The largest Ukrainian carrier AeroSvit Airlines (VV) declared bankruptcy on 28 December and immediately downsized its operation considerably, affecting thousands of passengers. It managed to accumulate debts several times larger than value of its assets. The country’s second biggest carrier Ukraine International Airlines (PS) will fill some of the gaps left by VV and also take over some of its aircraft in the process. But while VV insists that it is working on emerging from bankruptcy restructured, rumors suggest that its owner managed to take control of PS and on purpose closed down VV.
In recent years, Igor Kolomoisky - the tycoon behind Ukrainian Aviation Group which VV belongs to - made a few investments in Scandinavian airline industry. In 2010, he purchased Swedish Skyways and City Airline, followed by Danish Cimber Sterling a year later. He intended to merge the three airlines and create a major regional player in the market. However, in May 2012, Kolomoisky decided to cut the funding for the three unprofitable regional carriers, which caused all of them to immediately file for bankruptcy. Aside from marking the end to Kolomoisky's aspirations in Scandinavia, the move signaled that VV - along with its affiliates - could soon experience the same fate.
More recently, VV's on-time performance started to decline with more than usual disruptions in schedule. Furthermore, a number of Russian airports expressed dissatisfaction with VV and pointed out to debts owed by the airline. This has resulted in some of them (at least temporarily) banning the carrier, before Russia itself banned the airline from its whole airspace this week.
Despite hoping to avoid bankruptcy process and even denying that the situation was so serious when the first reports emerged in late December, VV ultimately found itself in court facing liquidation as a realistic outcome. The carrier hopes to receive protection from creditors and still operates some flights, but its future does not appear to be bright. However, the airline refuses to accept closure insisting that it will use the process for restructuring and emerge with improved revenues and efficiency. Although it did not assist with passengers which were immediately affected following network reduction, the carrier did set up a crisis center two weeks later for those with latter bookings. Refunds will also be available.
PS has already secured around 30 routes which will be transferred over from VV. Some destinations have already been taken over, but last transfers are currently scheduled to occur on 31 March. On some of these routes, VV will keep its code. PS will in the meantime take delivery of more aircraft, including those on leases previously operated by VV, as it currently does not have sufficient equipment to accommodate all transfers. Given that PS seems to be exceedingly collaborative, speculations emerged suggesting that Kolomoisky might have gotten behind PS and intentionally ditched VV, therefore de facto consolidating the two largest Ukrainian airlines and getting rid of a debt-ridden business at the same time. PS denied these rumors, but such scenario should not be ruled out considering unclear ownership structures of PS and its stakeholders. Analysts claim that further evidence of such development are noticeable through inputs made months earlier in distribution systems.
VV operated out of Kiev Borispol to destinations in Ukraine, (mostly Central) Asia, Europe, the Middle East and North America. Its fleet consisted of roughly 20 Boeing 737s and 10 767s. PS remained mostly in Europe, with a handful of closer destinations in Asia and the Middle East. It operates solely 737s, around 20, but is eyeing acquisition of widebodies for long-haul.
Hand in hand with trouble at VV comes the grounding of other airlines under Ukrainian Aviation Group and owned by Kolomoisky's Privat Group (like VV). Dnipropetrovsk-based Dniproavia reportedly grounded its fleet in early January. Its executive later registered a new airline named Aviadnipro in the city. Donetsk-based Donbassaero also halted operations and filed for bankruptcy. Part of its fleet was transferred to Windrose Airlines, which is owned by Privat Group but not under Ukrainian Aviation Group.
Both Dniproavia and Donbassaero were financially unstable, and it seems that they still remain in operation by keeping minimal services like VV. The two mainly operated charter services.