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Air transport and roads. Will transport market benefit from association with the EU?

14.11.2013

Author: Denis Katsilo
Source: LigaBusinessInform

On the eve of the Eastern Partnership Summit in November, where the Association and Free Trade Zone Agreement between Ukraine and the EU may be signed, the experts and officials polled by LigaBusinessInform assessed risks and benefits for the key segments of the Ukrainian transport sector.

Oleksii Andreychenko, senior analyst at Art Capital Investment Company:

In the near future, Ukraine’s joining the FTA with the EU will worsen the position of Ukrainian transport companies. This is due to increased competition with foreign carriers having more modern and advanced fleet and carrying large traffic volumes.

In the long term, Ukraine will become a key transit area for cargos transported between the EU and Asia, also by rail. Ukraine is naturally integrated into the rail transport system of the Customs Union, as it uses the same rail gage standard of 1,520 mm – in contrast to the most common European standard of 1,435 mm. Therefore, the Ukrainian railway transport companies would be more adapted to the growth of trade flow with the Customs Union.

Ukraine and the EU promote actively the program «Open Skies» aimed at creating equal access for Ukrainian and European carriers in Ukraine, which will inevitably result in consolidation of the Ukrainian air transportation market and elimination of the least competitive companies.

Rail carriers will continue to focus on the CIS countries and experience reduction in trade flows. Transit through Ukrainian ports will also suffer, as more strict customs procedures at the border with the Customs Union will mean essential advantage to Russian ports in the Azov-Black Sea basin, in the first place – Novorossiysk.

Evgen Prusenko, head of Ukravtodor:

Highways currently work on the edge of their capabilities. Not only transportation volumes, but also overall weight of vehicles has increased. The share of overloaded vehicles per moth is about 17%. Ukraine’s accession to the free trade zone with the EU will mean more efforts to meet the effective dimensions and weight parameters. It will help to save our roads to some extent.

Regarding freight traffic volumes, it is difficult to forecast the quantitative indices, but clearly they will be higher. After major overhaul in recent years pavement structure of major highways meets current loads. Load index on such roads is 11.5 tonnes per axle, whereas in Europe – from 10.5 to 13.5 tonnes per axle. On the rest of the road network built in the 60s and 70s increased traffic density creates high risks of their further destruction.

Arseniy Herasymiv, attorney at Ilyashev & Partners Law Firm:

In December 2006, the European Commission announced the official launch of the negotiations with Ukraine on Ukraine’s accession to the Common Aviation Area Agreement. Its signing will allow parties to freely carry out flights over each other’s territory, and create equal competitive opportunities in the airline industry.

The agreement has both advantages and disadvantages. Open Skies will facilitate reduction of air travel costs and appearance of budget airlines in the market. However, domestic companies will hardly compete with them in the price range. Obviously flight safety standards will be increased, but on the other hand, such measures will require additional costs from air carriers that may affect the cost of transportation. Customs duties and taxation of air travel market comprise an important part of the agreement. In short, any restrictions shall be removed and settlement issues shall be agreed.

Ukraine is undergoing a difficult stage of EU standards implementation in the aviation industry. It is worth noting that, unlike Moldova, Ukraine has a well-developed aviation industry consisting not only of the Antonov Design Bureau and aircraft plant, but a number of aircraft repair plants, extensive network of airfields and airports. The entire complex will have to be harmonized with the EU regulations. This work, or most of it, will have to be carried out before signing the documents.

At present, air transportation market is being consolidated, therefore, bringing the industry in compliance with international standards, in my opinion, is an absolute must for the aviation industry.

Dmytro Demydovych, Deputy Minister of Infrastructure:

I would like to consider two points of the matter: emotional and economic. From emotional point of view, I would like my family to live among the European values. I understand that signing of the Association Agreement with the EU offers many possibilities and benefits to the country, although in the short and medium term, it will be difficult for the Ukrainian enterprises to move to the new standards and present themselves in the European market. I am sure that the states members of the Customs Union will develop and grow, but some restrictions will be imposed on Ukraine. Entering into closer cooperation with the Customs union, we need to understand that Ukraine will become dependent on Russia’s economic indices.

If Ukraine takes advantage of the opportunities offered by the association with the EU, the country will make the leap – investment will come, concession projects will develop in key sectors. It will form a more clear, long-term, comprehensive and correct long-term strategy of Ukraine.

 
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