You
can read the new rules in Ukrainian here.
These
new rules are a weighty piece of evidence that the Ukrainian
government is not banking on conducting economic or institutional
reform with the aim of channeling the country towards stable
development.
The
new rules primarily concern the criteria that have to be met by the
airlines that work in Ukraine. For example, point 2.2 of the rules
states that regular international flights can only be operated by
those airlines that are mostly owned, or effectively controlled, by the state of Ukraine or Ukrainian citizens.
This
means that final beneficiaries or owners of more than 50 percent of
the statutory capital have to be Ukrainian. There are many additional
clauses and technical details on top of this core requirement. But
the essence is that the new aviation rules harm competition in
the industry and negatively impact the new government’s international
reputation.
In
particular, the new rules create unwarranted obstacles for companies
to enter Ukraine’s market or expand on the Ukrainian market. They
create uneven conditions for aviation market players, limiting
competition on international flights and reducing the number of
passengers who could use the service.
They
also deform the internal aviation market, introducing changes that
are highly unlikely to bring additional profits to airlines.
On
top of that, the rules take away any stimuli for Ukrainian airlines
for improvement and erode their ability to compete on international
markets in the longer term.
They
will also become a major blow for the reputation of the Ukrainian
government. The exit of WizzAir, a major international player, from
Ukraine’s market would be a scandalous affair that would get a lot of
coverage from western media. It would create an impression of
incoherency by the Ukrainian government in fulfilling its promises
regarding economic reform and liberalization of the market.
The
new rules were obviously not designed in the best public interest.
The best way out of this situation for the Ukrainian government would
be to cancel these new aviation rules.
Instead,
the government should busy itself with more important issues of the
aviation sector, such as providing security guarantees, further
liberalization of the market and cooperation with the International
Civil Aviation Organization (ICAO) to bring to responsibility those
Russian carriers that continue to service Crimea in violation of the
1944 Chicago Convention on civil aviation.
Volodymyr Bilotkach is a Senior
Lecturer in Economics at Newcastle University, and co-editor of
Journal of Air Transport Managemen. He can be reached at
[email protected].
Read the Ukrainian version of this op-ed on Vox Ukraine, a website dedicated to policy analysis by the expert, academic and business communities.
