Luster already wearing off ambitious scheme to boost air traffic
When the government rolled out an ambitious plan to jumpstart the domestic commercial airline industry last month, it said the move was a result of a mutual agreement among several dozen local air carriers.
Now, at least some of the airlines say it wasn’t all that mutual. Representatives of several regional airlines said they were forced to join the government’s experiment in the industry, and that the experiment is now threatening to undermine their business.
Several dozen local airlines slashed prices and launched a number of new flights as of July 1 as part of an industry‑wide experiment to boost passenger traffic on domestic routes. Prices for domestic flights fell by about 50 percent, and the number of domestic routes more that tripled.
Ministry, which masterminded the experiment, said at the time that 22 local airlines, both private and state‑owned, had agreed to the trial plan.
But the Post has discovered that not all domestic airlines were that keen on the plan. Representatives of three domestic airlines said their companies were opposed to participating in the program, but were forced into it by the Transportation Ministry. They refused to go on the record out of fear of retaliatory action by the government. At least one other small airline says the program is having a negative effect on business.
Lidiya Soroka, a cashier at Krym Air, a regional carrier that participates in the program, said July 15 that her company was already feeling the downside of the program. Krym Air has been forced to start making daily flights from Kyiv to Simferopol this summer as part of the experiment, after flying two to three times per week between the cities last summer. In addition, the company has been forced to slash the price of a one‑way ticket from Hr 400 to Hr 250.
The result? Most of the company’s flights on the route in the first half of July have been virtually empty, according to Soroka.
“We fly to Simferopol every day, but we only have passengers in our planes on Fridays and Saturdays,” she said.
To get airlines to embrace the new plan, the government offered a variety of incentives, including subsidized fuel and reduced airport taxes on both international and domestic flights.
The lower airport taxes have offered more relief to large international carriers than to small domestic airlines, analysts say. And according to Soroka, the fuel subsidies have not come through.
“A chain reaction has started in the company – There is now a lack of revenue to cover expenses,” Soroka said.
The Transportation Ministry was unavailable for comment on accusations levied by small airlines, or on the results of its plan to boost air traffic so far.
Roman Chelnokov, an airline consultant at Zhulyany airport, said that while the program may work out well for large airlines such as Aerosvit and Ukraine International Airlines, it is likely to hit airports and small regional carriers hard.
Chelnokov said small airlines are likely to be put out of business by competition with larger carriers.
“People would rather choose a one‑hour flight to Crimea on a Boeing than an equally priced two‑hour flight on a Soviet‑built Antonov or Yak,” he said.
It is unclear at this early stage what effect the new plan is having on overall domestic passenger traffic. The only statistic available is from the Crimean Trade and Transportation Ministry, which reported July 11 that 500 more tourists arrived in Crimea by air in the first week of July than during the same period last year.
Chelnokov noted that 500 passengers is only equivalent to five full Boeings, while the number of flights from Kyiv to Simferopol has grown from 12 per week to 97 per week now.
Meanwhile, according to Chelnokov, the country’s airports are getting hammered by airport tax reductions of 80 to 90 percent.
“We are going to lose more than 60 percent of our profits as long as this plan is in effect,” he said, referring to Zhulyany airport. “If Zhulyany is among the biggest airports, what is going to happen to small local airports?”
