “contractual issues” for the failure rather than list confidential contractual issues in public.

No wonder they can provide flights at £0.50 – or almost.

There are also claims that Borispol Airport would not sign a contract that, in particular with regard to Kyiv-London flights, had a requirement from Ryanair that it received an 80% discount on airport service charges – Borispol citing existing flights on that route receiving no such discount.  Yet others cite Borispol claims that Ryanair would cause the airport losses of UAH 2 billion.

Naturally there will be claims (with or without substance) that it is simply all maskerovka to protect the Ukrainian MAU airline (which falls within the oligarch Ihor Kolomoisky’s portfolio of interests).   It is undoubtedly true MAU will not suffer from this outcome.  Further, it has long been rumoured that MAU receives significant discounts from Borispol (and other Ukrainian airports) distorting the playing (or perhaps air) field.

However, Borispol Airport must have a standard framework contract.  So will Ryanair.  Borispol has contract with numerous international airlines.  Ryanair flies in and out of numerous international airports.  Somewhere in between those two framework contracts there was a compromise to be found – or seemingly not.

Are some of Borispol Airport’s fees far too high for all carriers (low cost or otherwise)?  Probably.  Are some of Ryanair’s demands far too onerous?  Probably.  Do other low cost airlines fly in and out of Ukraine?  Yes.  By way of example Onur Air the Turkish low cost airline flies in and out of Odessa.

Thus it is all something of a PR disaster that perhaps could have been avoided by a period of quiet, discreet, confidential contractual negotiations before any/so many statements for public consumption were made or tickets put on sale.  There are times when no deal can be reached.  Certainly no deal is better than a bad deal.  Hence doing things without fanfare until signatures are actually on commercial contracts is sensible.

While Kyiv and Lviv may well be spared drunken UK stag and hen parties (there is a truly silver lining to this cloud) there will also be significant damage to an already struggling national image when it comes to inward investment and business attractiveness.

No doubt there will have to be a political post mortem over this incident – for one way or another it was avoidable.

 

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