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Associate, ECOVIS Bondar & Bondar
Aviation in Ukraine
The aviation industry of Ukraine is rapidly developing at present. According to the State Statistics Service of Ukraine the number of passengers carried by air transport in Ukraine rose to 12.5 million1 in 2018 compared to approximately 10.6 million in 2017 and 8.1 million in 20132.
In recent years most attention has been focused on Government regulation of the industry, namely focused on state aviation charges, development of competition and avoidance of discrimination and abuse of monopoly position on the aviation market. All these issues were discussed a lot in business aviation circles in 2018 too. It is fair to say that many Government regulation activities were limited to public discussions and cooperation with the media. As a result, the lack of communication between the state authorities and carriers led to increasing complexity of regulation problems, but not to solving them.
However, the Ukrainian state authorities still made progress in regulating some of the issues in the aviation industry which are described below.
Air Navigation Service Charge and other State Charges
On 25 March 2019 the Ministry of Infrastructure of Ukraine published on its official website the Draft Law On Establishment of Cost Charges for the Air Navigation Service in the Airspace of Ukraine for public discussion as to review of the mentioned charges. It’s worth noting that since 2010 the cost of the air navigation service has been calculated according to the Order of the Ministry of Transportation and Communication of Ukraine No. 669 of 15 September 2010.
Therefore, there is a good chance to revise the outdated provisions of the Order so that it is tailored to European standards. The Draft completely changes the way of calculating charges for the air navigation service. The costs of air navigation services provided during the en-route, approach and aerodrome phases of aircraft operations will be identified separately, as required by the Doc 9082 ICAO’s Policies on Charges for Airports and Air Navigation Services and according to common European experience. It is worth noting that charges will differ for air navigation services provided at Boryspil International Airport and those provided at other airports throughout Ukraine.
The Draft’s author also underlines that its purpose is to ensure a conducive climate for the development of fair transportation development at Ukrainian airports. The cost of air navigation services obviously influences the overall cost of air transportation. As a result, the Order shall lead to the involvement of new airlines to the Ukrainian aviation market, increasing the amount of aircraft traffic and reducing the cost of air transportation. The Ministry of Infrastructure of Ukraine emphasizes that the final aim of the Order is to make air transport much more affordable for Ukrainian citizens.
Meanwhile, discussion on the state aviation charge in Ukraine is still in progress. The specified charge is currently collected according to the Order of the Government of Ukraine No. 819 of 28 September 1993 as amended in Order No. 1101 of 21 November 2018.
The sum of the aviation charge in Ukraine, application procedure and whom it applies to must be governed by a separate law rather than a by law. It is noticeable that Ukrainian courts have repeatedly recognized the acts of the Government regarding the charge as unlawful. Unfortunately, the collection of the charge is still regulated by the Government’s act.
Thus, based on these facts, it can be concluded that in order to make the collection of aviation charge in Ukraine legitimate the state authorities should get the relevant piece of legislation adopted. It is important to note the following. First of all, it is necessary to make the charge governed by the authority competent exactly for establishment of the aviation charge. Besides, the purpose of collecting the charge has to be pointed out. In order to adapt the law as per European standards we should remove elements of tax and the administrative fee from the charge. Furthermore, the law should contain provisions envisaging the relevant amendments in the Tax Code and the Air Code.
There is also talk of collecting an infrastructure fee from airport users. Obviously, the maintenance of airport infrastructure costs a lot. The income that airports get from rental and other payments is not enough to cover all costs. That is the main reason why users of a specific airport should be obliged to pay an infrastructure fee, which may contain payments for landing, use of airport facilities, handling of cargo and any other payments according to Doc 9562 Airport Economics Manual.
Passenger and Baggage Carriage Rules
To some extent the updated Aviation Rules of Ukraine entitled “The Rules of Passenger and Baggage Carriage” that came into force on 5 March 2019 were a big breakthrough on the Ukrainian aviation market. The previous Rules of Passenger and Baggage Carriage were established by the Order of the Ministry of Infrastructure of Ukraine No. 735 of 30 November 2012.
Firstly, the new Rules cancel any special requirements on free checked baggage allowance, charging a fee for issuing a boarding pass at the airport, seat pitch, etc. In other words, regulation of the aspects mentioned above is up to each carrier. Significantly enough, airport check-in and boarding closing time have changed and now must not exceed 45 and 15 minutes, respectively, prior to the scheduled departure time.
Unfortunately, the Rules have certain shortcomings as well. For instance, this act, which normally aims to only regulate aviation issues, includes a lot of provisions governing the commercial aspects of carriage. Obviously, this is not the competence of the Ukrainian aviation authorities. To sum up, we believe that the Rules still need to be finalized.
Ukrainian Ground Handling Market
The aircraft ground handling market is one of the biggest parts of the global aviation market. However, for many years there was no legal act in Ukraine that clearly regulated access to the Ukrainian ground handling market. As an example, it is worth mentioning cases of illegal refusal by the State Aviation Administration of Ukraine to issue the certificate of compliance to ground handling providers. On many occasions such actions by the state authorities were qualified by the Anti-Monopoly Committee of Ukraine as a violation of competition law.
Nevertheless, the Draft Order On Approval of Aviation Rules of Ukraine on Access to the Airport Ground Handling Market and the Draft On Approval of Aviation Rules of Ukraine as to Rules on Certification of Ground Handling Service Providers are already present on the website of the State Aviation Administration of Ukraine. Those acts were drawn up in order to adapt Ukrainian laws to European Union legislation. One of the most important results those acts shall lead to is the establishment of a transparent and non-discriminatory procedure for a ground handling provider to get a certificate for Ukrainian airports. Unfortunately, the acts described above have not yet been adopted.
Another aspect of the topic is the leasing of state-owned real estate. At present ground handling providers are obliged to wait months (or even years) in order to rent necessary space in airports because of the very bureaucratic and opaque procedure. As a result, this trend causes harm to businesses and leads to restriction of competition on the market. We are truly convinced that the described procedure has to be changed and adapted to European democratic standards. We also believe that the best option is to give airports the opportunity to enter lease agreements themselves without involving a lot of state authorities in the process.
Compulsory Insurance of Civil Aviation
Civil aviation subjects in Ukraine are obliged to insure their activities. The rules of the specified insurance were established by the Government of Ukraine in its Order No. 676 of 6 September 2017. At the same time, the Order contains a number of inaccuracies on the currency of minimum liability limit and the system for its calculation.
In 2018 the Government drew up the amendment of the Order regarding such main aspects as clarifying insurance risks, improvement determination of the minimum liability limit, establishing an obligatory term for refusal of insurance compensation, etc. The described amendment of the Order will help to optimize the system of compulsory insurance of civil aviation activity and to reduce the cost of air transportation.
The aviation industry is one of the main infrastructure sectors in Ukraine. The Ukrainian path to the European Union definitely depends on developing air transport and its regulation by the State. However, a lot of problems related to aviation still remain unresolved. Therefore, in order to ensure development of the aviation industry, the State Aviation Administration of Ukraine as well as other state authorities should improve aviation legislation in the near future.