«The skies of Ukraine have already been privatized» - General Director of Atlasjet Ukraine

Photo: Konstantin Melnitsky

For almost a year the airline company Atlasjet Ukraine has been trying to enter the Ukrainian air transport market. The launch of flights had to be postponed for to a future date due to judicial proceedings. Capital earlier wrote that Ukraine International Airlines (UIA) is attempting to prove the illegality of the rights granted to Atlasjet Ukraine to perform international flights. General Director of Atlasjet Ukraine Serhiy Podhorodetskiy told Capital when Atlasjet Ukraine will be able to launch flights and what the airline will undertake to do so.

Grand designs

— Why did the Turkish company Atlasjet decide to create a special subdisivion Atlasjet Ukraine?

— Atlasjet is rapidly growing in its native lands in Turkey and Asia. The current fleet of aircraft is 22 A320/321 Airbus planes. The company plans to establish a network in several countries around the world. Atlasjet Ukraine will become the third air carrier in the Atlasjet network after the two main companies Atlasjet and Zagrosjet that launched their business in Iraq. In 2015, there are plans to open airline companies in Russia and Kazakhstan. In addition, the network will be developed in the Balkan countries.

— Why can’t one simply fly on the main company of Atlasjet?

— The creation of a separate network simplifies the form of organization of business and allows for factoring in all legal nuances that exist in every country. Of course, this means going through a long bureaucratic process of establishing work in every country, but this is a stable and standard work process.

— Who are the shareholders of Atlasjet Ukraine?

— Two legal entities — Atlasjet Havacilik A.S. and the AIS Group Ukraina — and three individuals with Ukrainian citizenship — Volodymyr Kuzmiy, Maria Rozhkova and I — are shareholders of the company. The owner of the AIS Group is Azeri citizen Mammadzada Elhan. Kusmiy and Rozhkova earlier worked on joint projects with Atlasjet in Ukraine on the development of the client network in Simferopol and Odesa. Atlasjet Havacilik A.S. and AIS Group Ukraine control 90% of the share capital.

— How large is the fleet of aircraft and what plans are there for its development?

— At the moment, there are two Airbus A320 planes under the Ukrainian flag. These are not new planes. New aircraft must be earned. Renewal of the fleet was planned to start with the main company Atlasjet, and in May 2015 we planned to begin revamping the fleet of the Ukrainian daughter company on the Atlasjet to Atlasjet Ukraine principle of 2 to 1. Overall, we are planning to create in Ukraine a fleet of 15 Airbus A320/321 aircraft. It is possible that will have to review these plans as they were approved before the airports in Simferopol and Donetsk, to which we planned to fly, were cut off from Ukrainian aviation.

— How much is planned to be invested in the development of Atlasjet Ukraine?

— Investors registered with the National Bank of Ukraine US $15 mn. Pursuant to the contract, we have the right to use this money only after being issued the destinations for executing flights. But due to the artificially created obstacles and the fact that the State Aviation Service is blatantly destroying the competitive environment of civil aviation in Ukraine, we were forced to convey our aircraft to so-called «wet leasing» (i.e. conveyance of one airline to another together with the flight personnel — Capital).

Rocky road

— It was announced that Atlasjet Ukraine will fly the friendly skies on September 15, but his never happened.

— On July 3, the commission of the Ministry of Infrastructure and the State Aviation Service approved our applications for executing international flights. On July 25, pursuant to legislation, the Minister of Infrastructure approved the decision of the commission and issued the corresponding decree. After that, the State Aviation Service had to give us approval within 5 days on the grounds of the commission’s decision and submit them to the Ministry of Foreign Affairs. Then the MIA must inform the foreign ministries of countries to which the airline intends to begin flights that Ukraine granted the rights to airlines or limited their execution of flights to certain destinations between countries.

Head of the State Aviation Service Denis Antonyuk decided to not observe the current procedure and as of July 3 Ukraine International Airlines (UIA) contested the decision of the commission in court. Only on August 12 the ruling of the court on suspending the decision to grant us destinations was passed down. As it turns out, the skies over Ukraine have already been privatized, but the authorities forgot to give us a forewarning about this.

— In May Atlasjet Ukraine was issued permission to perform domestic flights. Why is the airline not flying on the territory of Ukraine?

— Flying across Ukraine alone makes no sense — domestic flights are not profitable. In order for airlines to cover their losses from domestic flights, a carrier must be stimulated by international destinations. We did come to this market looking for a shovel to bury our business six feet under and shut it down for good. We came here to work, not to organize a circus act in the aviation sector. We offered the Ministry of Infrastructure and the State Aviation Service very concise conditions that could improve the development of Ukrainian civilian aviation. What is imperative is that airlines are granted the rights to perform international flights on condition that domestic flights account for no less than 15%. In the event that domestic flights are not performed, which essentially is a socially important matter, we proposed to suspend the effect of rights to international destinations. We agreed to such conditions and proposed to adopt them.

— Did the company file a complaint to the government?

— We had a meeting with the ambassador of Turkey. He supports us fully. On September 29 he sent a letter to the Presidential Administration informing about the situation with Turkish investments in Ukraine. In addition to that, Atlasjet sent a letter to the newly elected president of Turkey Recep Erdogan. We also appealed to Vice Premier Volodymyr Groisman, but did not receive a response. The only one who tried to deal with the situation and establish an objective process of determining the rights for the use of aviation was the minister of infrastructure, but the decision of the commission in the ministry was blocked by head of the aviation service of Ukraine in violation of the existing procedure.

Premier Arseniy Yatsenyuk says investments will not be made in Ukraine as long as the conflict in the eastern regions of Ukraine persists. At the moment, we are only observing that investments are flowing out of the country. Unfortunately, Ukraine is such a country that is heavily dependent on electoral processes. While elections are being held, everyone must wait for what’s next. Apparently, the leadership took such a position not wanting to safeguard investments.

— Does this mean that Atlasjet Ukraine will not fly earlier than the parliamentary elections scheduled for the end of October?

— Given that the court proceedings have been dragged out, it is highly unlikely that Atlasjet Ukraine will hit the skies. I do not want to suggest that UIA has some influence on the courts, but not all courts understand the peculiarities of the aviation market and legislation in this sector. Such claims are not reviewed every day. In essence, this situation in Ukraine’s aviation industry is a precedent.

— Are you not considering alternatives to the launching of flights, for example, jointly flying to destinations with other Ukrainian airlines?

— This is totally ineffective and there are no commercial interests in such an alternative. If two airlines merge from which one has the right of destinations and the other has only an airplane and personnel, it will turn out that one is a serf and the other is the boss.

No altruism, just altitude

— How would you comment on the request of UIA regarding stabilization loans from the government? (As Capital earlier wrote, on September 12 UIA applied to the Cabinet of Ministers for a stabilization loan to the tune of US $100 mn)

— UIA should not position itself as a domestic airline. Both UIA and Atlasjet Ukraine are Ukrainian airlines backed by foreign capital. According to data of the National Securities and Exchange Commission, as of the end of Q2 2014 the Cypriot company Ontobet Promotions Limited owned 15.91% of the shares of UIA. The Kyiv-based Capital Investment Project, Ltd. owned another 74.16% in the company, according to information that Capital possesses.

A domestic airline participates in socially important programs approved by the government, but I never heard about any altruism of the UIA. They request a loan of US $100 mn only promising to present their social programs. If they grant us this amount, we are ready to implement such programs. We will earn money on our own. We are only asking that government officials not lobby anybody’s interests, comply with the laws and not do harm to the competitive environment.

— Can Atlasjet Ukraine overtake flights in the destinations of UIA?

— UIA will not exit the market. UIA President Yuriy Myroshnykov built up a very solid reserve of well trained specialists. I think that UIA will cure the painful symptoms that migrated from AeroSvit and everything will be resolved. But we are ready to substitute UIA with some other routes within 45 days. This is a standard time with all permits of officials to organize the launch of regular flights. After all, Wizz Air is flying all over Ukraine and is seeking fair competition just as many other Ukrainian airlines.