The recent warning by the budget airline WizzAir that it is considering pulling out of the Ukrainian market is extremely worrying. The primary concern is that the reason cited by WizzAir was mainly the new aviation rules for international flights in Ukraine adopted by the government.
You can read the new rules in Ukrainian here.
These new rules are a weighty piece of evidence that the Ukrainian government is not banking on conducting economic or institutional reform with the aim of channeling the country towards stable development.
The new rules primarily concern the criteria that have to be met by the airlines that work in Ukraine. For example, point 2.2 of the rules states that regular international flights can only be operated by those airlines that are mostly owned, or effectively controlled, by the state of Ukraine or Ukrainian citizens.
This means that final beneficiaries or owners of more than 50 percent of the statutory capital have to be Ukrainian. There are many additional clauses and technical details on top of this core requirement. But the essence is that the new aviation rules harm competition in the industry and negatively impact the new government's international reputation.
In particular, the new rules create unwarranted obstacles for companies to enter Ukraine's market or expand on the Ukrainian market. They create uneven conditions for aviation market players, limiting competition on international flights and reducing the number of passengers who could use the service.
They also deform the internal aviation market, introducing changes that are highly unlikely to bring additional profits to airlines.
On top of that, the rules take away any stimuli for Ukrainian airlines for improvement and erode their ability to compete on international markets in the longer term.
They will also become a major blow for the reputation of the Ukrainian government. The exit of WizzAir, a major international player, from Ukraine's market would be a scandalous affair that would get a lot of coverage from western media. It would create an impression of incoherency by the Ukrainian government in fulfilling its promises regarding economic reform and liberalization of the market.
The new rules were obviously not designed in the best public interest. The best way out of this situation for the Ukrainian government would be to cancel these new aviation rules.
Instead, the government should busy itself with more important issues of the aviation sector, such as providing security guarantees, further liberalization of the market and cooperation with the International Civil Aviation Organization (ICAO) to bring to responsibility those Russian carriers that continue to service Crimea in violation of the 1944 Chicago Convention on civil aviation.
Volodymyr Bilotkach is a Senior Lecturer in Economics at Newcastle University, and co-editor of Journal of Air Transport Managemen. He can be reached at volodymyr.bilotkach@ncl.ac.uk.
Read the Ukrainian version of this op-ed on Vox Ukraine, a website dedicated to policy analysis by the expert, academic and business communities.
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