Abstract
This chapter is devoted to the issue of entry and activity of European low-cost airlines in the Ukrainian market. Ukraine, with the largest territory and population in Eastern Europe, is an important partner of European countries. The rapid development of air transportation between Ukraine and European countries in the 21st century is based on two factors: 1) high tourist interest in the historical and cultural heritage of Europe and 2) communication of migrant workers, the number of which is steadily growing. The authors reveal the specifics of the entry and development by European airlines of market niches of low-cost transportation in Ukraine in 2008-2021. In particular, the activities of airlines are considered: Ryanair, Wizz Air, German Wings, Meridiana, Ernest Airlines, Vueling Airlines, AegeanAir, Air Baltic, Austrian Airlines, and others. The activity of European low-cost carriers in the number of flights and directions of passenger transportation in Ukraine is evaluated.
TopIntroduction And Background
Low-cost flights in Europe have become quite popular and stimulate the development of mass tourism. They are successfully developed by low-cost airlines, which allow to fly at budget prices in different directions. Low-cost carriers (LCCs) have become an ideal alternative to transportation in the global economic crisis. It is especially relevant for Ukrainians, because it allows to travel even to those who have a relatively low income.
Low-cost airline is an air carrier that offers generally low rates, but at the same time does not provide most of the traditional passenger services. Key elements of LCC business model in today’s conditions there is one class of service, simple tariff structure with limited differential services and there is no practice of return money for an unused ticket and rebooking services.
This chapter aims to investigate the issue of entry and consolidation of European low-cost airlines in the Ukrainian market in the Pre-Covid-19 Era, the impact of the COVID-19 crisis on the activities of LCCs, and Post-COVID-19 recovery of the low-cost air transportation market in Ukraine in 2021.
Ukraine is a member of such international aviation organizations as the European Civil Aviation Conference (ECAC), the European Organization for the Safety of Air Navigation (EUROCONTROL) and the International Civil Aviation Organization (ICAO). On 12 October 2021, Ukraine and the EU signed a Common Aviation Area (CAA) agreement, as part of the 23rd Ukraine-EU summit in Kyiv. It is an important step in supporting the process of liberalization of air services.
The development of international tourism and air transportation in Ukraine should be considered as interdependent processes. They were significantly influenced by international geopolitical factors.
The aviation industry in Ukraine began to develop after the state gained independence. In September 1992, Ukraine became a member of ICAO. In October 1992, the State Air Traffic Services Enterprise (UkSATSE) was established. In May 1993, it adopted its own Air Code and established scheduled flights to more than 70 countries.
In the difficult economic realities of the formation of the state of Ukraine in the 90s of the twentieth century there was a sharp decline in air traffic: the number of departing passengers decreased 11.5 times (from 15 million in 1990 to 1.3 million in 1999), and in a number of regional airports even more – dozens of times. The economic crisis in Ukraine, the rupture of planned economic ties with the countries of the former USSR, the formation of a market economy, a sharp decline in real incomes have led to this. Since 2000, a slow increase in air traffic has been observed. In 2001, according to the State Statistics Service of Ukraine, 2.1 million passengers used air transport in Ukraine, in 2007 – 6.2 million.
Since 2008, Ukrainians have been able to fly more economically and more often thanks to the entry into the market of the first European low-cost airline Wizz Air.
There are several stages in the development of international low-cost air transportation in Ukraine, in particular:
- •
rapid formation of the low-cost air transportation market: from the arrival on the Ukrainian market of the first low-cost airline Wizz Air to the beginning of the Russian aggression against Ukraine (2008-2013);
- •
geopolitical depression of the low-cost market, due to the beginning of the Russian aggression against Ukraine and the occupation of Crimea and border cities in eastern Ukraine (2014-2016);
- •
restart and exponential growth of the international low-cost air transportation industry, due to the introduction on June 11, 2017 for Ukrainian citizens of a visa-free regime with the EU (2017-2019);
- •
COVID-19 collapse of the LCC market (March 2020-May 2021);
- •
partial recovery of low-cost air transportation (spring-summer 2021);
- •
Post-COVID-19 recovery of the low-cost air transportation market in Ukraine and the competitive struggle for the consumers (from summer 2021).
Key Terms in this Chapter
European Common Aviation Area (ECAA): A single market in aviation services. ECAA agreements were signed on 5 May 2006 in Salzburg between the EU and some external countries. On 12 October 2021, Ukraine and the EU signed an ECAA agreement, as part of the 23 rd Ukraine-EU summit in Kyiv.
Low-Cost Carrier (LCC) Business Model: An economic model of passenger air transportation according to the following business formula: “low costs – low fares – high demand – high incomes”. Key elements of LCC business model in today’s conditions there is one class of service, simple tariff structure with limited differential services and there is no practice of return money for an unused ticket and rebooking services.
Ukraine’s LCC Market: One of the most promising markets for LCCs, given the number of the country’s economically active population, as well as the dominance of the destinations in the EU in the ranking of tourist and personal air transportation of Ukrainians.
Low-Cost Airline: An airline that operates with an especially high emphasis on minimizing operating costs, offers generally low fares in exchange for eliminating many traditional passenger services.
Air Transportation: A method of transporting goods, mail and carrying passengers by aircraft. Air transportation is classified by direction, cargo category, type of loading, class of service, etc.
COVID-19 Crisis: A global complex crisis caused by the COVID-19 pandemic. The outbreak began in December 2019 in Wuhan (Hubei, China), and was recognized by the WHO as a pandemic on March 11, 2020. Air transportation has faced huge financial losses due to international quarantine measures.
Pre-COVID-19 Era: A period of stable dynamic development of the global (including European) air transport market by scheduled and low-cost airlines in the 21 st century (except for the collapse of 2008 due to the financial crisis), which lasted until March 2020, that is, before the global COVID-19 crisis.
Post-COVID-19 Recovery: A period of recovery of the potential of the global and regional air transportation markets by scheduled and low-cost airlines after the lifting of quarantine travel restrictions imposed by governments around the world in 2020-2021 to counter the spread of the COVID-19 pandemic.