Академія Публічно-Приватного Партнерства

Prospects for public-private partnership at airports

Prospects for public-private partnership at airports

Prior to the coronavirus pandemic, the airport sector was considered one of the most attractive for private business to participate in public-private partnerships around the world, including in Ukraine. Passenger traffic grew rapidly, airports made high profits, and private businesses expressed interest in long-term investments in airport infrastructure. Based on such positive expectations, the Ministry of Infrastructure of Ukraine has recognized the modernization of airports and, first of all, regional airports in small towns with a population of 250-350 thousand, as one of its priorities, hoping that these projects will interest private business and will be implemented on PPP conditions.

Given these plans and taking into account the requests of local communities in November and December 2019, the PPP Agency established by the Ministry of Economy has signed memoranda of understanding on structuring PPP projects for the modernization of Rivne and Vinnytsia airports and is still actively working on these issues despite recently the situation has dramatically changed. The Minister of Infrastructure Vladyslav Krykliy also emphasizes the importance of the development of regional airports in the context of the coronavirus pandemic (https://www.ukrinform.ua/rubric-economy/3031317-v-umovah-pandemii-vazlivo-rozvivati-regionalni-aeroporti-kriklij.html) . The authorities are behaving as if nothing has happened neither in the world nor in Ukraine. Infrastructure investment priorities have remained the same as they were before the economic crisis caused by the pandemic.

Meanwhile, in our opinion, the management of the transport sector should have paid attention to how the pandemic has affected transport policy in other countries and, in particular, what trends are observed in the development of airport infrastructure.

Since March 2020, when the air traffic has almost completely stopped, airports and airlines around the world have suffered huge losses. There is a mass dismissal of staff, including highly qualified. Aviation companies are unable to cope with the crisis on their own and are turning to the state for support and financial assistance to overcome the crisis caused by the pandemic.

If we talk about Ukraine, not only regional but also the most powerful airports (Boryspil International Airport and Kyiv International Airport (Zhulyany)) have found themselves in a rather difficult situation due to the pandemic. A significant share of staff has been reduced (almost half), and large debts for airport maintenance are accumulating. The situation with the leading Ukrainian airlines is not better either. At the same time, both airports, the private Kyiv (Zhulyany) and the state-owned Boryspil, as well as domestic airlines, have not yet received any response to their requests, despite repeated appeals to the authorities in the person of the Ministry of Infrastructure. Thus, our aviation industry is already losing out to neighboring countries, which will used the existing advantages in the resumption of air services.

How many years it will take for airlines to resume last year's flights due to the economic crisis, declining incomes and psychological problems associated with the unclear situation with the coronavirus in the future is still unclear. According to the expectations of the representatives of the airport industry, even according to optimistic forecasts, the slow recovery of demand for air travel and return to the pre-quarantine level will take several years. And there are many reasons for such expectations.

The fact is that the consequence of the pandemic was not only a deep economic crisis but also almost complete termination of activities in certain areas, in particular, such as tourism and air services. What has happened in recent months has forced the society to reconsider its attitude to many things.

People's attitudes to their needs have changed. Today there is a decrease in the consumption of goods and services by the population, and this is not only due to the lack of funds; people's behavior has changed. It turned out that many things can be done online without loading traffic in cities or between cities and countries. It is likely that this trend will continue in the future, and people will travel much less for business. Consequently, the market for air services will narrow. Accordingly, the flight prices for tourists will grow, which will lead to a decrease in this category of passengers. Thus, in the medium term, the passenger air transport market will definitely not increase. In view of the above, the forecast for the aviation industry to reach the level that existed before the pandemic in a few years is very optimistic.

The society began to treat the environment more cautiously. The latter will also affect the development of the aviation industry. In particular, it should be noted that some countries, such as Austria, have already announced the implementation of a policy of combating "social and environmental dumping", which results in a negative impact on the environment (https://korrespondent.net/world/4238314- v-avstryy-zapretyly-prodavat-deshevye-avyabylety). This initiative introduced a minimum ticket price of 40 euros and a tax of 30 euros for those who will use the aircraft to cover a distance of less than 350 km. In the future, Austria generally plans to prohibit short flights of less than three hours, provided that there is an alternative high-speed train route which is more environmentally friendly. Similar approaches can be introduced in other countries of the world, because they make sense.

Unfortunately, all the above facts and other observations of experts did not make the Ukrainian authorities think about changing the priorities in infrastructure development, in particular with regard to the aviation sector. We plan to continue to encourage short flights through regional airports, despite not only the pandemic but also the implementation of a large-scale state program "Large Construction", which will result in reduced demand for air travel within the country. The Ministry of Infrastructure does not talk about the development of railway connections both in Ukraine and abroad. At the same time, the issue of attracting private business for the reconstruction of railway stations on the conditions of public-private partnership is being actively discussed. Obviously, given that passengers will have to spend a lot of time there, waiting for their trains, which are only by name "high-speed"…

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