Exclusive Interview of Pavel Ryabikin, Boryspil Airport CEO, to the Interfax-Ukraine Agency
Question: Talking of the airport development, its financial and production performance indicators, we need to mention its base carrier, in this case - Ukraine International Airlines. How do you intend to arrange the cooperation? Are there any contentious issues?
It’s the right emphasis. Today the base carrier is the one who provides the major passengers influx and the only one who implements the transit politics at the airport due to the increasing number of transit passengers. Therefore, the life forces us to negotiate. We are in continuous interaction, looking for mutually beneficial solutions.
In my opinion, one must understand the main thing: a competitive product, against the other hubs or airlines, can be created only by collaborative efforts. Therefore, we are working to ensure that our collaborative product for transit is the most profitable allowing us to compete with the large transfer hubs of our geographical area.
Naturally, as any other partners, we always have some disputes, but we are trying to solve them peacefully in most cases. Sometimes, judgement proceedings take place. But we need to understand that it is a working process, nothing personal. We are working on the strategy to make Ukraine a major transit country.
Question: Does the UIA have any debts to the airport?
It has. These debts are historical, from the previous periods. They are associated with the procedure of fee charging per a transit passenger. The airport considered as transit only those passengers who flew from/to Kyiv on the international flights, and the UIA, during its calculations, proceeds from the fact that a passenger from Dnipro, Kherson, Odesa having connection at Boryspil is transit as well. However, there were no calculation techniques for counting such passengers as transit ones. As a result, the disputes concerning such working moments appear. The airport is too much regulated by similar techniques and orders where the fee refers to the transit international passenger only but the carrier's logic can be also understood. These issues sometimes happen to be solved in court.
Question: You have mentioned the Ministry of Infrastructure orders. Is the order allowing the head of the airport to provide up to 80% discounts off the airport fee effective?
This is an issue for a separate large discussion. The new version of this order was published. This document gives us a possibility to apply the economic instruments in a more flexible way to stimulate passenger influx growth. How perfect is the document? – There are no bounds to perfection, we always want something better, something greater.
Question: Can the statement of the document on the right of the airport head to issue a discount ultimately make him responsible and guilty?
Director General has a contract which defines his actions and clearly specifies what he has no right to admit, particularly the worsening of the enterprise economical situation. Therefore, this is a logical regulation to delegate the responsibility to the CEO's level, who is obliged to make an optimal choice.
The Ministry of Infrastructure and the Minister set the task of attracting the cheaper carriers to increase the number of "flying" Ukrainians, and I support him in this question. During the negotiations with Ryanair, as well as within the Ministry, we worked out the joint Program where the airport and the Ministry potential actions are clearly determined to ensure the possibility to make tickets cheaper for Ukrainians. We have been doing this work for two month. The airport has completed its home task, adjusted its public offer and increased the existing discounts for newly opened destinations. We made every effort at Boryspil Airport for Ryanair to come to Ukraine. We also balanced the volume discounts. They can be given to any airlines without exception, and the Ministry included the reduction of the basic rates concerning the airport fee charging in its document as well.
We consider that the income decrease resulting from the rate reduction will be compensated by the passenger influx growth being stimulated by the cost lowering of both - the transportation itself and the visa-free regime with the EU.
In terms of transportation cost reduction, we are waiting for a signal from the carriers, primarily from the base one. From their side, they should demonstrate that our actions have not passed them by, and they could offer Ukrainians cheaper tickets. I hope we'll see this in the nearest future.
We’ve already got the base carrier’s feedback, which on 13 May reported the sale of 500 thousand tickets per year at the low cost rate.
Question: Concerning the Ryanair issue, what is the result of the recent negotiations?
Negotiations are ongoing. We identified the existing problems and divided them into two parts - procedures, consisting in their handling on the territory of the Boryspil airport, and finances, consisting in charging of our fees they are required to pay.
The airlines have the approach of the low fixed price and that's all. And we explained that our regulations foresee a differential indicator dependently on the take-off weight, etc. To stimulate new destinations, we determined the necessity to reduce the fees we talked about, then we provided the clear indicators to the Ministry what shall be changed in the regulatory base to enable the carriers of scale and price category to operate flights to Ukraine and offer here their services.
Besides, the system of discounts developed by our specialists will be interesting to the base carrier as well as to the others. The negotiations themselves are a working moment, continuous contacts.
For me, the importance of this question lies not in the coming of the Ryanair, but in the preconditions of normal operations for any low cost airlines.
Question: If so, are you now negotiating with other low cost air carriers? For example, Norwegian Air Shuttle?
To say there is someone who can use the airport as a base and operate flights like Wizz Air - no, there is not any, and now they are even not expected. However, the Minister has a plan to create the national low cost carrier but I do not have the right to tell you what I know. We are ready to work with everyone who is ready for normal healthy market conditions.
From the potentially new carriers we are waiting for Qatar, more likely in a year, since the summer season. However, there is a chance they will come during winter 2017/2018 season. For the moment they cannot adjust their schedule due to the issues concerning the aircraft procurement from Airbus. In addition, we expect the growth of the base carrier passenger influx, they have very ambitious plans to expand the fleet: at least plus four wide-body aircraft in the following year.
Question: The base carrier has the intention to expand its fleet up to 91 aircraft by 2021, and even if it has its bases not only in Kyiv but in other regions as well, will Boryspil Airport be prepared for the handling of the UIA fleet which is planned to be based at the airport by 2021?
First of all, I have put the task to coordinate those infrastructure projects I told about with the plans of the base carrier. We are strictly following their situation in our infrastructure growth.
Question: What are the possible sources of financing for those projects?
Nowadays, this question probably cannot be solved without loans. So first of all this is the credit financing. Some projects can be implemented at our own expense, for example, parking, apron, transit area.
Question: In your opinion, what is the best way to get loans? Domestic market or international one? Perhaps, issuing bonds?
The cheaper the better. Therefore, we will choose the cheapest from all possible sources of financing. Issuing the bonds is theoretically possible, but a couple of weeks ago we closed off the last bonds we had because of they were too expensive for us.
Question: Own financing can be provided by the income increasing due to the passenger influx growth. What are the plans by these indicators?
In relation to 2016, the passenger influx growth is 32% from January till the mid-May. If this figure is maintained, it will be good. By the end of the year we expect to reach 10 million passengers. We put ourselves the highest possible goals.
Question: Returning to the Ryanair issue and to the future: speaking at a conference you noted that the airline would rather operate its flights not to Boryspil but to Gostomel. This caused a number of disagreements. Please, tell in details what exactly you meant taking into account your words on perspectives by 2030?
Assessing the daily traffic from Boryspil and Brovary to Kyiv we see they are approximately similar by size, but Brovary allows 100,000 per day, and Boryspil – 50,000. Why? Because Boryspil has an airport that provides many jobs. The average daily wave from Irpin, Gostomel and Bucha is even greater than from Brovary. This is an answer. We realize that Kyiv will need, sooner or later, the third airport. Unfortunately, Zhulyany is bounded and limited by naturally critical length of the runway.
So speaking of Gostomel I meant a unique chance to arrange the handling of this low cost carrier there and enable the development of the whole region with the new direction. I don't know if such chance will appear again.
Question: Previously, the problem of inefficient lease of premises conducted by the State-Owned Property Fund was repeatedly raised. Are you cooperating with them in any way?
The Fund is a strictly regulated organization, and we understand that the only way to increase efficiency and earnings from the leasing is to get away from the SPF by means of corporatisation. This is one of the tasks put to the enterprise for this year.
Question: Will there be any problems in this process?
The problems start from a simple glance at the map with the image of the territory named "Boryspil Airport". There are hundreds of objects built since the late 1950s. Later buildings were again constructed and reconstructed. However, these reconstructions were not always properly documented. We have carried out the inventory and now understand that 47 objects have proper documentation for the ownership right. Some objects do not have documentation for reconstruction or modernization. It shall be corrected. Having done this, it will be possible to conduct the corporatisation. There are also problems of land allocation and many contentious issues of boundaries overlapping.
Besides, we need a master plan which will be further implemented with clearly defined territory functionalities.
Question: Concerning the subject of the infrastructure, do you consider it is possible to revive the project "Air Express"?
Yes, today this issue is raised again. There is a chance to use the loan allocated to its construction. Will it be a format of light underground or lightened railway train? I am not ready to answer. I think the basic scenario will be determined by the end of May. A single investor for both projects - railway to Boryspil and completion of the Ring Road - is not being considered at the moment.
Basically, we do not have a choice. We will connect to the Boryspil railway branch. The method and the location of this connection are discussed.
The lightened train offered by Kyiv City State Administration can use both railway and city tramways. This can be very extensive network of routes. If this lightened option is approved, it may be launched in 3 years. It has no difficulties. The main thing is to make an order and get the mobile two-system train of Tram-Train type manufactured.
Question: In summary, how will, in your opinion, the airport infrastructure be developed in the coming years
Everything will depend on the growth of the economy and the growth of citizen well-being. We see that, for example, the opening of flights from Kherson has shown good loads. This indicates the existing potential. I am sure that all regional airports will be developed and revived. The sequence and the speed - I can not say but I know that they all started talking about revivification of their capacities. It is not possible to say that everyone will come back to life. Nevertheless, the revival will be. And the Lviv airport may become the headliner of the whole western region. It is not for nothing that Ryanair has scheduled more flights there than in Kyiv.