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| We Expecting UIA's Debt Restructuring Proposals, Interview with Head of UkSATSE |
| (Centre for Transport Strategies 07.11.2019) |
In mid-October, the Cabinet of Ministers approved the candidacy of the new head of Ukrainian State Air Traffic Services Enterprise (UkSATSE). Andrii Yarmak has previous experience as the head of the aviation transport department at the Ministry of Infrastructure of Ukraine. After he had resigned from this position, he went into business for some time. Yarmak says he has long wanted to return to aviation and therefore quickly agreed to the proposal of the new Minister of Infrastructure.
Andrii Yarmak, Acting Director of UkSATSE, has shared his outlooks on the main problems of the enterprise, UIA's debt, changes in the route network over Ukraine after 2014 and plans for the next year in his interview to the CTS.
How did you land this job?
I was invited to the interview by the Minister who was aware of my experience in both aviation and project management sectors. My appointed was based on the results of the interview.
Why did you decide to return to the public sector?
Back when I was working at the Ministry of Infrastructure, I used to say that public service is a separate profession which should be learned and enjoyed. I prefer the real sector of the economy and live operational management of a specific enterprise. Moreover, I have always planned to return to aviation. Therefore, having received such a proposal, I gladly agreed. I can't say that I was following the UkSATSE performance every day, but I clearly understand the peculiarities of its operation and key tasks. While working at the Ministry of Infrastructure of Ukraine, I also coordinated the activities of this enterprise. Of course, it will take some time to understand all the processes in detail.
Did the previous management hand over the administration to you or did you have to deal with it yourself?
There was a transfer of administration, but still I had to plunge into a large amount of information. Such an enterprise has many focus areas, and it is impossible to fully cover them for a day. However, I’ve got the main information.
Did you come with your team?
I came alone at first, but now I actively form a team. As for technical areas and operational activities, I have full confidence in the professionalism of the people working here. They are very good specialists. With regard to the UkSATSE’s economic activity, this issue will have to be considered.
What does the route network over Ukraine look like now? What has changed since 2014?
The UkSATSE’s most successful year throughout the history of independence of Ukraine was 2013. At that time, the average number of flights over Ukraine was more than 57 thousand per month, and in 2015 the number of flights decreased to 27 thousand. At present, in some months there are more than 38 thousand of flights per month. The main downfall was in transit flows. If in 2013, 65% of all flights were transit, today the share of transit is just over 40%. That is, we have refocused from transit air flows to flows taking off and landing in Ukraine. The main reason is the closure of part of the airspace over the South of the country, over the temporarily occupied territory of Crimea including the territorial waters, as well as the closure of the Joint Forces Operation zone, and the buffer zone.
The reduction of transit flows also affected the UkSATSE's profitability. Previously, transit flows were directed mainly from Europe to Asia, and those were large long-haul aircraft. According to the calculation formula, the heavier the aircraft, the higher is the payment for the provided air navigation services in the airspace of Ukraine. Now, mainly medium-haul aircraft operate on transit routes.
The good news is that since 2017, the dynamics of flights has been recovering. The annual increase in volume is about 20%.
Is it possible to resume the number of transit flows without opening the airspace over the East and Crimea?
The issue of transit is a political one. The increase in air traffic volume is now mainly due to the increase in flights to and from Ukraine.
We have done extensive work with our European colleagues on opening 4 air routes in the international airspace over the high seas. As part of this case, we have shown together with our international partners that these routes are safe for flight operations. And our challenge now is to encourage airlines to use them, as it gives them significant economic benefits in terms of fuel and flight time savings.
Is it possible to open any more transit flows?
It depends on many factors. We are constantly analysing airline flights and are ready to expeditiously take up any transit flows. We have all the necessary equipment and specialists to do this.
UIA demands compensation from the state because of forced flying around the territory of the Russian Federation and Crimea. The Minister of Infrastructure recently announced that this could be an indirect compensation in the form of a discount on charges. What can you say about this?
As far as air navigation is concerned, the EUROCONTROL and ICAO regulations as well as the Air Code stipulate that all unit rates should be the same for all users. We do not have the right at the legislative level to grant any preferences, and we will continue to adhere to this practice.
What are the top-5 airlines that most often use the Ukrainian airspace for transit flights?
They are Turkish Airlines, Belavia, LOT, Qatar, Lufthansa and Wizz Air.
What financial indicators do you plan to reach by the end of the year?
The plan with a positive financial result has been approved for 2019. But so far, the enterprise has negative indicators for 9 months. If we talk about why this is the case, there are several reasons. The exchange rate difference played a big role: the euro exchange rate in the state budget for 2019 (on which we focused) was set at the level of UAH 33.5, but in fact it is now about UAH 27. Since our tariffs are linked to the euro, this has directly affected revenues and as a result, we have not received about 15-20% of it. The second reason is untimely settlements of airlines for services provided.
The Minister of Infrastructure stated that UIA owed UAH 1 billion to UkSATSE. Is that true?
The general figures are like that, but this amount includes charges for services provided, penalties and current payments.
Are you currently negotiating with UIA?
After my appointment to the post, we stepped up our dialogue. The airline has resumed payment, but we are waiting for a proposal on how it plans to restructure its financial obligations.
Apart from UIA, what other airlines have debts to you?
As a rule, all airlines pay their bills on time.
What do air navigation charges consist of?
There are two types of air navigation charges: route and terminal charges. The route charges are collected for the transit through the Ukrainian airspace. The terminal charges comprise approach control and aerodrome charges. Air navigation charges are established by the Ministry of Infrastructure of Ukraine in coordination with the Ministry of Economy.
The route charges are the same for all airlines. As for the terminal charges, there is a small difference beginning this summer: the unit rates for Boryspil are lower than for all other airports. This is because the intensity of flights at Boryspil is higher and respectively, the cost of one operation is lower.
Tell me, what is the structure of UkSATSE?
We've got almost 4,400 people. The main activity is the provision of air navigation, communication, navigation and surveillance services. There are structural units providing related services: Training and Certification Centre, Aviation Training and Certification Centre for pilots which has aircraft simulators, UkSATSE Flight Calibration Service providing services of NAVAIDS Flight Tests, and Medical and Sanitary Unit.
What are the main expenditure items?
As with all companies, the main expenditure items include salary fund, investment activities and tax payments.
Is there a problem with personnel outflows?
We have a natural outflow at UkSATSE, but nothing cardinal. We have quite a high average salary of about UAH 25-30 thousand. Air Traffic Controllers earn more. Our specialists are also in demand abroad, but for the transfer, they need to be certified by the local aviation authorities. For our part, we try to keep salaries competitive so that there is no mass outflow of employees.
To what extent does the quality of the services provided by UkSATSE correspond to the European quality?
Speaking about the quality of services and safety, we fully comply with European standards. In 2004, Ukraine became a member of EUROCONTROL and fully adopted its methodologies and recommendations. Therefore, in terms of technology, operations and safety, we fully comply with European standards.
What are the three main problems of UkSATSE?
Loss of transit potential, financial situation of the enterprise and suspension of fixed assets modernization.
What are your KPIs for the next year?
Ensure UkSATSE’s positive financial result, increase transit through the Ukrainian airspace, complete the stage of technical integration of Ukraine into the EUROCONTROL Common Route Charges System and resume the modernization of the entire air navigation system. Additional KPI regarding human resources is that we need to continue developing our human resources potential.
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