Necessity of Restructuring Ukrainian Airlines Business and Improving Their Value Management in Conditions… UDC 336.71:658.011 (JEL Classification: P17; P27 )
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Necessity of restructuring ukrainian airlines business and improving their value management in conditions… UDC 336.71:658.011 (JEL Classification: P17; P27 ) O. B. Mnykh, R. M. Brytskyi NECESSITY OF RESTRUCTURING UKRAINIAN AIRLINES BUSINESS AND IMPROVING THEIR VALUE MANAGEMENT IN CONDITIONS OF EUROPEAN INTEGRATION AND INCREASED COMPETITION Abstract. The article describes the qualitative High-tech sectors of the world economy are and quantitative changes reflecting dynamics of the demonstrating high rates of growth in the value of airlines development in the domestic and foreign air intangible assets, showing practical interest in the passenger transport markets. The reasons that caused possibilities of using concepts of marketing and bankruptcy of “Dniproavia” joint stock company are logistics in international management. Every year characterized; the results of regression models are these sectors are increasing capitalization rates, the assesssed. The factors that dictate the need for restructuring Ukrainian airlines business on the basis of cost of national airlines brands is growing, the international airlines experience are determined. revenues from leasing of aircraft and other facilities Key words: restructuring, market value, market necessary for the passenger flows servicing are capitalization, value management, competition, airline, going up. air passenger transport market. Global airlines are the driving force of structural and functional changes in national Problem. Modern processes of integrated economies. The structure of their real assets global aviation business development show a reflects the effect of organizational innovations. In significant effect that organizational structures, addition, ROI dependence on the volume of functional, technological and socio-political changes material resources involved in the sphere of air have on the increase of airlines capitalization and services is decreasing. During the world crisis their economic security. Inclusion into the scientific famous brand airlines are gradually reducing analysis of social, moral, and political factors that transaction costs in the process of conquering new affect the aviation industry economy as a whole and international markets (economies of scale). All of individual business entities, in particular, is a feature these phenomena eventually lead to changes of: of the institutional approach to the of the airlines – aviation market competitive environment development prospects assessment. and critical resources coverage; At the beginning of the 21st century in – redistribution of market power through conditions of deepening recession in Ukraine it is M & A transactions; important to establish public-private partnerships, – increase the investment attractiveness of search for new target markets and choose innovative effective airlines. solutions of strategic nature that will determine the Thus, after the stock market collapse in 2008 content of restructuring in the real economy and the the market capitalization of the world largest airlines capitalization dynamics [1–3]. companies has grown by more than $10 trillion. From 2008 to August 2013 only 67 companies Analysis of recent publications. In today's preserved their positions in the ranking of the best business world all economic resources have become 100 companies. In August 2013 the market mobile, losing their national characteristics and capitalization of 100 world largest companies was geographic peculiarities of target markets. The $13.6 trillion; the difference between the first and corporate globalization has become a real world the 20th positions in the rating was $215 billion. power as the monopolization of investment resources [4]. The phenomena of globalization in the is about 90 %. Economic competition intensifies the business world reflect the high rate of change in the global development conflict. The growing capitali- activities scale of large companies that carry out zation of industrialized countries in general and extensive maneuvers to create new barriers to airlines, in particular, become relevant issues. market access. They are active in introducing into 39 Lviv Polytechnic National University Institutional Repository http://ena.lp.edu.ua O. B. Mnykh, R. M. Brytskyi practice the new rules on the market and an partially canceled. At the beginning of 2013 Ukrainian aggressive marketing policy. From 2008 to 2013 33 air company “Aerosvit” stopped its operation. large companies were squeezed out from the list of Management of domestic airlines should TOP-100 not having the necessary resources for focus their particular attention on shaping the maintaining competitive positions. In recent years, image of their companies and gaining customer due to strengthening influence of the financial and loyalty, on creating high value services to clients. political capital market positions of major world The rating compiled by Business Insider, presents leaders of aviation market are rapidly changing. 20 worst airlines of the world. Ukrainian More tough become political and trade restrictions International Airlines (UIA) is placed the third by the EU against Russian international airlines in from the end in this rating [8]. The main players in conditions of military conflict aggravation between the market of charter airlines are two companies Ukraine and Russia. “Ukraine International Airlines” and Windrose. Global airlines are actively expanding its “Kharkiv Airlines” provides less volume of similar presence in the markets of the EU and Ukraine. In services. None of the Ukrainian airlines can match particular, the airline Emirates, based in Dubai the level of capitalization of any foreign company, International airport, on January 16, 2014 even that of AirAsia (7.6 bln.) [9]. performed its first flight from Dubai to Kyiv [5]. Management of Ukrainian airlines should According to experts, the direction of passenger look for reponses to existing challenge in flights Ukraine – United Arab Emirates (UAE) is strengthening the core competencies of all the dynamically growing and is expected to be one of employees; this will allow them to competently the most competitive international destinations. conduct business restructuring. Generalization of Today direct flights between the two countries, in the above problem tasks suggests that scientific addition to Emirates, are performed by 5 more research focused on identifying opportunities of airlines – 3 Ukrainian and 2 from the Middle East. increasing airlines capitalization on the basis of According to analysts, when Emirates enters this restructuring their business is of special interest. market sector the frequency of flights between the “Boryspil” and Dubai International will grow by The purpose of the research is to 30 %. This will have a positive impact on the cash summarize foreign and domestic experience of flows dynamics of the airline and the airports that airlines operation and define peculiarities of factor are serving it. It should be noted that by 2020 the interaction in the process of restructuring their company plans to double its fleet. Since the business; to estimate possibilities of improving beginning of its operation Emirates received over value-oriented management system of Ukrainian 500 international awards for its high level of airlines in an unstable market environment. service. Therefore, savings on transaction costs due to its famous brand is an important competitive The main results of the research. For more advantage of the company. With the presence of than twenty years the Ukrainian market of air such a large airline in the Ukrainian market the passenger traffic, unfortunately, remains a competitive environment is going to change. For monopoly and is closed to using modern marketing small airlines that are engaged mainly in charter tools and innovative management technologies; flights ordered by tour operators, the prospects of this results in the air services price increase (for further survival in tough competitive environment both passenger and cargo air transportation). are poor [6, 7]. Low-costers carrying tourists from Introduction of modern paradigm of value- tour operators are significant competitors to charter based management into the practice of managing airlines. According to the government aviation airlines in conditions of their target markets instability agency, services of Ukrainian airlines in January- (concerning cargo and / or passenger traffic) requires June 2014 were used by 1.8 mln. people, and the simulation of different types of relationships at charter flights were used by 815.8 thousand people, different levels – production and operational, which is 21.1 % less than the same indicator for the organizational, marketing, intellectual and financial – previous period (charter services in June 2014 were to identify potential growth and cost increase. received by 229.8 thousand people.). Because of In practice of enterprise management and the lack of demand in 2014 charter flights were assessment of restructuring in the system of value- 40 Lviv Polytechnic National University Institutional Repository http://ena.lp.edu.ua Necessity of restructuring ukrainian airlines business and improving their value management in conditions… oriented management [9-12] the added value, in – on the basis of enriching knowledge in particular, the added value for shareholders, is the the airlines strategic management it is expedient to most commonly used indicator, which includes the point out innovative products,