Two-year-old startup Ukraine International Airlines is building on projected annual growth rates of 25 per cent, while its capital Kiev could ultimately challenge the supre-macy of Moscow as an international hub for the CIS states.
At the same time the carrier's senior management is talking with potential partners, including two western airlines, over the sale of an equity stake of 25 per cent, says deputy president Dick Creagh. Austrian Airlines, which codeshares with UIA from Vienna, is a candidate. UIA is 11.3 per cent owned by GPA Group, with the remainder held by the Ukrainian government through Air Ukraine, the former Aeroflot division.
UIA believes it is an attractive, well managed target for investors wishing to exploit the relative political stability of Ukraine and its huge potential traffic growth. 'We have by far the best airline in the former Soviet Union,' claims Creagh. The carrier expects to break even in 1995, its third year of operations, on revenues of $38 million. In 1994, it carried 120,000 passengers and earned $25 million.
Ukraine has one of the strongest economies among the states of the former Soviet Union, with a population of 52 million. As middle class incomes grow, air traffic could increase 50-fold, says Creagh. Labour costs are low - just 5 per cent of UIA's total costs.
By law the carrier's Ukrainian employees must receive their salaries in local currency. A maximum of 30 per cent of seat capacity is reserved for local currency fares.
The carrier ultimately aims to be the dominant international carrier out of Ukraine, though the immediate priority is to develop Kiev as a local hub. UIA depends on Air Ukraine for feed from Ukraine's 38 domestic airports and the rest of the CIS. UIA is helping with efforts to improve standards and quality of service on Air Ukraine flights. 'The faster they improve their standards the better,' says Creagh. If the CIS network is improved, he says Kiev could challenge Moscow as the main CIS hub.
The Ukrainian government is currently developing a two airline policy and intends to reserve different spheres of interest for each carrier, though Creagh say UIA is not interested in serving domestic or CIS routes. UIA has 30 western European designated route rights, while Air Ukraine operates to the Middle East, US, China, Greece and Israel.
UIA currently serves 13 western European destinations from Kiev with two B737-200s leased from GPA. The carrier initially started operations with two B737-400s but swapped them for the older version towards the end of 1994. A third B737 was due for delivery in March and, depending on negotiations with potential investors, either a B737-400 or -300 could be leased in 1996. Flights are due to begin in mid-1995 from Lvov, which has a large ethnic and VFR market, to Frankfurt, Amsterdam and Munich.
Source: Airline Business
