Boryspil gets more investment on the ground

Swissport International, the world's leading ground- and cargo-handling business, has entered the Ukrainian market in anticipation of increased transit travel through Kyiv's Boryspil International Arport (KBP). Swissport recently purchased a 51 percent stake in Interavia, one of Ukraine's major ground-handling firms. However the deal is awaiting final approval from Ukraine's Anti-Monopoly Committee.

Swissport International concluded a joint venture on Feb. 21 with Ukrainian International Airlines (UIA), under which the two companies will jointly operate Interavia Ltd., a local ground-handling company UIA co-founded with its British partner Airline Business Handling (ABH) in 2005.

Swissport bought its stake in Interavia for an amount neither party would disclose. Accordingly, UIA's stake in Interavia was decreased from 60 to 29.4 percent, and ABH's from 40 to 19.6 percent. With the addition of Boryspil, Swissport now operates in 175 airports worldwide. The firm said it will not only significantly enhance Interavia's ground-handling capabilities, but also indirectly facilitate the growth of transfer traffic at KBP.

Swissport's website states that it currently serves more than 70 million passengers a year and provides ramp handling for over 2 million aircraft. In 2004, Swissport reported revenues of over $1.2 billion and employed more than 21,000 people worldwide. Interavia has 113 fulltime employees and provides ground-handling services for approximately 20 airlines at KBP, the only airport in which it operates currently. In 2005, the company served about 10,000 flights and 1 million passengers.

Interavia recently reported an annual turnover of $2 million, which has been growing at a rate of 20 percent a year.

Mark Skinner, Vice President of Business Development at Swissport International, added that the turnover for ground-handling operations in Ukraine overall has grown roughly 20-30 percent per annum for the last three years. He expects growth to remain equally strong.

At present, two major Ukrainian ground-handling firms operate at Boryspil, said Valeriy Polishchuk, Boryspil's first deputy director. Aerohandling, which belongs to Aerosvit, and Interavia. With the exceptions of Lufthansa and Ukrainian Mediterranean Airlines LTD, which handle their own ground operations, Polishchuk said Aerohandling and Interavia each cover about 50 percent of operations at KBP.

The main motive for streamlining Interavia's ground handling processes, which include check-in, minimizing ground time and ensuring a well-trained and friendly staff, appears to be increasing Boryspil's appeal as a transit hub.

Eastern European markets are growing and fast. According to the International Air Transport Association, Poland will have the largest growth worldwide for the next year. Skinner said Eastern Europe will likely expand at a faster pace than the rest of the world in the near future.

Polishchyk said that Boryspil's air travel volumes have been rising rapidly, noting a 24 percent increase in 2005 and a 19 percent rise this year, but added only 10 percent of all activity is attributable to transit traffic, which is "not sufficient."

Making Boryspil into a major hub, where, as Polishchuk envisions, 50 percent of traffic would be transfer passengers, remains a big task. Swissport can help make Boryspil more attractive for passengers traveling to and from Kyiv or using KBP as a transfer airport by "minimizing ground delays between flights and increasing efficiency," said Volodymyr Bilotkach, an Associate Professor of Economics specializing in airlines at the University of California, Irvine.

He added, however, that increasing efficiency can only "marginally increase a carrier's attractiveness to travelers, but that strategies like higher frequency of flights, better frequent-flier programs, lower prices, and better in-flight service are more important determinants of an airline's competitiveness."

Aerosvit, UIA, and other airlines are expanding their flight repertoire, by using additional aircraft to boost their frequency on established routes. However, Bilotkach said that UIA, which remains an important Ukrainian carrier, primarily feeds traffic to other airlines out of their hub airports. Bilotkach said this makes the airline extremely vulnerable to foreign competition. All KLM would have to do to shut down UIA's service to Amsterdam is add an evening flight to Kyiv that returns in the morning, he said.

Regarding ground handling, Bilotkach thinks that having one ground-handling company servicing KBP makes more economic sense than two.

According to Polishchuk, Boryspil itself is hoping to develop its own ground-handling operations, which would bring the number at KBP to three.

This strong competition in passenger handling should result in a positive decision from Ukraine's Antimonopoly Committee regarding Swissport's purchase of a controlling share in Interavia. Neither Swissport nor UIA anticipates any problems.

Orysia Kulick, Kyiv Post Staff Writer
Apr 06 2006