As we anticipate the reopening of scheduled services to Ukraine at some point in 2025, some of Europe’s boldest airlines recognise the inevitable bounce back in demand and are already publicly declaring their readiness to return to the market.
Ukraine’s aviation landscape is likely to be very different from when scheduled services ceased in April 2023. At that time just 36 flights operated before hostilities prevented any further safe operations from commercial airlines. During the past three years, the whole aviation industry has undergone significant change, but for a country that lost all its scheduled services any recovery and future landscape starts with a blank piece of paper on which various parties will make a claim. However, before exploring what lies ahead, a quick look at the past gives us an idea of what the aviation payoff could be worth.
A Significant Market In 2019
With nearly 15 million departing seats in 2019 Ukraine ranked 20th across all European markets, below Finland but ahead of Romania, and had doubled in size since 2010 when only 6.5 million seats were on offer. Ukraine had become a popular and fast-growing market and the key operating metrics for 2019 outlined in the table below show just how the market had been shaping up.
In 2019, the market was in a period of transition with legacy airlines maintaining a very strong share relative to other European markets, but with scope for rapid transformation in the coming years. While Wizz Air were the second-largest carrier in the market with an 8% share of capacity and Ryanair had less than a 5% share, the dominant carrier remained Ukraine International Airlines, operating around one-third of all capacity and serving long-haul destinations such as New York and Bangkok, with up to five weekly flights to both. Indeed, for the budget conscious traveller Ukraine International had some of the most competitive prices from Western Europe to Thailand, although connections could be lengthy.
For legacy airlines, Ukraine was a valuable source of both local and connecting traffic with Turkish Airlines alone generating approx. US$45 million of revenues and Lufthansa a very respectable US$31 million and the collective Lufthansa group some US$53 million, which would make them the largest non-domiciled airline in the market. Allowing for the inevitable rush back to the market that we have seen on similar occasions around the world, potentially Ukraine could by the end of this year be attracting the attention of both the historic and new airline operators – but just how will that look?
Source: OAG Data
Inevitably A New Market Structure
It’s highly likely that the new market in Ukraine will look very different to that of 2019, due to altered geography and, more importantly, potential airline and aircraft availability.
The immediate catalyst for a recovery will come from the low-cost sector with both Wizz Air and Ryanair already putting markers into the ground around relaunching services. Ryanair have claimed that they will launch services from Kyiv and Lviv within six weeks of a cease fire agreement, reallocating aircraft from their Stansted and Orly bases. Meanwhile, and perhaps not quite so aggressively given their on-going engine supply issues, Wizz Air claim that they will have introduced some 60 routes from both Kyiv and Lviv within six months. While first mover advantage will be important for either airline the broader message is that, not surprisingly, the new Ukraine market will have a much larger low-cost carrier (LCC) share of capacity than we saw in 2019. Importantly, much of that capacity will involve based aircraft and local employment which will in turn generate wider economic activity. While we can only speculate, a LCC share of 40% would not be unreasonable once the market has settled, marking a significant shift from the previous split.
Amongst the legacy carrier group, Turkish Airlines will be back in the market as quickly as they can, although they too are struggling with fleet and supply chain issues. The lure of connecting traffic – particularly to some of the longer haul markets such as the United States and Canada – will be too valuable to ignore. Alongside the historic legacy carriers operating to Ukraine expect the big Middle East airlines to start showing an interest in the market before the end of 2025 (if they can find the capacity).
All of which leaves a big question mark around Ukraine International and if, or how, they could return to the market. Indeed, does Ukraine need a national airline?
Room For a National Airline
For a national carrier in 2019, Ukraine International were a relatively successful airline making a net profit of some US$69 million, although in the previous two years the carrier had lost US$106 million. Importantly the airline connected the country to key trading partners and diaspora communities around the world while generating some interesting sixth freedom revenue flows. In 2019, 2.6 million passengers were estimated to have connected over Kyiv with an estimated revenue generation of over US$661. Interestingly, the single largest sixth freedom traffic flow in 2019 for Ukraine International was between Tel Aviv and New York with US$31 million of revenues lost that are unlikely to ever return.
Financing a Ukraine International Airlines Mk2 would be an expensive task amongst many other more pressing priorities, especially when – as with any new airline – the initial losses of a new carrier will be a further drain on hard cash. Sadly, it is therefore unlikely that a national carrier will emerge as part of the ceasefire, and with two of Europe’s lowest cost airlines hovering around already, will the new market either have space or want a locally based legacy airline? Probably not.
The Winners & Losers
Ukraine’s new aviation market will look very different from 2019 and as in many other markets that have emerged in recent times, the low-cost airlines will be the winners and in many ways that is not a bad thing. Locally based aircraft, local jobs, rapid connectivity to major markets and creative thinking to stimulate new markets will all help stimulate the wider economic regeneration required.
Unfortunately, while the established non-domiciled legacy airlines will re-enter the market as quickly as aircraft availability allows, the once national airline’s global reach feels like a distant memory in a very different world.
