AVIATION ISSN: 1648-7788 / eISSN: 1822-4180 2018 Volume 22 Issue 1: 1–5 https://doi.org/10.3846/aviation.2018.1855

PERSPECTIVES OF THE AIR TRANSPORTATION MARKET IN

Tamara OLESHKO, Iryna HEIETS*

National Aviation University, 1 Kosmonavta Komarova Ave., 03 680 , Ukraine

Received 20 December 2017; accepted 29 January 2018

Abstract. The paper considers the current situation in the air transportation market in Ukraine. It is shown that, in the Ukrainian segment of the global aviation market, the effectiveness of passenger traffic and air transportation in reference to passenger per kilometer may grow in national and international flight routes. The authors justify the rapid increase in civil aviation efficiency and high capability of the air transport industry of Ukraine, taking into account the global rates of civil aviation development. Keywords: civil aviation, , air transportation market, air traffic, passenger traffic, load factor, air transport.

Introduction The air transport industry has experienced a rapid devel- of air transportation has demonstrated an almost double opment followed by an average annual growth rate equal increase (see Figure 1). Having been adjusted for inflation, to almost 10 per cent over the past 55 years. This rate ex- the costs of air transport for users continue to fall. ceeds the average growth of the gross domestic product Governments have had substancial gains from the effi- (GDP) three times. A certain increase in the volume of air cient performance of the air transport industry (Harrison, transportation has been achieved as a result of technologi- 2005; Alamdari, 2010). Airlines are forecast to generate cal advances, high level of productivity demonstrated by $124 billion in tax revenues in 2018 (see Figure 2). manufacturers, enhanced goods consumption, and liber- Air transport is vitally important for the trading of alization pertaining to air transport markets. goods produced by various manufacturers, in particular Civil aviation can benefit from and contribute to the for the trading of separate parts for a certain product, for economic development of states provided that effective instance aircraft parts (Miziuk, 2014). This kind of trading interaction in various sectors of economy is ensured. To is a major element of cross border trade today. Accord- emphasize the role of air transport in the economic devel- ing to the forecast performed by the WTO (World Trade opment of states and regions, it is necessary to take into account the economic and social benefits that an efficient air transport system can offer.

1. Case analysis The level of global economic development is increasing significantly thanks to air transport efficiency. This- eco nomic benefit is a result of improving connections be- tween cities, which, in turn, enables the flow of goods, people, finances, technologies, and ideas. With this in mind, it is safe to say that expenses on air transport are to be decreased. In air transportation, the number of con- nections between cities of origin and cities of destination is expected to reach more than 19,000 in 2017. In com- Figure 1. Analysis of costs of air transport and the number of parison with the situation twenty years ago, the volume connections between cities of origin and cities of destination

*Corresponding author. E-mail: [email protected]

Copyright © 2018 The Author(s). Published by VGTU Press

This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unre- stricted use, distribution, and reproduction in any medium, provided the original author and source are credited. 2 T. Oleshko, I. Heiets. Perspectives of the air transportation market in Ukraine

In 2016, the Ukrainian air transportation market man- aged to overpower the crisis and demonstrated higher results in comparison with 2013. The values obtained in 2013 are standard ones to compare the achievements of the modern economy of Ukraine (Oleshko & Heiets, 2017). According to State Aviation Administration of Ukraine (2016a), in the year 2016, the number of passengers car- ried by air transport in Ukraine reached 8.27 million, which is 31.3% higher than in the same period in 2015. Moreover, this number exceeded the value obtained in 2013 (8.11 million passengers) by 2.1% (Figure 4). In the Ukrainian air transportation market, the na- tional airlines carried 4.944.400 passengers, whereas for- Figure 2. Global tax revenues gained from activities of airlines eign airlines carried 3.487.500 passengers (an increase equal to 23% for national airlines and 2.1% for foreign airlines in comparison with 2015). Taking into consideration that Organization, 2016), the benefits that can be gained from Ukraine has temporarily lost two large airports such as the international trade carried out by means of air transporta- Simferopol International Airport and the Donetsk Inter- tion will reach $5.9 trillion in 2018. With this in mind, it national Airport, it is safe to say that the air transportation should be noted that $685 billion are predicted to be spent market has overpowered the crisis. in the area of air tourism in 2018. The leading positions in the aviation market of Ukraine A positive influence of air transport on the global have been taken by the following airlines: “Ukrainian In- economy has been enhanced in reference to the effective ternational Airlines”, “Azur Air”, “Wind Rose”, “”, employment in the area of civil aviation and other indus- “Bravo”, and “Atlasjet Ukraine”. These airlines conduct 95% tries having economic relations with it (Belobaba, Odoni, of all passenger carryings performed in Ukraine. & Barnhart, 2015). This leads one to conclude that na- The growth in passenger traffic by a third in compari- tional economies can obtain financial resources equal to son with 2015 is connected with a 24.9% increase in air 69.6 million owing to the creating of new jobs in 2018 transportation volumes achieved by Ukrainian Interna- (IATA, 2016). tional Airlines. This increase was achieved due to both the In many countries, the value of aviation to the economy establishment of a large number of new flights, including has not received much attention lately. Yet, effective com- long-haul flights and 9 new planes introduced into the mercial activities performed by airlines enhance the interest aircraft fleet. of passengers in air tourism (Kulayev & Shchelkunov, 2010). In 2016, the number of passengers carried by YanAir In 2018, commercial airlines are expected to receive Airlines exceeded the values obtained in 2015 6.8 times. around 1,850 new aircraft, which is deemed to be a sub- Wind Rose Airlines increased their values by 75.8% in stantial investment into the aviation industry (Figure 3). 2015, and Azur Air Airlines, in turn, increased its pas- The sufficient average cost recovery tends to give airlines senger traffic by 17%. These data have been confirmed by an opportunity to obtain investments (IATA, 2016). The financial statistics. It is necessary to emphasize that, in a trends in the global market foster the process of substitu- financial equivalent, the national airlines provided services tion carried out by airlines in reference to aircraft fleets for as much as 21.6 billion hryvnias (UAH) in 2016, which with high fuel consumption. In the future, airlines ought is 10 billion UAH more than in 2015. to be able to operate aircraft with higher efficiency. This objective can be achieved due to the decrease in fuel costs 9000.0 (Ozer & Phillips, 2012). 8106.3 8110.4 8277.8 8000.0 7504.8 6475.2 7000.0 6181.0 6304.3 6106.5 7475.3 6000.0 6820.9 6900.3 4928.6 5131.1 6328.5 5828.6 5679.6 5000.0 4208.3 5144.3 4000.0 4934.8 4135.9 3000.0 3904.3 3289.6 2000.0 918.7 1024.3 1246.2 995.2 962.2 1176.3 1285.4 1210.1 646.6 624.7 802.5 1000.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Air passenger volumes Internaonal passenger Naonal passenger traffic traffic Figure 3. Return of financial resources invested into civil Figure 4. Volumes of passenger transportation by air aviation development in 2006–2016 Aviation, 2018, 22(1): 1–5 3

Twenty nine Ukrainian airlines (19 of which are en- in accordance with a signed agreement on joint airway gaged in passenger transportation) performed 79.5 thou- operation with the “Motor Sich” from “Zaporizhia”. sand commercial flights in 2016, compared to 66.3 thou- The temporary situation in the Ukrainian air transporta- sand flights in 2015. There were 40 national airlines that tion market al.owed “” to increase passenger traffic performed 96 thousand flights in 2013, which is shown in Ukraine by more than a double. in Figure 5. In 2016, Ukrainian airlines began operating Considering that Ukrainian national airlines in- 27 international routes on a regular basis; foreign airlines creased passenger transportation on international flights began operating 13 routes according to a schedule. by 23%, which is equal to 4.94 million people, the foreign

60 airlines achieved an increase equal to 2.1% only (3.84 mil- 49 47 lion people). 50 46 43 40 The national air transportation market is developing 37 40 36 34 35 33 at an acceptable tempo. Passenger traffic between Ukrain- 29 30 ian cities increased by 29.5% in 2016, which was equal to 791.9 thousand people. 20 Nowadays, four national airlines carry out regular 10 passenger transportation within Ukraine, namely “UIA”,

0 “”, “Bravo”, and “Motor Sich” perform flights 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 between 9 cities of Ukraine. Figures 7 and 8 show pas-

Number of Ukrainian airlines senger kilometers and passenger traffic (national and in- Figure 5. Number of Ukrainian airlines that carried out ternational) for the period from 2006 to 2016. commercial transportation of passengers, cargo and mail in 14000 12700.7 2006–2016 11474.4 11294.5 12000 10101 9569.7 10000 8174.7 8296.6 9421.2 Ten Ukrainian airlines are currently performing 8000 7040.8 5612.8 6976.2 scheduled flights to 42 countries, and 28 foreign airlines, 6000

4000 2512.2 2363.8 2433.9 in turn, are flying to 27 countries (Figure 6). Neverthe- 1829 2145.4 1978.7 1945.9 1326.8 1273.9 1635.4 less, according to the analysis of the period from 2006 to 2000 2632.6 0 2016, the number of foreign airlines has decreased by two. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 In 2016, two new foreign airlines entered the Ukrainian Passenger traffic in internaonal flights Passenger traffic in naonal flights market – “Sprint Air”, an airline from (performing flights from the airport of Radom to Lviv), and “Air Ser- Figure 7. Passenger traffic in international and national flights, 2006–2016 bia”, an airline from (flights from Kyiv to ) (State Aviation Administration of Ukraine, 2016b). 16000.0 15168.4 60 13707.5 54 53 56 50 14000.0 13110.5 48 48 57 56 11890.2 50 44 11261.1 12000.0 10392.6 11080.5 37 10054.6 40 10000.0 8676.1 8418.5 28 6889.0 30 8000.0 6000.0 20 13 12 11 11 11 11 10 9 8 9 10 4000.0 10 2000.0 521.1 666.5 733.6 602.7 561.9 660.7 698.1 675.2 0 317.9 283 364.2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ukrainian Airlines Foreign Airlines Internaonal Naonal passenger passenger traffic traffic Figure 6. Number of Ukrainian and foreign airlines which carried out regular international passenger transportation Figure 8. Air transportation efficiency in reference to from/to airports of Ukraine in 2006–2016 passenger per kilometer, 2006–2016

The establishment of new flight routes to various coun- International charter air transportation increased by tries was a result of the prohibition on air connection with 52.5% in 2016. Fifteen Ukrainian airlines carried 2.53 Russia, which came into force on October 25, 2015. How- million passengers while operating non-scheduled flights. ever, Ukrainian national airlines did not take a full advan- 91% of passengers were transported by such airlines as tage of this situation. The biggest winners were the follow- “UIA”, “Azur Air”, “Wind Rose”, “YanAir”, and “Bravo”. In ing foreign airlines: “Belavia” from and “Turkish 2016, the load factor in international flights conducted by Airlines” from , which benefited to a greater extent. Ukrainian airlines equaled 78.2 %; for national flights this At present, the Belarusian carrier flies to Ukrainian air- factor reached 73.3 % (Figure 9). ports such as “Boryspil”, “Kyiv”, “Kharkiv”, “Odesa”, “Lviv” 4 T. Oleshko, I. Heiets. Perspectives of the air transportation market in Ukraine

100 Due to the difficult economic conditions, decrease in 80 passenger traffic, and some decline in the purchasing ca- pability of Ukrainian citizens in 2014–2015, the volumes 60 of passenger transportation at “Boryspil” airport grew to a 2 9 8 8 1 1

40 1 greater extent, thanks to the successful implementation of 3 1 73 79.4 78. 77. 74. 70. 66. 65. 63. 61. 58. the selected “hub” development strategy in 2016. 20 A 19.4% growth in passenger traffic took place at an- 0 other capital airport, “Kyiv” (Zhuliany), simultaneously 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 with almost all regional airports in Ukraine. In particu- Load factors in internaonal passenger traffic lar, the number of passengers serviced by the airport of Figure 9. Load factor in international passenger traffic of Rivne has grown 8.6 times, the airport of Vinnytsia – 6.6 Ukrainian airlines, 2006–2016 times, Ivano-Frankivsk – 3.9 times, Kryvyi Rig – 6.4 times, Zaporizhia – 2.2 times, Kharkiv – 60.1%, Lviv – 29.4%, Odesa – 8.9%, Kherson – 1.6%. In 2016, a decrease in pas- Evaluating the load factor values from a global perspec- senger traffic was observed only at the airports of tive, it is clear that the average load factor in international (17.7%) and Uzhgorod (75.7%) (Oleshko & Heiets, 2017). passenger traffic in Ukraine exceeds analogical values in HRK; 3.6 other regions of the world (Figure 10). As illustrated in SIP; 7.9 Figure 11, at the end of 2016, the number of departing and arriving aircraft equaled 133.200 (compared to 120.700 in LTD; 6.4 LWO; 2015) (State Aviation Administration of Ukraine, 2016b). 4.1 79.4 IEV; 6.1 80 68.6 67.4 60.1 62.1 64.3 70 55.4 60 KBP; 60 50 DOK; 7.1 40 68.8 59.1 64.1 78.2 30 56.2 62.3 67.8 DNK; 3.1 20 10 2012 0

HRK; 4.6 LTD; 8 KBP 2015 2016 LWO; 5.7 DNK DOK Figure 10. Load factor in international passenger traffic in Ukraine and other regions of the world IEV; 8.7 IEV LWO DNK; 2.2 250 000 KBP; 66.9 LTD SIP 200 000 HRK 150 000 2016 7 8 4 3

100 000 9 4 217 012 212 713

204 11 Figure 12. Market shares in the total volume of passenger 191 535 182 95 178 389 163 89 162 666 transportation via the airports in Ukraine in 2012 and 2016 50 000 142 43 133 18 120 66 0 Despite the growth in 2016, passenger transporta- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 tion within Ukraine was less popular than international Air Traffic Movements transportation. The reason is the high level of expenses Figure 11. Air traffic movements in 2006–2016 and the low level of paying capacity in Ukraine, as well as a developed network of rail and auto transport. The It should be noted that about 98% of the total passen- low demand for national flights is caused by the cost of ger traffic as well as mail and cargo traffic are concentrated tickets. The high cost of tickets can be explained by the in 7 leading airports, namely “Boryspil”, “Kyiv” (Zhuliany), fact that, in Ukraine, air navigation and fuel are expensive. “Odesa”, “Lviv”, “Kharkiv”, “Dnipro”, and “Zaporizhia” In the beginning of 2018, the profitability gained from a (Figure 12). The “Boryspil” international airport is located national flight to “Odesa” airport by the plane An-24 can successfully at the intersection of many airways that unite only be achieved at a ticket price of about 1200 UAH. One Asia with Europe and America. More than 40 national can surmise that Ukrainians are more interested in flying and foreign airlines carry out transportation of passengers abroad or use other types of transport if confronted with and cargo from “Boryspil” using 80 regular flight routes such a price for tickets. around the world. Aviation, 2018, 22(1): 1–5 5

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