Price hikes, new routes and European compensations: What Ukrainians expect from 'aviation visa-free'?

Author : Iryna Shostak

Source : 112 Ukraine

During the Ukraine-EU summit in Kyiv, the Agreement on the Common Aviation Area (CAA) between Europe and Ukraine was signed. The government says that the document will allow Ukrainians to buy cheap air tickets and expand the geography of travel. Experts, on the other hand, are less optimistic, and some representatives of the industry even assure that not only carriers, but also passengers will ultimately lose from the agreement
23:37, 13 October 2021

Open Skies
Open source

The global air transportation market is going through a difficult time, so you should not expect short-term benefits from CAA. The process of Ukraine's entry into the "European sky" has already stretched for 8 long years: the document was initialed back in November 2013. And after signing, another long stage will follow - ratification in all 27 EU states (the agreement also provides for the incorporation of a number of EU regulations and directives into Ukrainian legislation).

It should be noted that the text of the agreement provides for a "temporary application" mechanism, which gives a "green light" for the preliminary use of the document immediately after its signing.

What CAA provides

For companies from the EU, the Ukrainian air transportation market will open, and for Ukrainian carriers, all restrictions on flights between EU cities will be lifted. So, instead of waiting for permission from the State Aviation Service, airlines will negotiate directly with airports on slot periods during which aircraft are allowed to take off and land.

In simple words: the procedure for air transportation will be greatly simplified and a common aviation space will be created.

But it should be noted right away that "open skies" does not mean the arrival of European low-cost airlines in Ukraine (apart from WizzAir and Ryanair already actively working with us). The joint aviation space will create conditions for carriers, primarily low-cost airlines, to have more opportunities to open new routes.

Among other things, the signing of the CAA provides that European standards in the field of civil aviation will operate in Ukraine. This concerns the protection of passengers' rights, the environment, air traffic management and flight safety.

What will change for travelers?

Liberalization of air traffic between the EU and Ukraine will take place in two stages. And on each of them, passengers will benefit. The only question is how long-term they will turn out to be.

Reduced prices for air tickets

At the first stage, all restrictions on flights between any cities of Ukraine and the EU will be lifted for Ukrainian and European airlines (without additional conditions).

That is, the wall of bilateral agreements, which secured profitable routes for monopolists, will "collapse". So, if earlier the use quotas were distributed between two companies - Ukrainian and local European (for example, Kyiv - Prague flights are divided between UIA and Czech Airlines, and other carriers are refused), then immediately after the entry into force of the agreement, any airline from Ukraine and Europe will be able to take the route that it considers promising. The only thing is that it will need to obtain permission from the airport.

And this means that there will be a decrease in the cost of air tickets.

"Competition will definitely intensify on the most popular routes, and Ukrainian airlines will have to get used to work in conditions of tough competition and, accordingly, work to improve their own efficiency, which they have not always done before," says Oleksandr Kava, an expert in the field of transport.

Aviation expert Bohdan Dolintse notes in a comment to that liberalization in certain areas can increase competition by 15%. That is, potentially the cost of tickets will decrease by 20-30% on those flights that are still "busy with restrictions" today. And this is about 20% of routes (in particular, Kyiv - Paris, Kyiv - Amsterdam).

However, this promises to not last long: after a weak player leaves some route, the remaining participants can raise prices again to compensate for their previous costs. As practice shows, this is more than possible.

“In some countries, there have actually been situations when, due to a too tough price war, air carriers first sharply lowered ticket prices, and soon, having survived competitors, raised them an order of magnitude higher than they were before the liberalization began,” Dolintse explains.

It is difficult to prevent this. The airlines themselves should work on this (assess their efficiency and understand whether they will be able to withstand the competition without prejudice to themselves and the consumer), as well as the government.

“The Ukrainian aviation authorities should take timely measures to prepare the market and carriers for the conditions that will come after liberalization. There were cases that after the full opening of the sky, national carriers ceased to exist, or reduced the route network, which led to an increase in prices. And there was no more competition in such areas, "the expert adds.

New routes

After we have done our "homework" (we will integrate all EU requirements into the legislation), the second stage of liberalization will come - European airlines will be able to operate domestic flights in Ukraine. For example, the same low-cost airlines known to Ukrainian passengers will be able to fly from Kyiv to Odesa or from Kharkiv to Lviv. By the way, domestic air carriers will not receive such a prerogative for domestic flights to the EU. But we'll come back to this issue later.

The second stage of liberalization is noteworthy, but, according to experts, it is unlikely that European carriers will use it at all.

"The Ukrainian domestic market is not interesting even for Ukrainian airlines, and it is obvious that it will not be interesting for European ones. Therefore, I think that this is a theoretical opportunity that will not be used even in the long term," Oleksandr Kava notes.

Instead, Ukrainian airlines will be able to apply for difficult routes, where at least one of the points will be Ukrainian (for example, Kyiv - Frankfurt - Reykjavik, Kyiv - Warsaw - Paris or Lviv - Milan - Barcelona). The only question is how profitable they will be for airlines and how long they will "live" after opening.

"But is there a request for such flights? After all, as a rule, there is a request for a flight to a specific country, and then within the country to regional airports. There is no large passenger traffic for flights between individual countries. It will be difficult to find routes that would be economically viable",  notes Bogdan Dolintse.

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It can also be downright inconvenient. For example, a passenger flies from Kyiv to Rome on a Kyiv - Berlin - Rome flight. He will have several hours of waiting while the plane will land in Berlin and carry out all the necessary maintenance operations.

EU air carriers will be allowed to land at the airports of the countries of the European Neighborhood Policy and the Common European Aviation Area during flights between Ukraine and the EU. In simple words: difficult routes will appear, for example, Ukraine - Albania - Italy.

"European" compensation

One of the points of the agreement is the mandatory implementation by Ukraine of EU directive 261/2004 on the protection of passengers' rights during flight delays and cancellations.

It is noteworthy that a significant part of these requirements in Ukraine had already been brought into compliance, but certain restrictions remained. For example, the number of days for which the passenger is entitled to compensation. So, if earlier in Ukraine an air carrier could cancel a flight 2 weeks before departure and not compensate the passenger for the corresponding additional costs, then EU regulation provides that if the airline cancels flights in less than a month, then the passenger is entitled to compensation from 250 to 600 euros.

But if the airline ignores these rules, it can be quite difficult to get a refund.

“I think that Ukraine will retain the norms that were there before. In the situation with the covid, we see that even European companies, which in Europe promptly compensated passengers for non-use of tickets due to canceled flights, looked for any opportunities in our conditions, so as not to pay the passengers cash (they were offered certificates, etc.) ", notes Olexander Kava.

Why the industry doesn't share the authorities' enthusiasm

The fact is that Ukrainian carriers, in particular UIA and Sky UP, are afraid of disproportionate conditions that are spelled out in the current version of the agreement for Ukrainian and European companies. Experts partly agree with this.

All roads are open for European airlines

So, according to Bohdan Dolintse, Ukraine really makes much more concessions towards the admission of European companies to the Ukrainian market, despite the fact that some of these rights, which are received by European carriers, are not received by Ukrainian companies in the EU.

For example, we are talking about the provision of unlimited domestic logging (domestic flights) for European airlines in the second phase of liberalization.

“We give our partners domestic transportation to get what we already have. After all, Ukraine has already liberalized air traffic with 16 EU countries. At the same time, European carriers do not use the frequencies they already have, even half. It is not a fact that they will take advantage of new perspectives at all," says in a comment Sky UP.

Also, concerns are raised by the issue of access to slots, which is why the "entry" of Ukrainian airlines into European airports may also be questionable.

We remind you that after the entry of CAA into force, Ukrainian air carriers will negotiate directly with the airports on the slot periods during which the aircraft are allowed to take off and land.

We remind you that after the entry into force of the SAP, Ukrainian air carriers will negotiate directly with the airports on the slot periods during which the aircraft are allowed to take off and land.

So, if earlier interstate agreements were, among other things, one of the mechanisms that helped the Ukrainian side to defend the rights of airlines and receive slots, then after the signing of the CAA, the negotiation process of Ukrainian companies for opening new flights or changing slots at European airports may become more complicated.

For example, at large airports or hub airports, "good" slots are usually distributed long ago. So, due to the limitation of slots or the availability of slots at an inconvenient time, situations arise when in Ukraine, European companies, unlike Ukrainian in the EU, open roads to unloaded airports, where it is possible to choose a slot "for every taste."

"European companies are gaining access to the Ukrainian market, and for our carriers the possibilities of opening new flights will be limited due to the lack of appropriate slots. Previously, this was decided by state agreements (when countries signed a bilateral agreement on the number of flights per week, then in parallel, negotiations on slots took place). It was a leverage so that Ukrainian carriers also had the opportunity to get slots for efficient operation, "explains aviation expert Bohdan Dolintse.

After European requirements, will there be European salaries?

The CAA agreement also includes many standardization requirements. Many of those norms currently in force in Ukraine must be harmonized with European ones. Among them, for example, crew working time standards, certification, airline audits, industry salary standards. According to Sky UP representatives, this is what the government should focus on.

Most of these "asymmetric" opportunities were laid down at the stage of negotiations on the CAA in 2012-2013. In theory, the Ukrainian government could try to convince the EU to amend the agreement. But whether it will do it in practice, time will tell.

One way or another, according to experts, for the whole industry it is a big step towards integration with the EU, which in the future will bring Ukrainian legislation to the European one and, accordingly, improve the quality of industry management. But this requires investments in infrastructure and the development of personnel qualifications.

After all the work done, the passenger should ultimately win.

"CAA means the expansion of the network of flights, as well as the intensification of competition. The user - the passenger always benefits from competition," summarizes Kava.

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