Right to the sky. What airline companies will get new routes

20-05-2016

The State Aviation Administration of Ukraine (SAA) adopted new rules of assignment of airline companies for routes. Who and on what conditions will be allowed to fly?

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Source: liga.net

On Tuesday, May 17, the State Aviation Administration of Ukraine (SAA) changed the Procedure for granting and revoking rights to operate air routes. The market has been waiting for new rules almost a year.   

Airline companies were forced to work with a number of restrictions all this time, because previous rules were adopted last June as a transitional option to unlock the market. In fact, they were a kind of a compromise between parties, although, the players’ opinion on many proposed rules was not taken into account. Everyone was convinced that the revision of rules is about timing. However, most of Ukrainian airlines were so close to stop the flights already in June this year.

Changes were made and they removed two of the most acute problems of the market.

  1. Abolition of restrictions on access to the international air transportation market

Ukrainian companies could perform international flights only after a year of flying exclusively within the territory of Ukraine. These are the requirements of a regulator, who had good intentions to develop the domestic market.

This requirement turned to be almost impossible to fulfil for most market participants because of unprofitable domestic transportation services. There are several reasons: low incomes of Ukrainians and the availability of affordable land transportation services. In addition, the termination of flights to Donetsk and Simferopol as well as significant decrease in the paying capacity of the population reduced the already small domestic market by half.

In such a way, there would be neither additional domestic flights nor international flights.

  1. Cancellation of additional requirements to the ownership structure

In order to recognize the airline company as the Ukrainian one, the proportion of physical and legal entities in the ownership structure shouldn’t exceed 50%. These are the rules of international aviation law. This rule exists in our regulatory and legal environment at the level of law – in the Air Code. The airline company confirms the ownership structure when obtaining the license.

It makes no sense to prove this fact again when submitting the documents to obtain the right to operate air routes. Therefore, these additional requirements are not only in direct contradiction to the provisions of the Air Code, but actually made it impossible for foreign investments to come into Ukrainian airline companies.

However, making these changes doesn’t solve all problems of the aviation industry. Moreover, the current rules don’t allow to fully develop aviation services while they should become an effective tool in the hands of a regulator to develop the market. That’s why, it is needed to completely revise the Procedure and abolish discriminatory rules and legal uncertainty.

What should be changed?

Increased transparency and disclosure of information. International air services are provided on the basis of bilateral intergovernmental agreements signed with each country and supplemented by agreements at the level of aviation administration bodies – records of meetings of joint commissions or exchange of official letters. They determine the possibilities of Ukrainian airlines, including coordinated airports, the number of carriers in each air route, the number of available frequencies (flights per week).

The SAA doesn’t publish all this information. This creates a huge inconvenience for air carriers, who, on the one hand, are not always aware of available frequencies on certain air routes, and on the other hand – apply for getting assignments for air routes, which hasn’t already have the quota of the Ukrainian side.

A complete review of criteria for assessing applications and selecting the carrier. If there are restrictions on an air route in terms of the number of air carriers or frequencies, the procedure provides for holding of a competitive tender. Its goal is to select the most effective carrier of those who have applied. However, quantitative criteria established by the procedure don’t allow to make this choice. The assess only how effectively the carrier uses already received rights, the level of payments to the state budget per one aircraft, the number of aviation accidents and the regularity of flights within the previous six months.

The list of criteria of the EU countries is much longer: they take into account the starting date of flights and the schedule convenience, the service level of airline companies, proposed tariffs, the financial capacity of the carrier, the competition on the market, the impact on the development of regional airports and transfer flights, etc.

Liberalization of charter flights. Today they are regulated by Rules for charter flights, which are not provided for in the Air Code of Ukraine (adopted in 2011). In spite of this fact, this document is still in use and imposes significant restrictions on charter air carriers. For example, it prohibits performing charter flights to those cities, where Ukrainian airline companies perform regular flights to as well as to the cities at a distance of 200 km from them.

At the same time, this rule is also valid for air routes that don’t have restrictions for regular flights, in other words, the ones that can be opened for all air carriers concerned. For example, if the Ukrainian airline company performs regular flights from Kyiv to Barcelona, performing the charter flights is prohibited to Barcelona, neighboring Girona and even to Palma de Mallorca located on the nearby island.

Improving the quality of regulation. Many procedural aspects require to be revised and amended. In particular, it is necessary to define the powers of the commission and the reasons for refusal of admission, clarify the voting and decision-making rules, provide an opportunity to appeal the commission’s decision in the court, reduce the list of documents submitted by the air carrier for admission, etc.

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