|14th June 2021|
|Andrii Yarmak, Head of UkSATSE, on air travel problems, traffic pricing and the Minsk incident|
|In an interview with BusinessCensor (BC) Andrii Yarmak, Head of UkSATSE, explained what responsibility air traffic controllers have, why air traffic is not recovering, how Ukraine is attracting transit traffic to its airspace and why the terminal charge differs from one airport to another.
The state enterprise (SE) UkSATSE, the national provider of air navigation services, operates the entire airspace of Ukraine.
In terms of airspace volume (which is 776 square kilometres), our country ranks as the 5th largest in Europe.
How does UkSATSE work in a pandemic crisis? What exactly are the air traffic controllers of the Enterprise responsible for? What lures air carriers to the Ukrainian sky? And is it true that the crew of the plane carrying the Belarusian blogger Roman Protasevich requested an emergency landing at the Ukrainian airport?
Andrii Yarmak, Acting Director of UkSATSE, explained this in an interview with BusinessCensor.
1. Air traffic controllers’ responsibilities
- What is the enterprise directly responsible for and what services does it charge for?
- In brief, our enterprise provides air navigation services, which include air traffic services (during take-off/landing and en-route phases), provision of air crew communications, navigation signals, en-route meteorological services, planning and management of airspace use.
Our area of responsibility is the airspace both in civil aerodrome areas (UkSATSE is represented at every airport in Ukraine) and in air traffic control areas, including the upper airspace that is used for transit flights.
Therefore, our main revenue source is airspace users' payments for air navigation services provided to them.
Our charges are divided into two types - route and terminal charges. The route charge is collected for providing overflight in Ukrainian airspace, the terminal charge is collected for providing take-off/landing on approach to an aerodrome.
- In 2017, there was an incident involving a Ukrainian pilot at a Turkish airport: the plane took off but was hit by heavy hail in a few minutes later and was forced to turn back. The hail then hit the nose of the plane and the glass in the cockpit so badly that there were fears whether the pilot would be able to land the plane properly. In this situation, who is responsible for what happened - who makes the decision on flight in such weather conditions?
- I don't recall this particular story. But I can tell you about our area of responsibility.
The main tasks of an air traffic controller are to prevent aircraft collisions in the air, regulate aircraft flows, provide all necessary information to the aircraft crew: on air traffic, weather information, state of the runway, etc.
The final decision to fly the aircraft shall be taken by the pilot-in-command (PIC).
In some cases, when a thunderstorm passes directly over an airport, then all take-off and landing operations shall be temporarily suspended and aircraft on approach shall be sent to a holding area until the weather conditions return to normal.
- Can an air traffic controller request the PIC to turn the aircraft around or land the aircraft at an alternative airport?
- Cases on forced landings are regulated by the Chicago Convention (Convention on International Civil Aviation - BC) and Ukrainian regulations. In particular, if it is known that a serious threat to safety has been detected on the board, the crew does not communicate or there is a threat to national security.
Usually, emergency landings are caused by other reasons - someone has fallen sick in an aircraft or there is a technical problem. Then the PIC shall use the emergency frequency and request to land at the nearest airport.
- Let us recall the Ukrainian "Belarusian case": in 2016, a UkSATSE controller insisted that a Kyiv-Minsk-bound civilian aircraft shall be returned to Kyiv. And, according to the audio recordings available on the net, the controller threatened to scramble a military aircraft to intercept the aircraft if the PIC would refuse to return. Can a controller make such decisions?
- That story happened a few years before I joined UkSATSE. I know that by now that incident is completely over.
In essence, a controller cannot make such decisions on his/her own - the controller must receive a command from the competent authorities who have the competence to give such instructions. In such cases, in accordance with internal instructions, a controller communicates with the crew and transmits commands for further flight operations.
- If the pilot had then refused to return, could Ukraine have used a military aircraft to intercept the aircraft?
- This is a measure of last resort, used in exceptional cases. According to the Chicago Convention, a country can only use military aviation when national security is threatened, if there is an object in its airspace that fails to communicate and may pose a potential safety threat.
- If the plane is returned, who has to pay the airline compensation for the disrupted flight?
- This is a non-standard situation and the solution depends on the return reason and individual negotiations between the airline and the party responsible for the aircraft's emergency landing.
- Following the incident with the landing of the plane carrying the Belarusian political blogger Roman Protasevich, Alexander Lukashenko, who considers himself president of Belarus, said that Belarus had been forced to accept the plane because Ukrainian airports refused to receive it. Did the Enterprise receive a request for an emergency landing from the aircraft crew?
- No requests have been submitted to us. We can easily prove this by presenting our records - conversations between the crew and controllers are always recorded.
In addition, such recordings are also taken on board. All the data can be listened to and the information collated. We, for our side, are ready to provide it as part of this investigation.
2. Traffic, money and credit
- The coronavirus pandemic has had a major impact on air travel. How does the map of flights over Ukraine look now?
It is recovering against the backdrop of a difficult 2020. It is the tourist season now and we see a certain activity of flights, including from Ukrainian airports to the south - people are flying to Egypt, Turkey and Cyprus.
In addition, flights to Bulgaria, Greece and Georgia are resumed. Vaccination passports are likely to be introduced in the EU by the end of the summer and Ukrainians will be able to fly to Europe more often.
This will give further momentum to the air traffic recovery. Based on the results of May, we have reached just under 60% of the traffic of the same month in 2019.
- What else may air travel recovery depend on?
On June 1, our colleagues from Eurocontrol (the European Organisation for the Safety of Air Navigation - BC) issued an updated forecast for the current year.
It outlines several scenarios, all of which depend not only on the coronavirus situation and the introduction of vaccination passports, but also how synchronised the governments of each country will lift restrictions on flights and entry of foreigners.
In the most optimistic scenario, at the end of the year, air traffic will recover by 80% relative to 2019 on a month-to-month basis. The average figure for the whole year would be of course significantly lower.
The most pessimistic scenario is that we stay at the level of 50%. From what I can see, we are moving in the middle scenario, but perhaps by the end of the summer we will accelerate and get more encouraging figures.
- How financially difficult has the last year and a half been for the Ånterprise?
- Very difficult, because we are a large enterprise with over 4,000 employees. When the traffic went down, we had to keep the entire air navigation system operational, retain highly qualified specialists and continue to ensure the servicing and safety of the flights that were being carried out.
- Did the enterprise break even?
- No. It was not possible. Our revenues are built on the principle: if there is traffic - there is a service charge. With the pandemic outbreak, traffic has dropped drastically.
For example, in April and May 2020, traffic decreased by 98% compared to April and May 2019 - i.e. traffic almost stopped. There were no revenues and most of the expenses were maintained (the main expenditure was salaries). The need to support all systems was also not dependent on flight intensity.
The company had not even been facing such a crisis between 2014 and 2016. When the temporary occupation of Crimea took place, part of the airspace in eastern Ukraine, all Russian air transit and air links with Russia were terminated.
In that period, the flights decline was gradual, and in 2020 the crisis engulfed the industry in a matter of days.
- How have you solved the funding problem?
- We have been looking for external sources. We managed to negotiate a credit line with the EBRD to support our liquidity (it was a EUR 25 million loan - BC).
This helped us get through the most difficult period - the spring and summer of last year. And then, having implemented all the anti-crisis measures at the enterprise, we began to return to normal work - as much as it was possible.
- For how long has the company borrowed a loan and what was interest rate?
- It was for three years, with interest holidays on the loan for the first time. The loan interest rate is low, much lower than Ukrainian banks could offer us. All in all, these are very favourable conditions at a time of the biggest turbulence in the industry.
- How much has UkSATSE lost because of the occupation of Crimea, the closure of flights over parts of eastern Ukraine and the flights termination in our airspace by Russian airlines?
- About 30% of our transit traffic used to go over Crimea, another 30% over eastern Ukraine, i.e. we lost about 60% of our transit potential in 2014-2015.
In addition, there were airports in Crimea, Donetsk and Luhansk where Ukrainian and international airlines flew quite actively. The Ukrainian industry has also lost this air link.
Regarding transit - in 2014, we had revenue of $20m from Russian airlines alone (Ukraine closed its skies to Russian airlines in the autumn of 2015 - BC).
- Around 2010, Russia started looking for bypasses for its cargo transiting Ukraine. Representatives of the maritime and railways sectors complained about Russian cargoes being diverted. Was this trend observed in air transit before 2014?
- I have not seen such trends in aviation. On the contrary, Russian transit through our airspace had been increasing until 2013. There were even several intergovernmental agreements signed between Ukraine and Russia to liberalize the number of flights between the countries.
3. Flight map
- What do the top 5 airlines that fly over Ukraine look like now? Has the structure of the leaders changed compared to 2019?
- The group of leaders remained, but the quantitative performance of these top five airlines decreased.
All carriers reduced the number of flights and most airlines also reduced their fleets. If we talk about the leaders among Ukrainian airlines, these are: UIA, Sky Up, Windrose, Azur Ukraine, plus, this year, Bees Airlines joined the list.
Foreigners actively using Ukrainian airspace include Turkish Airlines, Belavia, Pegasus Airlines, Wizz Air and Qatar Airways.
- Following the story of the interception of the plane on which Protasevich flew on, a number of countries, including Ukraine, have banned their airlines from flying to/over Belarus. How might this situation affect UkSATSE's revenues?
- Any bans in the short term have a negative effect because the number of flights is reduced.
But we, together with the MIU, SAAU and the Ministry of Foreign Affairs, are doing our best to attract more airlines to our airspace.
For example, we negotiated with Lufthansa, which now flies to the northern direction using Ukrainian airspace (previously the airline used to fly through Belarus).
We are actively working with air carriers to encourage them to use Ukrainian airspace over the Black Sea.
To this purpose, the Ministry of Infrastructure revised the charges: from June 1 this year new air navigation rates of charge came into force, according to which the cost of a 100 km flight over the Black Sea is EUR 25 instead of EUR 51.1 (the rate of EUR 51.1 remained for flights over the sovereign territory of Ukraine - BC).
- Who do you hope to attract with a reduced rate of charge?
- We have already negotiated with all Ukrainian carriers, who we convinced to use the airspace over the Black Sea for flights in the southern and eastern directions, including from Kyiv. Before that they used to fly through the airspace of Romania, Bulgaria and Turkey.
We are actively working with foreign carriers. For example, we are negotiating with airlines from the Persian region and with European carriers so that they start using the airspace over the Black Sea as often as they did before 2014.
* ÀNS - air navigation services
- Why should airlines agree?
- In terms of safety, we have developed special flight planning procedures to minimise all risks. All the world’s leading safety regulators - the American FAA and the European EASA, have confirmed the effectiveness of these procedures.
We offer economically attractive rates of charge for flying in this part of the airspace. In addition, airlines using the airspace over the Black Sea will save flight time, fuel and consequently reduce CO2 emissions.
Now this is more of a political issue - we have to convince aviation authorities in other countries and aviation associations to recommend their airlines to use Ukrainian airspace in the Black Sea area.
- If you compare Ukrainian rates of charge with those of other countries, where would our country rank?
- They are somewhere in the middle, because in the most expensive countries the cost of flying 100 km starts at 100 euros and the lowest rates start at 30 euros.
- How are these rates of charge calculated?
- Depending on the volume of air traffic in a country's airspace and national cost base. For example, after the temporary occupation of Crimea, air traffic went south. And Turkey has had the economic opportunity to reduce its rates of charge to ˆ30 and below.
We have been trying not to raise the rates of charge for the last two years, because we understand that the whole aviation industry is going through a difficult time, and shifting the financial burden from one conditional aviation company to another is not a partnership approach, and it will ultimately lead to higher ticket prices for passengers.
We will contribute to restoring air traffic and then we will develop the industry together, and the passengers will appreciate the result of this synergy.
4. Kyiv hub
- Why is the terminal charge for Boryspil almost half as low as for regional airports?
- It is lower not only for Boryspil, but also for Kyiv Airport - for these two airports there is a single rate of charge within the Kyiv Air Hub, as it covers up to 70% of all traffic.
The rate of charge depends, among other things, on traffic intensity - the higher is the traffic, the cheaper is the cost of the air navigation service system. In regions, the intensity is noticeably lower, so the cost is higher.
- The traffic intensity of Odesa airport and Uzhhorod airport, for example, is very different.
Why is no individual terminal charge developed for each of the regional airports?
- There is an approved Regional Airport Development Strategy, according to which MIU has decided to make a single terminal charge for all regional airports. This provides an opportunity to attract airlines to all regional airports.
- Don't you think this is a discriminatory approach?
- There are different approaches around the world to developing rates of charge for airports. There are examples where the rates of charge are the same for all airports in a country. There are examples where rates of charge are calculated for each airport individually. There are examples where rates of charge are set for individual airport clusters.
For example, single terminal rates of charge have been introduced for the Milan hub - Linate, Malpensa and Bergamo airports. It all depends on what strategy the government implements in the airport sector in a particular region and in the country as a whole.
IA Boryspil is a hub airport and it needs to compete with the aviation hubs of neighbouring countries: Istanbul, Moscow and Warsaw airports. Therefore, MIU has designated it as a separate air hub to stimulate the development of the base airline.
- Then what does the hub concept have to do with the IA Kyiv?
- There was a regulation from the Antimonopoly Committee of Ukraine (AMCU) that Boryspil airport cannot have a special rate - this creates unequal conditions between Boryspil and Kyiv airports and violates the principle of competition within the Kyiv air hub.
Following this regulation, MIU decided to introduce a single terminal rate of charge. On the one hand, this stimulates the development of the hub, while on the other hand it levels out the non-competitive preconditions in the aviation services market.
5. Debts, courts and UIA
- How are airlines settling up their payments with the state enterprise UkSATSE during the crisis period? Has the enterprise made instalment payments to anyone?
- No one in the airline market expected such course of events and a radical drop in traffic, so the problem of working capital came up rather quickly. We have no authority at all to give anyone an instalment - we are a state enterprise. Therefore, having assessed the situation, we decided to shift all Ukrainian airlines to a weekly payment of invoices in order to obtain working capital in a timely manner.
We negotiated with the airlines and agreed not to solve financial problems at each other's expense.
- Are there any new debtors?
- To date, the situation has leveled off, and we are receiving all current payments on time in the amount of services provided.
- What was the end of the legal battle with UIA over its debts to the enterprise?
- Litigation over the old debt is still ongoing. But since last April, the airline has been settling current payments with us.
- Why are the proceedings taking so long? When will you get an idea whether these debts can be paid or not?
- It is difficult for me to comment on the speed with which our cases are handled. But apart from the main disputes over debts and the amount of penalties, we have had about five other related legal disputes with the UIA over the correctness of route charges by the UIA and allegedly discriminatory terms of contracts for 2018-2019. We have won all these cases.
I think that in the near future we will have an understanding regarding the case consideration on the outstanding amounts.
- Have you discussed the issue of debt with Yevhen Dykhne, the current head of UIA?
- We communicate with UIA on an operational level, the airline is still our client and one of the main users of Ukrainian airspace.
We have a working dialogue, but I don't have an understanding of when the legal disputes will be concluded and a settlement made.
- Why has UkSATSE sued SkyUp Airlines?
- It was because of outstanding debts. But we have won the case, and the airline is gradually paying off the debt that was the subject of the court dispute and, of course, it is paying its current bills in a timely manner.
- SkyUp is a young airline. Where does it get its debts from?
- This issue is purely a matter of airline financial planning.
We provide our services in advance and then invoice the airline upon services rendered. The airline has a month to pay. If we see that the airline starts to accumulate outstanding debts, we go to a court.
- The average age of UkSATSE employees is 45+. You are younger than your subordinates by almost 10 years. How did the team welcome you?
- The reception was, in principle, OK. There was no time to look around - I was plunged into a whirlwind of technical integration events, courts with UIA, then the pandemic and crisis in the industry started.
Everyone had to plunge quickly into problems and solve them. I succeeded in rallying the team around the common goal to ensure the enterprise operations and to lay the foundations for the further growth. I believe I have succeeded.
- Have you had to downsize number of people and level of salaries because of the crisis?
- We did not reduce number of people at the initial stage, because we failed to understand the depth of the crisis. But afterwards we carried out the so-called pension reform - in close cooperation with the trade unions we amended our collective agreement, which allowed the enterprise to find a civilised understanding with people who had decided to take a well-deserved retirement.
We rescheduled all staff to part-time work and revised work schedules.
On the one hand, it enabled us to save our financial resources and, on the other hand, to respond quickly to situations with people who fall sick, especially for operational shifts.
This is how we have preserved our main asset, our staff, who, as traffic increases, we can still gradually move into normal work mode with appropriate pay, and also pick up large volumes of traffic.
- What KPIs do you have in your contract? Can the impact of a pandemic on the industry be a reason to terminate a contract?
I don't have a full-fledged contract, I was appointed by the Cabinet of Ministers order. There is a competition underway right now. The KPIs are to ensure the enterprise's profitability, traffic increase, guarantee of safety 24/7 and continuation of the air navigation system modernisation.
- Do you know when the contract will be signed?
- As soon as I win the competition.
- Have you already met with the new Minister of Infrastructure, Oleksandr Kubrakov? What have you talked about?
- Of course. We have talked about the current situation and a little bit about Belarus - where we can strengthen, rearrange and get both additional income and traffic for Ukrainian airspace. I need the line ministry's support in this matter, as the issue is a political one.
- Don't you have the impression that everything in state structures is very bureaucratic and slow - papers can wander from office to office for months and end up getting lost somewhere. Don't you want to return to business after that?
- In business, things are indeed faster. But this is such a challenge - no matter how slow the processes might be, we have to react promptly to current problems, as the pandemic has shown.
But the point, after all, is not to do it fast - it is to do it properly. Bureaucracy is also a kind of check point - an extra check. If you go too fast, you can get into trouble.
When we work in coordination with MIU, all issues are resolved promptly and in the best interests of the enterprise.