Ukraine International Airlines loses nearly $100 million

Ukraine International Airlines posted a net loss of almost Hr 2.7 billion (about $100 million) in 2018, or about nine times more than it lost in 2017, Ukrainian media reported on March 25, citing a UIA investor report.

This is the second year in a row that the company has made a loss, despite seeing growth in passengers. According to a February statement by company head Yuri Miroshnikov, UIA is struggling to stay profitable in the face of growing competition from budget airlines. In 2017, the company recorded a Hr 304 million loss.

The company is also renewing its fleet, having spent $20 million on four new Boeing 777-200 aircraft. Miroshnikov had also said that fuel costs and fuel excise taxes contributed to high expenses.

UIA did not immediately respond to requests for comment on March 25, nor did it send a copy of its annual financial results to the Kyiv Post.

News site Ekonomichna Pravda, citing UIA’s report, said the company plans to tap into its reserve capital to pay Hr 2 million in dividends to preferred shareholders.

While international flights are still profitable, domestic flights are not, according to Miroshnikov’s statement. The airline cannot compete with cheap train fares, he said.

Even so, the airline increased its passenger volume by 15 percent in 2018, carrying over 8 million people. Last year, UIA launched four new flights – to Delhi, Toronto, Cairo and Venice.

But competition from budget airlines is growing. Irish company Ryanair entered the Ukrainian market in September, while Hungarian airline Wizz Air expanded its Ukrainian schedule, offering 41 destinations from three Ukrainian cities.

Yevgen Treskunov, the co-founder of independent aviation consulting firm Aviaplan, told the Kyiv Post in February that fuel excise tax is a substantial overhead for UIA, which buys 400,000 tons of fuel per year.

Andriy Guck, a partner at Ante Law Firm, told Kyiv Post that it’s hard to analyze the company’s net loss without seeing the full investor report, but he cast doubt on UIA’s stated reasons for why it has been struggling.

“There are doubts about the explanations that the company is giving,” said Guck. He pointed to UIA’s recent legal victories, the increase in passenger numbers, and the airline starting to charge for services that were previously free. All of this should be offsetting the airline’s costs, he said.

“One can say that it has systemic problems… There are other companies with the same challenges, but they don’t have these problems,” said Guck.

UIA is trying to increase revenue by not including food in the price of a ticket and charging fees to customers with oversized baggage.

Miroshnikov had predicted that the business would stabilize in 2019, but Guck sees a potentially worrying trend.

“If UIA has problems, we may have a situation where we’ll lose a very serious aviation asset,” said Guck, adding that it’s doubtful that any one airline would be able to take UIA’s place in the market.