Gone are the peak periods of 2012-2013, when more than eight million passengers flew through Ukraine’s airports each year. Traffic has fallen by 20 percent since then, according to the latest numbers, a drop accelerated by Russia's war against Ukraine. Nobody is predicting a rebound until the economy improves and the war ends.
Ukraine has halted service to war-torn Donetsk and Russian-occupied Crimea. Foreign tourists have been discouraged and Ukrainians have had their purchasing power cut by a prolonged recession and sharp currency devaluation.
The latest airline casualty is Hungary’s Wizz Air, one of Europe’s top budget carriers and Ukraine’s third largest by market share for international flights.
Citing “ongoing instability in eastern Ukraine, the devaluation…of the local currency and the impact of foreign exchange controls,” the low-cost airline said in a news release that it will slash 10 Ukrainian routes starting on April 20 and halt operations at its local subsidiary. Its Hungarian unit will handle the eight remaining routes, all going through Kyiv, with a single Airbus A320.
Wizz Air’s decision comes after regularly scheduled operations were cut by Kharkiv Airlines and UTAir-Ukraine, which were directly affected by the war.
Local airlines have been forced to hike their prices following the hryvnia’s drop in value by more than half in the last year. Everything from aircraft lease rates and jet fuel to airport fees and overflight taxes are paid in U.S. dollars, reported local flagship Ukraine International Airlines in a statement last year.
Even the government-mandated fee of 50 cents for each passenger of domestic flights that goes to the Ukrainian treasury is U.S. dollar-pegged, the airline said.
Ongoing volatility adds further risk. Since passengers pay for tickets in hryvnia at the interbank rate on the day of payment, airlines face losing money on tickets that are sold months or weeks in advance, said Serhiy Vovk, the director of consultancy Center for Transport Strategies.
“Another factor is the central bank requirement for companies to convert 75 percent of their hard currency earnings into hryvnia, which reduces the ability of airlines to meet dollar-denominated obligations,” Vovk said.
Overall, the flow of passengers plunged by 20 percent in 2014 over the previous year, to less than 6.5 million travelers, according to the State Aviation Service. Ninety percent were international passengers, which represented a 15 percent drop in the same period.
Domestic air travel almost halved to 647,000 in 2014 on annual basis from 1.2 million passengers, with 65 percent average occupancy. By contrast, average occupancy on international flights dropped 4.9 percentage points to 73 percent in 2014.
Foreigners are wary of flying to and through Ukraine, said Oleksandr Myronenko, aviation market researcher and co-founder of Avianews. The July 17, 2014 downing of Malaysian Airlines flight MH17, killing 298 people, “changed the image of Ukraine,” he said.
Only 146,804 international tourists visited Ukraine last year, 70 percent less than in 2013, according to data provided by the State Statistics Service.
Ukraine International Airlines carried 14.6 percent fewer passengers, with Wizz business sinking by nearly 20 percent and Russia’s UTair-Ukraine falling by 24 percent.
“Do you know of at least one airline that has spoken of positive activities? I’m not even talking about profit growth,” Infrastructure Minister Andriy Pyvovarsky asked hypothetically in a column published on Ekonomichna Pravda’s website on March 31.
Market contracts
When war transformed Donetsk Airport into a no-fly zone in May, UTair-Ukraine lost its key domestic destination, said Thomas Jaeger, managing director of ch-aviation.com, a Swiss provider of airline intelligence. It had been the nation’s fourth busiest airport in 2013 with passenger traffic of 1.1 million. The third largest airport, Simferopol in Crimea, also became off limits to most carriers after Russia annexed the peninsula in March 2014.
UTair-Ukraine has since suspended scheduled operations and now exclusively operates chartered flights, Jaeger said.
Kharkiv Airlines temporarily suspended flights following the winter season, the carrier’s press service told Ukraine’s Liga news agency. It is currently seeking to resume operations this summer with charter flights to “popular tourist destinations” on behalf of its parent, tour operator PegasTouristik.
“Looking at the market, all of the airlines have started optimization,” Myronenko said.
Despite the downward trends, news of Wizz’s rollback came as a shock to Ukrainian authorities and Wizz’s competitors. Pyvovarsky told the Kyiv Post by phone that he was surprised Wizz Air had closed its Ukrainian subsidiary so quickly. “In meetings with company officials in March, they indicated that they were looking to leave unprofitable markets, but I didn’t expect this to happen so quickly,” he said.
The minister said that Wizz had conducted an initial public offering in February of stocks on the London market, so the move was based on “strictly economic” reasons.
Wizz press contacts in Kyiv, Budapest and London didn’t respond to requests for comment.
Speaking of Wizz, Ukraine International Airline president Yuriy Miroshnikov told Liga that it is strange that “surviving the winter, which always is considered the low season, the airline is closing routes at the beginning of the summer season, which in aviation is considered profitable.”
After enjoying an occupancy rate of 74.5 percent on 7,949 flights during winter, the airline announced flights will increase by 13 percent this summer over the same period a year ago. Fourteen new international flights from five cities will be introduced, including Kyiv-Beijing planned for launch on April 29.
Kyiv Post editor-at-large Mark Rachkevych can be reached at [email protected].
