Kyiv Boryspil International Airport is one of the few government-owned enterprises which went from losses to profits over the past two years.
Yevhenii Dykhne, the acting CEO of the main aviation gateway to
Ukraine, told the Kyiv Post in an interview that the turnaround he engineered
means the airport can compete favorably with other international transport hubs
in Europe.
Dykhne, 46, was in charge of organizing passenger transportation
operations in the state Ukrainian railways, known as Ukrzalyznitsia, before
getting appointed as acting CEO in Boryspil in September 2014.
Though Dykhne has been heading the airport for two years, he is
still an acting director.
There have been two competitions for a new permanent CEO, but both
were stopped. One was blocked by a court ruling initiated by an applicant who
complained about unfair conditions. Another one did not receive an approval
from the government.
So a new competition will take place in September. Dykhne said he
is planning to take part in it, using his success as acting CEO as his
strongest selling point to get the job on a permanent basis.
In the first six months of 2016, the airport earned $26.6 million,
compared to $4 million in losses in 2014. The number of passengers in the first
six months of this year increased to 3.6 million passengers, or by 16 percent,
compared to the results when Dykhne arrived in office.
Ukraine’s Infrastructure Minister Volodymyr Omelyan also
characterized Dykhne’s work at Boryspil airport as good, but said other
candidates will be considered.
“I would like strong participants to take part in the competition
so we would choose the best one among the best and not the best one among the
worst,” Omelyan told the Kyiv Post.
Dykhne, in previous interview with other journalists, described
the problems he encountered when he took over: Too much focus on grandiose
spending and projects, unnecessary conflicts with airline companies and lack of
attention to service in the airport.
All these factors contributed to losses and a drop in passengers
since 2012. Moreover, Boryspil management is terminal D for most, if not all,
air traffic — rendering terminals B, C and F either mothballed or mostly
useless.
How did the turnaround happen?
Dykhne’s team concentrated the work of the airport within terminal
D, constructed on the eve of the Euro 2012 football championship.
Management decreased the time between connecting flights and
improved infrastructure in the departure lounge. The management also decreased
the time needed to service aircraft on the airport apron. This helped to
service more aircraft, attract more travelers and thus earn more in service
fees.
Five new companies started flying from Boryspil airport this year:
Air Serbia, Atlas Jet, Aegean Airlines, Mahan Air and Yanair. The existing
carriers opened additional 25 new
directions.
Ukrainian International Airlines, the dominant airlines in the
nation with a near-monopoly position, launched six new destinations and
increased regular flights on existing routes.
The new routes mitigated the impact of the loss of 81 flights per
week to Russia following the ban on air connection between the states imposed
on Oct. 25, 2015, and which still remain in place.
Hub strategy
But the main factor that led to better financial results was an
increase in transfer passengers, Dykhne said.
The number of people traveling to other locations via Boryspil
airport increased from 14 to 30 percent of the overall passenger flow. “When
the purchasing power of our population is low, it is the foreign markets and
transit passengers who give us confidence that our work is financially stable,”
Dykhne told the Kyiv Post.
In developing Boryspil airport into a transportation hub, Dykhne
looks to Istanbul Ataturk Airport, which is the 10th busiest in the world in
international passenger traffic. Having served more than 60 million travelers
in 2015, this airline gateway has around 43 percent of transit passengers.
Boryspil airport is also located in a favorable geographical
position, like Istanbul airport, but it does not receive as much state
assistance as the Istanbul airport or Turkish airlines, according to the acting
CEO.
“I think that we can temporally reach Istanbul dynamics too,”
Dykhne said. “Our direct passenger flow is developing slowly and the transit
passenger traffic is developing very fast.”
Relations with UIA
Improvement in relations with Ukraine International Airlines
helped.
Headquartered in Boryspil, the airline is the dominant carrier
with majority ownership by Ukraine’s second richest billionaire oligarch, Ihor
Kolomoiskiy. It transports 61.7 percent of passengers passing through Boryspil
airport.
“The airline will add nine big aircraft to its fleet by the end of
the year,” Dykhne said. “They all are loaded with future flights and will give
additional passenger flow, thank God, to the airport Boryspil.”
After taking the post, Dykhne partly settled disputes with Ukraine
International Airlines over old debts for airport services and developed a
common plan of development for the two enterprises.
Ukraine International Airlines paid Boryspol airport Hr 220 million
($8.8 million) in old debts based on recalculations of transit passenger costs.
The airport also accepted promissory notes for 23 percent annual interest rate
and received an additional Hr 10 million ($399,000) in interest payments.
“Before we took over the management of the enterprise, the airport
Boryspil, unfortunately, did not do anything to properly, legally and
technically reasonable count transit passengers,” Dykhne said.
According to Dykhne, the new management figured out “a transparent
and well-tuned system of control which satisfies the airline company and the
airport.”
While resolving some issues, around Hr 100 million in debts still
remain in dispute, Dykhne said.
Despite claims that the solution was transparent, critics say that
the amount of the debt and the way it was repaid remains unclear.
Andriy Guck, an aviation expert and a partner at Ante law firm
whose clients include airlines, told the Kyiv Post that disputes remain a part
of the monopoly carrier’s strategy of saving money.
“But if one counts the disputes between UIA and State Aviation
Administration of Ukraine regarding the aviation fees, then it will be hundreds
of millions,” Guck said. “In fact, this is an interest-free loan. Secondly, the
procrastination with paying the debts over time makes them cheaper for UIA.”
Guck also questions the transfer passenger counting mechanism.
“UIA wants to include in the category of transfer passengers
virtually everyone and want to count them in its own way,” Guck said. “If the
airport agreed to UIA conditions in passenger count, then this should be well
analyzed by regulators. There are millions or tens of millions there.”
Criticism
The thaw between Ukraine International Airline and Boryspil
airport has drawn criticism that the acting CEO is lobbying Kolomoskiy’s
interests by giving his airline a competitive advantage over other carriers.
Mykola Marchenko, head of the Association of Enterprises of the
Aviation Industry, which unites seven competing carriers, claims that the
discounts for the anchor Ukraine International Airlines are discriminatory and
non-transparent.
“If today one passenger brings the airport Hr 405 ($16) of income
and the rest of passengers bring Hr 800 ($32) then there is a question who is
regulating this,” Marchenko told the Kyiv Post.
Dykhne confirmed that Ukraine International Airlines is enjoying
lower airport fees but that is due to high traffic of the airline.
The size of the discount is defined in line with the respective
decree of the Infrastructure Ministry. It depends on the take-off weight of the
aircraft and the number of passengers.
The airport press service specifies that Ukraine International
Airlines pays, on average, 15 percent less than it would have paid if there
were not the stimulus program. The discount is granted only for additional
passengers, cannot exceed 80 percent and is given mainly for transit travelers.
Meanwhile, in the first six months of 2016, the carrier increased
its passenger flow in the airport by 21 percent year on year.
“Those carriers who increase the passenger traffic have a discount
on the increased passenger flow,” Dykhne said.
Future plans
In the near future, Dykhne plans to continue concentrating the
work of the airport in terminal D.
“We plan in the nearest future to increase the gallery of the
terminal D and develop the terminal, expand it, increase the number of
departure gates,” the acting CEO said. “The ones we have now are not
enough.”
Terminal F, constructed in 2010, is not included in the
development plan of Boryspil. It could be used as a reserve terminal. Dykhne
describes its construction as an example of unthriftiness; it cost Hr 50
million ($6 million at that time).
Another functional piece of infrastructure in the airport,
terminal B, is outdated but still operable.
Dykhne said that when foreign budget airlines come on the
Ukrainian market, a separate terminal could be used for them.
At the moment, terminal D is working at only 50 percent of its
capacity. Reaching greater capacity requires, besides more travelers, renegotiating
schedules with airlines.
In 2017, the airport management plans to launch a new fueling
system that will enable servicing aircraft directly at the airport apron
without private ground handling intermediaries. Carriers will be able to buy
fuel and store it at the airport.
Dykhne also said that the government allowed the Boryspil airport
to finish parking ramps near terminal D next summer.
The future development will also require a transfer to state
ownership of adjacent lands and territories inside the airport which were sold
to private companies and individuals.
“Terminal D was built not where it should but where it could be
built,” Dykhne said. “And now it is hampering the technological development of
the Borispol airport.”
Mazepa International Airport?
The Boryspil airport also could soon change its name.
The name of 17th century cossack hetman Ivan Mazepa won in a poll
conducted by the Infrastructure Ministry. The renaming corresponds to worldwide
trends of assigning names of famous historic figures to airports. In September, the government is expected to
hold additional discussions.
According to Dykhne, the change will not cause “global economic
expenses” but it is crucial to preserve the reference to the nearby located town
Boryspil in the name of the airport and preserve the KBP code.
“This is a widely promoted brand and a transfer hub,” he
said. “And the change can cause
inconvenience to our passengers.”
The airport is planning to service 8 million passengers this year.
This is 10 percent more than in 2015.
“As soon as the Ukrainian economy starts working effectively and
the purchasing power of the population grows, the central airport of the 40
million (person) country will transport around 40 million passengers per year,”
Dykhne said. “Practically, it is five times more than today. That is why we are
preparing the base for this kind of future of the airport.”
Kyiv Post staff writer Olena Savchuk can be reached at
[email protected].
