Problems of Ukrainian aviation during the pandemic

Date:

During the trip of the President of Ukraine Volodymyr Zelenskyi to meet with his Polish colleague Andrzej Duda, the functions of board No. 1 were performed by “Antonov” (AN-148), which can be seen in the photo OP official website.

PHOTO: OFFICE OF THE PRESIDENT

According to the State Register of Civil Aircraft of Ukraine, the State Aviation Enterprise “Ukraine” has one aircraft with the registration mark UR-UKR at its disposal. Recently, the guarantor complained for technical problems with this aircraft. In fact, for the purposes of maintaining the presidential AN-148 in working condition, another aircraft acted as a donor.

What is happening to the aviation industry in our country?

Financing of the aviation industry has always been a state priority, and the industry itself is a matter of pride, hopes and aspirations of our country.

In times of stable economy, the Ukrainian state not only financed aircraft construction, but also provided state guarantees for the implementation of projects that stimulated aircraft factories and strengthened defense capabilities.

History of state guarantees

According to the Ministry of Finance, state guarantees in the field of aircraft construction are not a widespread phenomenon. In particular, the following guarantees were provided several times:

  • In 2009, for the financing of production activities of the Kharkiv State Aviation Manufacturing Enterprise and the formation of a resource base, in particular, the repayment of accounts payable to banks and the completion of aircraft as part of the implementation of investment projects for the construction of aircraft for the period 2009-2015 in the amount of UAH 1.6 billion. (bonds of the Kharkiv State Aviation Production Enterprise);
  • In 2009, for the financing of the production activities of the Kyiv Aviation Plant “Aviant” and the formation of a resource base, in particular, the repayment of accounts payable to banks and the completion of aircraft as part of the implementation of investment projects for the construction of aircraft for the period 2009-2015 in the amount of UAH 858 million. (bonds of SE “Kyiv Aviation Plant “Aviant”);
  • In 2016, for the implementation of the State Enterprise “Odesa Aviation Plant” Program for increasing the defense capability and security of the state in the amount of UAH 24 million.allocated by PJSC “Ukreximbank”.

As of the end of 2021, the amount of overdue debt of the Kharkiv State Aviation Production Enterprise to the state for the state’s fulfillment of guarantee obligations under the issued bonds is UAH 2.1 billion. (including a fine of 9.6 million hryvnias).

The debt of SE “ANTONOV” (successor of SE “Kyiv Aviation Plant “Aviant”) amounts to UAH 176.2 million.

Only Odesa Aircraft Plant currently has no financial obligations and debts to Ukreximbank and the state for a loan obtained in 2016 under a state guarantee.

Probably due to the fact that in 2016, the Office of the Organization of Support for the Repair of Weapons and Military Equipment of the Armed Forces of Ukraine, in accordance with Cabinet Resolution No. 423 dated 14.07.2016, concluded a state contract for the purchase of overhaul services for two L-39 aircraft and as a result of its implementation UAH 33.4 million was transferred. to the accounts of SE “Odesa Aviation Plant”.

“Everyday” support

In the context of the outbreak of the acute respiratory disease COVID-19, caused by the SARS-CoV-2 coronavirus, the state authorities of various countries adopted a number of legal acts, which effectively stopped both international and domestic air traffic for a long time.

This affected not only air carriers, but also affected all components of aircraft construction, up to the production and supply of individual components.

Therefore, the Government’s steps were logical, with which the State Budget of Ukraine for 2021 provided for budget program 3101370 “Reimbursement of expenses of Ukrainian air carriers during the introduction of restrictive anti-epidemic measures in order to prevent the spread of the acute respiratory disease COVID-19 on the territory of Ukraine, caused by the SARS-CoV- 2” in the amount of 104 million hryvnias.

The procedure for using these funds was approved only at the end of the year at the same government meeting on November 24 (see resolution No. 1219) and as of the beginning of December 2021, the Ministry of Infrastructure had not received any appeals from air carriers at all.

When we inquired about this issue at the beginning of 2022, it turned out that several companies did take advantage of state support and the following Ukrainian air carriers submitted their applications:

  • Skype;
  • Azur Air Ukraine;
  • Rose of the winds;
  • International Airlines of Ukraine.

Based on the results of the consideration of the applications, the Ministry of Infrastructure reimbursed expenses. However, only UAH 60.7 million out of the 104 million required.

It seems that this is the end of the anti-covid support for the airline business. After all, the Law on the State Budget for 2022 does not provide for a similar budget program.

National air carrier

Undoubtedly, the latest information trend can be called the creation of a new air carrier with national status.

On the one hand, state policy is aimed at the denationalization and privatization of all enterprises that are not related to the provision of administrative services, and on the other hand, during the forum “Major Construction: Aviation and Tourism”, the President of Ukraine announced on the creation of a national air carrier with the participation of the European aircraft manufacturing company Airbus.

At the same time, in the presence of the head of state, the heads of the Ministry of Infrastructure and Airbus signed the Memorandum of Intentions of Cooperation.

Such uncertainty in economic priorities and incomprehensibility in partners can lead to devastating consequences.

It is also not clear how the state seeks to save the industry from the consequences of the pandemic by introducing another competitor to the market, which will also be financed from the state budget.

In essence, this could lead to a nationalization of a highly competitive market with the provision of non-competitive support and benefits to an individual foreign aircraft manufacturer.

A similar practice already existed. For example, National Airlines of Ukraine OJSC, which owned Ukraine’s largest fleet of An-24 aircraft and specialized An-30 aircraft that carried out transportation both within Ukraine and abroad, went bankrupt.

The volume of domestic regular transportation in Ukraine performed by NAU aircraft exceeded 50% of the total volume of these transportations in Ukraine.

A separate item was devoted to the creation of a national air carrier in the Action Plan for the Implementation of the State Program for Stimulating the Economy to Overcome the Negative Consequences Caused by Restrictive Measures to Prevent the Occurrence and Spread of the Acute Respiratory Disease COVID-19 for 2020-2022 (Resolution of the Cabinet of Ministers dated 05/27/2020 No. 534).

The first steps took place one and a half years later.

Only on November 24 of last year, at a meeting of the Cabinet of Ministers, the joint-stock company “Ukrainian national airlines” (UNA, Ukrainian national airlines) was created, about which the Ministry of Infrastructure issued order No. 636 on the same day.

However, the legal entity has not been created to date and there are no data about it in the Unified State Register of Legal Entities.

The Ministry of Economy, which is also involved in this project, reported that the creation of a modern national air carrier is currently being worked out.

The option of entering the charter capital of a domestic airline that transports passengers is being considered. A national air carrier can be created on the basis of the corresponding airline through rebranding, which will have the opportunity to use domestic aviation equipment.

According to the mentioned state program, the estimated need for realizing the intentions of creating a national air carrier was initially estimated at UAH 750 million. However, appetites for the development of budget funds are growing over time.

In connection with this Law of 02.12.2021 No. 1931-IX “On Amendments to Appendices No. 1 and No. 3 to the Law of Ukraine “On the State Budget of Ukraine for 2021” (regarding the implementation of infrastructure projects and the development of social cultural sphere) changes were made to the distribution of State Budget expenditures and development expenditures were provided for the Ministry of Infrastructure from the general fund under budget program 3101380 “Formation of the authorized capital of a joint-stock company performing the tasks and functions of a national air carrier” in the amount of UAH 500 million.

And it was for this amount that the National Commission for Securities and the Stock Market had registered the debut issue of shares with a nominal value of UAH 10 each (the owner of the entire package is the Ministry of Infrastructure), and the Cabinet of Ministers determined Procedure for use of these funds.

At the same time, representatives of the authorities are already naming additional amounts of necessary expenses. Yes, one of the heads of the specialized committee of the Verkhovna Rada, Volodymyr Kreidenko assertsthat in 2022 it is planned to spend another 2.5 billion UAH on “Ukrainian National Airlines”.

The guarantor of the observance of the Constitution himself has at his disposal three airplanes and a rotorcraft of the state aviation enterprise “Ukraine”, in particular:

  • Airbus A319CJ aircraft, registration mark UR-ABA, manufactured in 2007;
  • aircraft An-148-100B, registration mark UR-UKR, manufactured in 2011;
  • aircraft An-74TK-300D, registration mark UR-AWB, manufactured in 2001;
  • Mi-8 MTV-1 rotorcraft, registration mark UR-PAB, manufactured in 2002;

Recently, it turned out that the rotorcraft is designed to support the Supreme Commander-in-Chief’s local flights in a non-working condition.

It is a shame that the President of Ukraine, making loud statements and signing memoranda regarding the creation and operation of a non-existent national air carrier, does so without prior analysis of the expediency of budget expenditures and professional processing of relevant ministries and agencies.

Did the country’s leadership abandon the production and operation of Ukrainian-made aircraft?

Why does the head of the aircraft-building state consider it expedient to involve foreign competitors in such projects, instead of supporting domestic aircraft factories?

Undoubtedly, the need to repair the presidential aircraft fleet cannot be a determining priority when creating a national air carrier and selecting strategic partners.

Volodymyr Bogatyr

attorney, honored lawyer of Ukraine, managing partner of the attorney association “Bogatyr and Partners”

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