Smoking Gun Proving that the Ukrainian Government does not Want Reforms: New Aviation Regulations

Recent announcement by Wizzair that the airline may consider leaving Ukrainian market is deeply disturbing, primarily because the carrier named the new government regulations on designation of Ukrainian carriers to international markets as the main reason for this possible action (the regulation – in Ukrainian – is available here).

The new regulations provide the smoking gun that shows that the new Ukrainian government is not committed to conducting economic and institutional reforms and putting Ukraine on the path of sustainable development. The new regulations concern conditions that have to be satisfied by the air carriers operating in Ukraine. As an example, Section 2.2 states that the right to operate an international route from and to Ukraine requires that the Ukrainian citizens or the state control or own at least 50% of the airline. There are multiple qualifications to this rule and tons of technical details, but the bottom line is that the said regulations are harmful to the competition in the Ukrainian airline industry and the passengers, and to the international reputation of the new government. Specifically, these regulations:

• Create unreasonable barriers to entry and expansion of Ukraine-based airlines, thereby creating an uneven playing field for the market players, restricting competition on international markets, and leading to losses to the traveling public;
• Distort domestic airline markets by attempting to force entry where such is unlikely to be profitable for the carriers;
• Place existing Ukraine-based carriers into a relatively worse competitive position as compared to the foreign-based airlines;
• Will ensure significant reputation losses to the Ukrainian government, as potential exit by Wizzair will be a newsworthy event that will both generate a lot of coverage in the Western mass media, and create perception of Ukraine’s government being inconsistent in fulfilling its promises of economic reform and market liberalization.

We do not see this new regulation as being in the public interest. We suggest that the best course of action for the Ukrainian government will be to repeal this regulation as soon as possible. We further suggest that Ukraine’s government focus on more salient issues in the aviation sector, including ensuring safety, furthering market liberalization, and working with ICAO to bring to account Russian carriers continuing their services to the Crimea in blatant violation of the Chicago Convention.

Signatures

• Olena Bilan (Dragon Capital)
• Yuriy Gorodnichenko (University of California Berkeley)
• Veronika Movchan (IER)
• Tymofiy Mylovanov (U. of Pittsburgh)
• Dmytro Sologub (Raiffeisen Bank Aval)
• Oleksandr Talavera (U. of Sheffield)
• Oleksandr Zholud (ICPS)
• Kateryna Dronova (affiliation withheld)
• Gerard Roland, University of California Berkeley
• Andriy Zapechelnyuk, University of Glasgow
• Olena Y. Nizalova, Kyiv School of Economics
• Ilona Sologoub, Kyiv School of Economics
• Igor Buinyi, Democratic Alliance
• Nataliia Shapoval, Kyiv School of Economics
• Pavlo Illyashenko, Center for Economic Solutions, Open Dialogue Foundation, AYA Capital
• Oleksandr Mertens, NAUKMA
• Vitaly Shaposhnikov, Alumni Association of NAUKMA
• Elena Minitch, Young Presidents Organization (YPO), Kiev Chapter, Democratic Alliance party
• Paul Kuchta, Center for Economic Solutions
• Viktoriya Podgorna, Center for social and political projects
• Andriy Guk, Marchenko Danevych
• Boris Danevych, Marchenko Danevych
• Volodymyr Polochaninov (former MP)
• Arthur Greene,University of Michigan
• Borys Davydenko, Liga.net
• Tom Coupe, Kyiv School of Economics
• John (Ivan) Jaworsky, Dept. of Political Science, University of Waterloo, Canada
• Olga Pindiuk, Vienna Institute for International Economic Studies
• Olexa Stepanyuk, Institute for Economic Research and Policy Consulting
• Viktor Artemenko,L’Université Lille 1, Wilfried Martens Centre for European Studies
• Zoya Buynytska,NGO “Institute for the development of social innovation”, Political party “Democratic Alliance”
• American Chamber of Commerce
• Easy Business
• Maryna Nazarenko,affiliation withheld
• Vasil Vasyltsev, Mediaspilnota
• Iryna Fedets,Affiliation withheld
• Vitaliy Umanets, NGO “AutoMaidan”
• Sergiy Medjanik, Information-analytical agency “Current Truth” (“Актуальна Правда”)
• Jaroslav Prytula, Ivan Franko Lviv National University named, Lviv Business School of UCU
• Bohdan Chomiak,Lapersa
• Andrii Linik, Artist
• Rostyslav Lukach,affiliation withheld
• Alina Storozhuk, Luxoft
• Roman Hnatiuk,(affiliation withheld)
• Igor Cherevko, Avis Rent a Car
• Yuriy Adamchuk,KM Core
• Ilya Porkalov, Dragon Asset Management
• Victor Perig, (affiliation withheld)
• Glib Vyshlinsky, GfK Ukraine Gleb
• Olena Zuikova,SP Advisors
• Andrii Luzan,Unicyb
• Zoya Mylovanova,affiliation withheld
• Olga Pavlovska,Muskie Program Alumnus
• Damian Handzy,Investor Analytics
• Denys Percheklii,Kyiv School of Economics
• Mykhailo Kopsovan,affiliation withheld
• Martin Foley,F&N News
• Andrew Alexseyenko,affiliation withheld
• Svitlana Barnes,Cambridge, UK
• Valeriy Shergin,(affiliation withheld)
• Liliya Matsuk,Ivan Franko National University of Lviv
• Vladimir Tarnay, Center for Political Studies and Analysis
• Viktor Prudkovskikh, Scherp
• Alex Bazeliuk, New Exhibition Tehnologies, JSC
• Tetiana Gomon,(affiliation withheld)
• Olena Chystiakova ,CEU
• Andrey Andreev, affiliation withheld
• Yurij Riphyak, The 40 Foundation, Democratic Alliance party
• Yulija Dovgal, Poltava National Technical Yurii Kondratuyk University
• Sergii Spivak, Corbina Telecom
• Sergiy Andruschenko, Pulsion Medical Systems SE, Munich
• Yuriy Shevchuk, AZS-Design.LTD
• Natalia Sydorova, BudEm
• Mykhailo Onipchenko, EuroExpert
• Iryna Nabytovych, Ukrainian Catholic University
• Maxim Serous, Stork Advisors
• Vladyslav Kyrychenko, Nash Format, founder