NATIONAL AVIATION UNIVERSITY

Air Transportation Management Department

PERMISSION TO DEFEND GRANTED

Head of the Department
____________________D. O. Shevchuk
“______”_____________________2020

MASTER THESIS
(explanatory notes)
Theme: “Forecast of international air transportation development in Ukraine”

Done by: Vladyslav Revin FTML 602(Ma)

Supervisor: Ivannikоva V.Yu., PhD, Associate professor

Advisers on Individual Parts of the Notes:

Theoretical Part - Dr. Ivannikova V.Yu., Associate Professor

Analytical Part – Dr. Ivannikova V.Yu., Associate Professor

Design Part – Dr. Ivannikova V.Yu., Associate Professor

Standards Inspector: Shevchenko Yu.V., PhD, Associate professor

Kyiv 2020
 Міністерство освіти і науки україни
Національний авіаційний університет
Кафедра організації авіаційних перевезень

ДОПУСТИТИ ДО ЗАХИСТУ
Завідувач кафедри
_____________Шевчук Д.О.
“_____”____________2020 р.

ДИПЛОМНА РОБОТА
(пояснювальна записка)
випускника освітнього рівня
“МАГІСТР”
Тема: “Прогноз розвитку міжнародних авіаційних перевезень України”

Виконавець: Ревін Владислав, ФТМЛ 602(Ма)

Керівник: к.т.н., доцент кафедри організації авіаційних перевезень НАУ

Іваннікова В.Ю

Теоретина частина - к.т.н., доцент Іваннікова Вікторія Юріївна

Аналітична частина - к.т.н., доцент Іваннікова Вікторія Юріївна

Проектна частина - к.т.н., доцент Іваннікова Вікторія Юріївна

Нормоконтролер: к.е.н., доцент Шевченко Ю.В.

Київ 2020

2
 NATIONAL AVIATION UNIVERSITY
Faculty of Transport Management and Logistics

Air Transportation Management Department

Major: 275 "Transport Technologies (by transport modes)"

APPROVED BY
Head of the Department
_________________________
“______”_____________________2020

TASK

for completion the Master thesis

Revin Vladyslav
(name, surname)

1. Theme of the master thesis entitled “Forecast for the development of

international air traffic in Ukraine” was approved by a decree of the Rector’s order
№ 2026/ст.. from 16.10.2020.
2. Terms of thesis performance: from 05.10.2020 to 31.12.2020
3. Initial data required for writing the bachelor thesis: basic information about
the company, traffic volumes and financial indicators; concept of bussines plan,
methodology of calculations of the warehouse.
4. Content of the explanatory notes: 1.1.The basic concepts on forecasting
techniques of air traffic, COVID-19 impact on social-economic, analyzing ACI
forecast air traffic from, Aviation during the COVID-19 pandemic, results of the
aviation industry in Ukraine , IATA and ICAO scenarios and forecast of COVID-
19 influences on aviation, aviation-as-a service: Five scenarios for 2035,
5. . List of the mandatory graphic materials: ICAO forecasting techniques
tree; Monthly airport traffic figures from January to June 2020 versus 2019 (in
millions), Passenger traffic volumes from January to June, 2020 versus 2019 (in
millions); Multiple Layers of Safety Throughout the Journey; Global Estimates of
Impacts in brief; Estimated impact on domestic passenger traffic and revenues by
region for 2020; ICAO reports on the effect of Covid-19 on civil aviation; .

3
Passenger-kilometers performed, total scheduled traffic (2010 – 2019), Analysis of
the activities of airlines and airports in Ukraine during 2018- 2019; . Share of
leading airports in total passenger transportation through Ukraine's airports
Forecast for global PRK before and after Covi19, Passenger numbers compared to
Baseline & 2019: International, Results of using the decomposition methods of
forecast for Boryspil airport for 3 scenarios.

6. Calendar
Термін Відмітка про
Task
виконання виконання
1. Collection and processing of 01.10.2020 – Done
statistical data 05.10.2011
2. Writing of the theoretical part 06.10.2020 – Done
20.10.2020
3. Writing of the analytical part 21.10.2020 – Done
05.11.2020
4. Writing of the design part 06.11.2020 – Done
20.11.2020
5. Writing of the introduction and 21.11.2020 – Done
summary 30.11.2020

6. Execution of the explanatory note, 01.12.2020- Done

graphic materials and presentation 05.12.2020

8. Given date of the task: October 05, 2020.

Supervisor of the master thesis: Dr. Ivannikova V.Yu., Associate

Professor.

Task was accepted for completion: Revin V.V.

4
 REPORT

Explanatory note to the thesis project “Forecast for the development of

international air traffic in Ukraine” 127 pages, 47 figures, 11 tables, 26 references.
KEY WORDS: COVID-19, IATA, FORECAST, SHORT TERM,
REGRESSION, MOVING AVARAGES, IMPACT,
Object of research – impact on possible models of forecasting during
pandemic
Subject of research – traffic of Boryspil airport and social-economic impact
on aviation
Aim of research – forecasting model of air traffic of Boryspil Airport during
pandemic
Methodology such research methods as the method of extrapolation of time
series, empirical methods of scientific research, namely the method of observation,
moving averages forecast.
The obtained results and their novelty: forecast of airport traffic till
December 2021.
Significance of the work done and conclusions: The main conclusions and
results of the master's thesis can be used by air transport companies to evalueate its
own risk to make routes at Boryspil airport
Recommendations for the use of results: The obtained economic, high-
quality, technological results can be used in the organization of routes to airport
Boryspil .
It is established that the research has scenarios and forecast of COVID-19
influences on aviation

5
 Content

LIST OF SYMBOLS.................................................................................................8
INTRODUCTION.....................................................................................................9
1. THEORETICAL PART......................................................................................13
1.1. The basic concepts on forecasting techniques of air traffic...........................14
1.2. COVID-19 impact on social-economic.........................................................25
1.2.1. Macroeconomic context: a grim outlook—from virus to debt crisis..........27
1.2.2. Global passenger traffic..............................................................................29
1.2.3. Global Air cargo.........................................................................................32
1.2.4. Impact on revenues.....................................................................................35
1.2.5. Covid-19 impact on Ukraine.......................................................................36
1.3. Analyzing forecasts air traffic from ACI.......................................................37
2. ANALYTICAL PART........................................................................................40
2.1. Global trends in the aviation industry...........................................................41
2.2. Aviation during the COVID-19 pandemic....................................................45
2.3. Analysis of passenger and freight traffic in the world..................................54
2.4. Results of the aviation industry in Ukraine...................................................59
2.5. Analysis of operating and financial activity of “Boryspil International
Airport”.................................................................................................................67
3. DESIGN PART...................................................................................................78
3.1. IATA and ICAO scenarios and forecast of COVID-19 influences on aviation
..............................................................................................................................79
3.2. Scenarios of forecast and economic modeling approach in aviation............91
3.3. Aviation-as-a service: Five scenarios for 2035.............................................97
3.4. Impact of the five scenarios on value sharing in the aviation industry.......103
3.5. Forecast of passenger traffic at Boryspil airport depending on the
development scenarios impact of the pandemic in the world.............................105
SUMMARY..........................................................................................................121
REFERENCES......................................................................................................125

6
 LIST OF ABBREVIATION

COVID-19 - pandemic of coronavirus disease 2019

ACI– Airport Council International
ІАТА – International Air Transport Association;
ІСАО – International Civil Aviation Organization;
GDP – gross domestic product
UAH. – Ukrainian hryvnas;
ths. – thousands.
RPK - revenue passenger-kilometres
S - strengths
W - weaknesses;
O - opportunities;
T - threats;
EU – European Union
ARMA - auto regressive moving average
ILO - International Labour Organization
WHO - World Health Organization
WTTC - World Travel and Tourism Council
USD - USA dollars
LTF- long-term traffic forecasts
AI – artificial inelegance

7
 INTRODUCTION

Air Transportation Management NAU.20.10.14 001EN

Department
Done by: Revin V.V. Letter Sheet. Sheets
Ivannikova V.Yu. D 9 3
Supеrvіsor
Introduction
Standards
Yuliia V. Shevchenko FTML 275 OП-202Ma
Inspector
Head of the
Shevchuk D. O.
Department

8
 Aviation - one of the most important sectors of the national economy, the
effective functioning of which is a necessary condition for structural change,
development and conduct of foreign economic activity, meeting the needs of the
population and social production in transportation and more.
The purpose and main tasks of the passenger traffic forecast are to provide a
strategic assessment of potential passenger traffic in potential destinations and to
prepare a response plan in advance for possible changes.
Influenced by market demands and the needs of changing times, aviation
companies are forced to adapt and create new business models - the introduction of
business that would be adequate responses to the demands of the external market
environment during COVID-19.
The COVID-19 coronavirus pandemic is the biggest test the world has faced
since World War II. Appearing in Asia late last year, the virus has spread to every
continent except Antarctica, and as of May 13, 4.17 million cases of coronavirus
and 287,000 deaths have been confirmed worldwide. The first case of COVID-19
in Ukraine was recorded on April 4, 2020, and as of November 22, 624,744 cases
and 10,951 deaths were confirmed in the country.
The crisis will have serious consequences in the global economy, and
according to the IMF report, the projected decline in GDP from April 2020 in
Ukraine will reach 7.7%. There are quite different assessments of the further
recovery of the global economy - from the V-shaped scenario, which provides for
economic recovery in 2019 in 2021, to a longer recovery and even a long-term
recession. Tourism is one of the sectors of the world economy that has suffered the
most from restrictions on movement, and the aviation situation is particularly
difficult. As of April 20, 2020, due to a pandemic, 100% of all international
destinations have imposed entry restrictions. The currently published scenarios
predict a decrease in the number of international tourist arrivals from 58% to 78%
per year, depending on the spreading of the virus, the duration of restrictions on
movement and border closures, but it is extremely difficult to accurately determine
the future.
9
 Governments responded immediately to the need to minimize the economic
impact of the COVID-19 pandemic, based on two general approaches: the first is
to provide affordable credit lines for business and the second is to delay debt and
tax arrears.
In Ukraine today, there is a significant lag in the pace of implementation of
measures to support the tourism sector, which seriously jeopardizes the
competitiveness of the industry in the global market during the projected recovery
period of 2020 year.
Key industry players, including international airlines, are introducing a
number of external and internal measures to minimize the effects of the COVID-19
pandemic, including market security guarantees (postponement or reimbursement
of booked rooms, optimized loyalty programs, community support), health and
safety measures and internal reorganization (reductions, unpaid leave, reductions /
waivers of capital investments).
Countries are gradually lifting restrictions on business and services for
businesses, but with regard to air transport, it is being restored locally (within one
country). The next step in resuming air traffic will be to open borders between
neighboring countries, where the situation is relatively similar (for example,
Australia and New Zealand, Thailand and China, etc.).
The European Commission has issued a number of recommendations for the
opening of borders in two stages: the first will gradually remove restrictions on
border crossings between EU member states, and the second plans to lift all
coronavirus-related restrictions between member states. The situation regarding the
opening of the EU's external borders to third-country nationals (including Ukraine)
remains uncertain.
The share of tourism in the overall economy of Ukraine is a topic of in-depth
discussions and is, according to official statistics, about 3-4% of GDP, which is
much lower than the international average (equal to 10%). Therefore, tourism is
practically not taken into account in the formation of economic policy at the
national level. However, the latest data from international organizations (primarily
10
the UN World Tourism Organization, UNWTO) confirm the own calculations of
domestic experts, who determined this share at about 9% of Ukraine's GDP. This
gives grounds to consider this indicator much more important for the Ukrainian
economy than before.
In Ukraine, subsidies or cheap loans to airlines are not mentioned at all: state
aid to quarantined businesses is aimed primarily at small and medium-sized
businesses. This is forcing domestic airlines to look for a way out of the crisis on
their own.
Сompany redesigning and forecasting traffic in certain destinations is
becoming the most significant way for airlines to respond to reduce the impact of
the pandemic on airline profits.

11
 1. THEORETICAL PART

Air Transportation Management NAU.20.10.14 002EN

Department
Done by: Revin V.V. Letter Sheet. Sheets
Ivannikova V.Yu. D 13 26
Supеrvіsor
Theoretical part
Standards
Yuliia V. Shevchenko FTML 275 OП-202Ma
Inspector
Head of the
Shevchuk D. O.
Department

12
 1.1. The basic concepts on forecasting techniques of air traffic

In general, forecasting techniques can be broken down into two different

categories: qualitative or quantitative. Quantitative forecasting techniques consist
of either time series analysis or causal models and rely heavily on historical data.
Holt’s Method, moving averages, and trend projection are just a few examples of
time series techniques. Causal methods consist of many different regression
models. To contrast, qualitative forecasting techniques are much less methodical
and rely on judgement. Some examples are the Delphi Method and sales force
composites.
There are a few well-known facts about forecasting that is important to
always remember. First, forecasts, in general, are always wrong in some point. No
forecast is perfectly accurate; therefore the goal is to achieve a forecast with
minimal error. Second, long term forecasts are usually less accurate than short term
forecasts. Third, aggregate forecasts, where data is drawn from various sources are
generally more accurate than disaggregate forecasts.
Forecasting models consist of two components: a systematic component and
a random component. The systematic component is what we are trying to predict,
and often exhibits trends, cycles or seasonality. Trends are any steady growth or
decline in the forecast. Seasonality is defined as up and down swings exhibiting a
pattern in a short or intermediate time, generally a year. Cycles are up or down
swings over a long time. With any forecast, there is always a random component
that cannot be explained, but the goal is to minimize this element as much as
possible. The basic approach to forecasting is to understand the objective, and then
identify major factors that influence the variable in question. It is important to
choose the appropriate forecasting technique and finally, evaluate performance and
measure error. In this section, an overview of different forecasting methods and
models will be presented, as well as methods to measure forecast accuracy.

13
 An analysis of the experience of leading American, Japanese and Western
European companies and corporations shows that one of the important forms of
planning in companies in these countries is strategic planning. Features of strategic
planning and their differences from existing approaches are that strategic planning
is focused not on the detailed development of all aspects of the company's
production and economic activities, but on the choice of the most promising areas
of its development. The effectiveness and efficiency of strategic plans largely
depends on the reliability of scientific foresight of quantitative and qualitative
changes in social phenomena and processes. In turn, the reliability of forecast
predictions significantly depends on how fully the consequences of structural
changes occurring in the current and future planning periods are reflected in them,
which is of particular relevance for the development of passenger transport
systems.
The level of theoretical studies of various aspects of passenger transport
does not yet correspond to its actual importance in the socio-economic life of the
country, which is explained not only by the relatively small number of works in
this area, but also by the greater complexity of this socio-economic phenomenon,
the formation of which occurs under the complex influence of many different
factors. Also, in forecasting and strategic planning of passenger transportation, the
role of professional intuition and production experience is still important. To
determine the predicted volumes of passenger traffic by various modes of
transport, methods are used that are both similar in general terms and that have
their own differences.
Calculating the total passenger flow using five-factor models, these
scientists come to the conclusion that the greatest stability of the results is typical
for the prediction of suburban flows, and the least for long-distance and local
passenger flows.
Before the coronaviruses, the following methods were most widely used in
the development of passenger traffic forecasts:

14
 - mechanical extrapolation of the trends of change in time series identified
by analytical alignment of these series;
- the method of analogy based on the average annual growth rate of the size
of traffic, calculated for a number of past years;
In addition, research has been carried out to develop a methodology for
predicting the demand of the population for transportation using the methods of
regression-correlation analysis. Factors such as the country's population, the
proportion of the urban population, national income, the capacity of the resort
network, which were considered from the point of view of sources of potential
passenger flows, passenger seats as a measure of the supply of air transport
services, were considered as determining factors.
In addition, heuristic methods are also used, forecasts for which are made by
individual economists and are based on individual opinion, intuition, without the
use of mathematical methods. A common misconception among researchers who
have developed models for prospective passenger departures is to develop one
model for a wide forecast period from short-term to long-term.
The features of the implementation of this approach include:
- dividing the general forecasting interval of the research object into separate
stages (forecasting horizons and time intervals);
- determination for each time horizon of the main forecasting parameters
(goals, objectives, principles, methods, criteria, etc.);
- determination of a set of factors affecting the predicted indicator at each
stage;
- determining the state of the analyzed objects or indicators and managing
this state by verifying the developed models forecasting.
To develop the “integrated model”, the existing forecasting methods were
divided into three time horizons:
- short-term forecast (from 1 month to 1 year);
- medium-term forecast (from 1 to 35 years);
- long-term forecast (over 35 years).
15
 Long-term forecasts are also called promising.
For this division, the existing forecasting methods were analyzed by the
number of variable variables in their equations. Variables include factors that
affect the investigated value (dependent variable). The more variable variables in
the equation, the more likely it is to obtain more accurate values in the medium and
long term. Forecasting methods may not contain changeable variables (expert
methods), if it is not possible to represent the dependent value from any specific
factors. Most of the methods are presented in the form of simple equations with
one or two variables. Thus, all the variety in the number of variable values is
reduced to three varieties:
1) there are no mutable variables;
2) the number of variable variables in the equation is up to two, inclusive;
3) complex equations with more than two variable variables.
The forecasting horizon directly depends on the number of variable variables
in the forecast equation. For example, expert methods where there is no
mathematical equation (no variable variables) can give an accurate forecast
(according to experts) only in the short term. The medium-term forecast using this
method has the least accuracy, since the factors influencing the forecast object are
uncertain.
Correlation-regression equations can be simple or complex equations. A
simple equation is one-way (linear) regression with up to two variable variables
inclusive, which can predict the forecast value with high accuracy in the short
term, and can also give approximate values for the medium term with low
accuracy. Adaptive forecasting methods represent similar forecasting results.
Long-term perspective can be predicted with high accuracy by models that include
more than two variable variables. These include only multivariate regression
(correlation regression method).
As you know, most of the methods can be used for several forecast horizons.
For example, when a forecaster develops a medium-term forecasting model, he can
use it to forecast values for a short-term period. That is, this forecast model can be
16
used for two forecast horizons: short-term and medium-term. We propose to
classify these equations according to the maximum forecast period, i.e., the short-
term model will be attributed only to the medium-term one. Based on the proposed
judgments, the classification of forecasting methods from the forecasting horizon
is made.
Reliable forecasts of civil aviation activity play a critical role in the planning
process of States, airports, airlines, engine and airframe manufacturers, suppliers,
air navigation service providers and other relevant organizations.
The first consideration in terms of a forecast is its intended use. Forecasting
has a short-term, medium-term or long-term time horizon depending on the
intended use, the length of which can vary from industry to industry, as well as the
particular application concerned. Forecasting is not an independent discipline but
is a part of the overall aviation planning process. The form of the output, the level
of the detail and the rigour of the method used will vary depending on the intended
use of the forecast. In the civil aviation field, forecasts generally are used to:
 assist States in facilitating the orderly development of civil aviation
and to assist all levels of government in the planning of airspace and airport
infrastructure such as air traffic control, terminal facilities, access roads, runways,
taxiways and aprons;
 assist airlines in the long-term planning of equipment and route
structures; and
 assist aircraft manufacturers in planning future types of aircraft (in
terms of size and range) and when to develop them.
Forecasting methods in general can be divided into three broad categories:
quantitative or mathematical, qualitative or judgemental, and decision analysis,
which is a combination of the first two methods, as illustrated in Figure 1-1.
Forecasting techniques that start with historical data and develop a forecast
based on a set of rules fall into the category of quantitative methods. Situations in
which such data are not readily available or applicable and in which experience
and judgement have to be used are generally best suited for the application of
17
qualitative forecasting methods. Numerous methods exist for analysing time-series
data. The methods, which are possible in particular circumstances, may be limited
by a lack of data or resources. In general, however, a more reliable forecast may be
obtained by employing more than one approach and consolidating differing results
through judgement and knowledge of the markets concerned.

Fig 1.1. ICAO forecasting techniques tree

To understand what type should we choose for forecasting, it is need to be
described each of them in short description.
The time-series analysis methods are largely based on the assumption that
historical patterns will continue, and they rely heavily on the availability of
historical data.
A first step when forecasting air traffic activity is usually to study the
historical data (time series) and determine the trend in traffic development. In the
context of medium-term or long-term forecasting, a traffic trend represents the
18
development in traffic over many years, isolated from short-term fluctuations in
traffic levels. When deriving a medium-term or long-term forecast by extrapolating
from the traffic trend, the forecaster assumes that the factors which determined the
historical development of the traffic will continue to operate in the future as in the
past, except that their impact may change gradually, and steady-state conditions
will continue into the future. The appropriateness of using trend analysis in
forecasting depends heavily on stability in past developments and the confidence
of the forecaster that the assumption of continuing trends is appropriate to the
particular operating environment.
In its simplest form, trend projection analysis is nothing more complicated
than plotting the traffic data series on a graph. The traffic variable to be forecast
(the dependent variable) is plotted on the vertical axis, and time (the explanatory or
independent variable) is plotted on the horizontal axis. When each point in the time
series is plotted, a smooth curve that seems to come close to all the points may
then be drawn in freehand style, or a straight edge can be used to put a line through
the data.
A trend may be stable in absolute terms (linear growth) or in percentage
terms (exponential growth), but it can also suggest an ultimate limit to growth,
particularly if the time span extends over several decades. The type of trend curve
that best fits a given time series of traffic data may be determined by using
different types of graph paper and different ways of plotting the data. Plotting the
data on ordinary graph paper with even spacing (or arithmetic grid paper) will
show a linear growth pattern as a straight line. An exponential growth pattern
(constant percentage growth rate) will appear as a straight line on linear-
logarithmic paper (linear timescale, logarithmic traffic scale), and the slope of the
curve at any point will be proportional to the percentage rate of growth or decline
at that point in time.
After the data are plotted on graph paper and a trend curve that appears to fit
the data is established, the forecaster can then simply extend the visually fitted
trend curve to the future period for which the forecast is desired. The forecast data
19
can then be read from the graph and presented in a table. This is considered to be a
simple linear extrapolation of the data.
Trend projection analysis methods use mathematical techniques to determine
the best fit line through the data, just as is done by using graph paper and a straight
edge. In the more sophisticated trend projection methods, the mathematics and the
shape of the line being fitted to the data are more complex. Illustrative examples of
the use of trend projection can be found in paragraphs 116 to 126 and 143 to 151
of this part of the manual.
Decomposition methods involve the dissection of the problem into various
components. These methods are particularly relevant when strong seasonality or
cyclical patterns exist in the historical data. These methods can be used to identify
three aspects of the underlying pattern of the data: the trend factor, the seasonal
factor and any cyclical factor that may exist.
Exponential smoothing - a general class of widely used forecasting
techniques that attempts to deal with the causes of fluctuations in a time series
(trend, seasonality and cyclical factors) is that of smoothing. The two most
common smoothing techniques are moving averages and exponential smoothing.
Exponential smoothing, in general, draws upon the philosophy of decomposition.
The exponential smoothing approach to time series is similar to the moving
averages approach. However, it places more emphasis on the most recent data, to
increase their influence on the forecast. In doing so, it is important to recognize the
seasonality inherent in the airline traffic data if monthly or quarterly forecasts are
considered. In such cases, depending upon the month of the year, data would have
to be de-seasonalized. A smoothing factor would determine how much weight is to
be placed on, for example, various months of the year. The notion of giving greater
weight to more recent data is one that has strong intuitive appeal to the analyst,
depending on the particular circumstances, and is straightforward to apply.
As mentioned above, the moving averages technique is similar to
exponential smoothing. The only conceptual difference is that each observation is
weighted equally.
20
 Because of the equal weighting, moving averages tend to lag the current
situation more than exponential smoothing. The advantage of the moving averages
approach compared to exponential smoothing is that the former is much simpler. A
disadvantage of the moving averages approach is that a longer data series is
required for the analysis. Forecasts from moving averages can be used, as those
from exponential smoothing, for short-term forecasts. This can be achieved by
deviating from the standard formulation and assigning a relatively higher weight to
the most recent observation, provided there is justification for doing so. A
technique called auto regressive moving average (ARMA) can also be used, where
the forecasts are expressed as a linear combination of past actual values and/or past
computed error, since each new forecast based on a moving average is an
adjustment of the preceding forecast.
Another approach in the analysis of time series is the Box-Jenkins approach.
This method is suited to handle complex time-series data in which a variety of
patterns exist such as a continuation of a trend, a seasonal factor and a cyclical
factor. Typically, it uses the most recent data point as the starting value and then
analyses the recent forecasting errors to establish the adjustment factors for future
time periods. For example, if the forecast was 10 per cent lower in the previous
period, the forecast for the next period might be adjusted by some fraction of this
error (say 5 to 7 per cent) for the next period. This description also suggests that
the Box-Jenkins method is only appropriate for very short-term forecasts. The
method allows for much flexibility; however, it also calls for much subjectivity.
Extensive use has been made of trend forecasting by basing judgement on
past growth trends, which the analyst simply extrapolates, based on the historical
values. In the short term, this approach appears to be reliable, especially when the
extrapolation procedure is applied with modified growth rates to account for short-
term disturbance in underlying trends. In the long term, this type of extrapolation is
likely to be unreliable and is theoretically difficult to substantiate. Consequently,
forecasts derived by taking into account how economic, social and operational

21
conditions affect the development of traffic offer an alternative to time-series
analysis.
Causal methods infer a cause-and-effect relationship, hence the name. When
used successfully, causal methods can predict the ups and downs of the market.
This mathematical process is actually a testing procedure. The procedure is
designed to evaluate whether the relationship of the dependent variable (as
expressed in the causal model) to the independent (explanatory) variables is
significantly related to the movements of these variables.
Of the causal methods described in Figure 1.1, regression analysis is by far
the most popular method of forecasting civil aviation demand. In regression
analysis, the forecast is based not only on the historical values of the item being
forecast but also on other variables that are considered to have a causal
relationship. Multiple regression analysis takes into account more than a single
explanatory variable, in contrast to the one variable used in simple regression
analysis.
Econometric analysis
The use of multiple regression analysis with a price-income structure is
generally referred to as econometric analysis or econometric modelling. The
starting point for an econometric analysis is, in effect, a regression equation model
that postulates a causal relationship between a dependent variable and one or more
explanatory variables. Dependent variables in the analysis of traffic demand, in
general, are historical traffic data measured in terms of passengers or revenue
passenger-kilometres (RPK) and tonnes of freight or freight-tonne kilometres
(FTK). The explanatory (or independent) variables are those variables which
would have an influence on the demand for air travel. The econometric model
attempts to explain the demand for air travel as being caused by the changes in the
explanatory variables.
Using econometric analysis, the analyst tries to estimate the change in
demand from year (1) to year (2). Under such conditions, the change in demand

22
can be explained by a change that occurs along the demand curve as well as a shift
of the demand curve, as illustrated in Figure 1-3.
Advice is provided below on how to use econometric analysis to forecast air
traffic demand as well as the procedures to be utilized in the development of traffic
forecasting models using causal relationships.
Figure 1.2 illustrates the typical procedures to be followed and the steps
involved in the development of a forecast using an econometric model.
As depicted in the figure, the main steps in the development of a forecast
using an econometric model are:
a) Define the problem.
b) Select the relevant causal or explanatory variables.
c) After the relevant variables are selected, based on judgement or prior
analysis, establish the availability of data or the selection of substitutes or proxy
variables if such data are not available.
d) Once the data availability is established, formulate the model
specifying the type of functional relationship between the dependent variable and
the selected explanatory (causal) variables.
e) Carry out an analysis to test the relationship being hypothesized,
including the estimation of the model coefficients, their magnitudes and signs and
statistical measures.
f) When the foregoing criteria are achieved, establish the model in final
form.
g) Develop forecasts of future scenarios for the explanatory variables
from which the traffic forecast is subsequently derived.
It is important to keep in mind that the process is interactive and some of the
later steps will have an impact on earlier steps and vice versa. For example,
availability of data will influence the selection of causal variables.

23
 Fig. 1.2. Development of an econometric model

1.2. COVID-19 impact on social-economic

Airports Council International (ACI) World has published its fourth update
analysing the economic impact of the COVID-19 pandemic, and its effects on the
global airport business.
The month of August marked more than five months since COVID-19 was
declared a pandemic on 11 March 2020 by the World Health Organization (WHO).
Air transport has remained one of the hardest-hit global industries since the very
beginning of the global health crisis. In March, the virus outbreak got out of
control, with a rapid rise in daily confirmed cases across numerous countries.
By the middle of March, most countries went into lockdown. When the
gradual reopening of many parts of the economy started and some early signs of
recovery appeared, many States confronted the risk of a second wave of infections
and the re- imposition of lockdowns, which has already happened in several
jurisdictions.
24
 The ongoing pandemic has already claimed hundreds of thousands of lives
worldwide and resulted in dramatic economic impacts. Furthermore, it has created
disruption that has affected virtually all aspects of social and economic activity.
With thousands of aircraft on the ground and airports nearly empty, the
achievements of civil aviation in establishing global connectivity and convenient
air transportation have been largely put on pause. The United Nations’ Sustainable
Development Goals (SDGs), particularly those that address poverty, inequality,
and socioeconomic opportunities, which in many ways rely on efficient air
transportation, have come under threat.
As air transport has always been an industry based on the interdependence of
all its parts, the COVID-19 crisis devastated all stakeholders—from aircraft
manufacturers and travel agents to retailers in airports—and resulted in mass
furloughs and layoffs, business shutdowns, bankruptcies and other instances of
economic destitution.
Beyond the immediate and apparent damages, the global economy feels the
burden of vanishing indirect, induced and catalytic impacts arising from air
transportation activity: according to the Air Transport Action Group (ATAG),
aviation supports 65.5 million jobs worldwide and enables $2.7 trillion (figures in
US Dollars) in global Gross Domestic Product (GDP).
Even though most countries have moved from all-encompassing lockdowns
towards lighter restrictions with safeguards in place, most jurisdictions have
retained either partially or totally restrictive regulations pertaining to international
travel including 14- day self-quarantine on arrival. Africa and Latin America-
Caribbean appear to have the greatest number of countries with borders shut and
flights suspended.
The part seeks to highlights some key figures in terms of the impact of the
COVID-19 pandemic and subsequent lockdown on airport traffic and revenues. It
presents the fourth analytical assessment of the impact of coronavirus on the
airport industry since the beginning of the year and the third one since the Great
Lockdown marked recent history. In addition, the document amplifies some
25
fundamental shifts in the industry, discusses existential risks and touches upon
selected policies airports are advocating for through the voice of the global airport
community.

1.2.1. Macroeconomic context: a grim outlook—from virus to debt crisis

Since the release of the previous economic impact assessment in May which
referenced the April 2020 World Economic Outlook of the IMF, the global
economic institution downgraded its growth projections: according to the latest
figures published in June, the decline in global GDP is now estimated at -4.9% for
the year 2020, while the recovery is projected to be more gradual than previously
forecasted. Global growth is projected at 5.4% for the year 2021.
Even though this projection might inspire optimism at first sight, one should
understand that this would leave the global GDP for 2021 6.5 percentage points
lower as compared to pre-COVID-19 projections as of January 2020. It is an
uncomforting figure which reflects the decline in compensation of employees,
corporate profits as well as other types of income including returns on investment
and rents.
Each income component has been sharply reduced as normal economic
activity has been severely impaired by national lockdowns all over the globe, with
shut borders, reduced manufacturing, an annihilated service sector, the crash of
financial markets and non-fulfillment of financial obligations producing an adverse
chain reaction in the global economy. This is reflective of the precarious
macroeconomic situation in most parts of the world.
The IMF policy responses tracker suggests that practically all of the 196
economies across the globe have been pursuing a combination of fiscal and
monetary measures to keep their respective economic activity afloat—through tax
cuts and increased government spending, wages su bsidies and targeted sectoral
programs, government loans and guarantees, by lowering interest rates and
embarking on foreign exchange operations.
26
 All these measures are targeted towards keeping the global economy afloat
by stimulating demand, providing income and liquidity cushions to various sectors
of the economy, and keeping unemployment rates at socially acceptable levels.
Nevertheless, such measures can only partially offset the declines in income and
come at the cost of significantly rising debt levels.
The issue of declining global income cannot be isolated from the radical
spike in global unemployment—a significant risk to the recovery of the global
economy and air transport in particular.
According to the International Labour Organization (ILO), as of June 2020,
93% of people are employed in countries with workplace closures, while almost
third (32%) live in countries with required workplace closures for all but essential
workplaces. It is estimated that the global labour force saw a 14% decline in
working hours, while an equivalent of 400 million full-time jobs vanished from the
global economy, with the largest reduction occurring in the Americas (-18.3%).
Finally, it is estimated that 510 million women, equivalent to 40% of all employed
women, are employed in the hardest- hit sectors of the global economy, such as
tourism, hospitality, and air transport.
The ongoing health crisis magnified the long-term yet rapidly unfolding
socioeconomic phenomenon labeled as ‘precariat’ by some economists—the term
describing the mass class under unstable labour arrangements, typically with little
or no benefits, lack of job security and unclear professional continuity.
Underemployment and unemployment are significant obstacles for the recovery of
air transport.
Statistical evidence suggests that in the recent decade air transport demand
has been growing at roughly double the rate of global GDP, testifying to the fact
that air transport demand, by and large, is income-elastic (elasticity of 1 and
above). However, high income elasticity of demand for air transport is a double-
edged sword: when incomes are growing, the sector is benefitting from it at an
accelerated pace.

27
 When incomes are falling as is currently the case, demand for air transport
shrinks at even a faster pace than the decline in income, as consumers reorient
consumption towards necessity goods such as food and housing (income elasticity
between 0 and 1) or even inferior goods with negative income elasticity of
demand.
Finally, it is impossible to overlook the looming debt crisis. According to the
Institute for International Finance—the global association of the financial industry,
with close to 500 members from 70 countries including most of the world's largest
commercial banks and investment banks, global debt hit a record high of 331% of
global GDP in the first quarter of 2020, or over $258 trillion in absolute terms. The
pace of global debt build-up by governments, the corporate sector and households
is expected to further accelerate in the second and third quarters of 2020.
Out-of-control levels of debt unproportionate to the levels of income raise
legitimate concerns with respect to sustainability. Many economists express that
excessive debt levels may cause another global financial crisis and provoke a series
of sovereign, corporate and private defaults, and bankruptcies.

1.2.2. Global passenger traffic

The most comprehensive traffic figures collected from the world’s airports
reveal that the COVID-19 impact on aviation appeared as early as January. Global
passenger traffic grew by just +2.1% in January 2020, 1.6 percentage points down
from +3.7% a month prior and below the average growth rate recorded in the
preceding six months (+2.6%). The recorded passenger traffic was also more than
one percentage point lower vis-à-vis earlier monthly projection.
February was the first month to record a decline in global passenger traffic
volumes of - 13.9% year-over-year—the first double-digit decline since the
September 11 terrorist attacks.
As the COVID-19 outbreak rapidly progressed, the imposition of travel
restrictions and national lockdowns brought aviation to a virtual standstill by the
end of March. On a global scale, passenger traffic declined by -56.7% in the month
28
of March year-over-year and -58.2% under the business-as-usual (BAU) paradigm
(projected baseline). The difference between the two figures reflects unrealized
growth potential envisioned before the crisis.
The second quarter saw a record-deep decline in passenger traffic volumes.
In April, passenger traffic on a global scale reached a rock bottom of -93.7%
compared to the month of April 2019. In Europe, civil aviation activity practically
ceased, as it recorded - 98.4% decline in passenger traffic volumes year-over-year.
The month of May marked a small rebound in commercial civil aviation
activity as compared to previous months. Several markets, particularly those with a
significant domestic base—typically countries with a large population and vast
geography—started a gradual reopening of domestic routes. The decline in
passenger traffic volumes for the month of May was estimated at -90.3% year-
over-year.
In June, the mild recovery trend continued. As more countries started
reopening selected international routes, the dip in traffic diminished to -84.3%.
Accordingly, the second quarter of 2020 recorded a -89.3% decline in
passenger traffic volumes as compared to the year before and -89.6% decline
against the projected baseline for 2020. See Table 1.
In absolute terms, the loss in passenger traffic for the first two quarters of
2020 was estimated at -2.6 billion, equivalent of -60%.

Table 1.1
Monthly airport traffic figures from January to June 2020 versus
2019 (in millions)

(figures in
January February March Q1 2020 April May June Q2 2020
millions)
Passengers
697 653 743 2,093 747 766 802 2,315
2019
Passengers
711 562 322 1,595 47 74 126 247
2020

29
 Table 1.1 is continued

Year-over-
year 2.1% -13.9% -56.7% -23.8% -93.7% -90.3% -84.3% -89.3%
change (%)

Estimated
decline
versus -1.2% -17.2% -58.2% -26.4% -93.9% -90.7% -84.6% -89.6%
projected
baseline *
Cargo
44021 43929 44084 44102 44052 43840 43991 43980
2019
Cargo
43899 43898 9.0 44008 43958 43898 43959 43914
2020
Year-over-
year -4.4% -0.4% -16.9% -7.9% -23.8% -17.3% -11.3% -17.5%
change (%)
Estimated
decline
versus -3.3% -1.6% -14.8% -7.1% -24.3% -17.5% -13.4% -18.4%
projected
baseline *

Air
transport
8.0 43928 43959 24.0 43959 44051 44082 43887
movements
2019
Air
transport
44081 43837 44017 44063 43832 43984 43893 8.0
movements
2020
Year-over-
year -1.2% -4.3% -32.4% -13.2% -75.3% -70.8% -62.9% -69.6%
change (%)
Estimated
decline
versus -1.5% -5.6% -32.7% -13.8% -75.4% -71.0% -63.2% -69.8%
projected
baseline *

30
 900

800

700

600

500

400

300

200

100

0
January February March April May June

Passengers 2019 Passengers 2020

Fig.1.3. Passenger traffic volumes from January to June, 2020 versus 2019
(in millions)

1.2.3. Global Air cargo

Cargo traffic was not immune to the global health crisis either. Despite a
significant demand for air cargo arising from the demand for the transportation of
personal protective equipment (PPE), particularly in the months of March, April
and May, the impact was short-lived and could not offset the bigger and longer
declining trend.
Even before the start of the global pandemic, 2019 was the worst year for the
air cargo business since the Great Recession and the year 2009 in particular.
International trade grew by a marginal 0.9% in 2019, reflecting slowing GDP
growth across many manufacturing-intensive economies.
With the escalation of trade wars, lower levels of consumer and corporate
confidence as well as falling export orders, air cargo demand slowed down
consequently.
Air cargo accounts for more than a third of the world's trade in goods in
terms of value, making air freight levels a widely watched and key indicator of
economic activity.
Traditionally, air cargo has shown a stronger relationship with GDP as
opposed to passenger traffic.
31
 Additionally, air cargo has shown to be more elastic as compared to
passenger traffic with respect to income. While air cargo declined by -4.4% in
January, it rebounded slightly in February (-0.4%). However, in March the
volumes slipped by -16.9% year- over-year. In normal times, approximately half of
all commercial air cargo is transported in the belly hold of passenger aircraft as
opposed to dedicated freighters.
As the number of passenger flights fell, air cargo capacity diminished in a
radical way, creating an upward pressure on rates. The cumulative fall in air cargo
for the first three months of 2020 tumbled by -7.9% year-over-year.
Nevertheless, air freight rates were marked by volatility, rather than a
univocal hike, testifying to the general volatility and uncertainty in both air
transport and the global economy at large. Consistent with the uncertainty in air
transport, air cargo continued the fall in April and reached -23.8% as compared to
the year before.
The subsequent two months showed some recovery, as the decline was
diminished to - 17.3% in May and -11.3% in June. As such, the decline in air cargo
in the second quarter was estimated at -17.5% in contrast with the same period in
2019.
In absolute terms, air cargo volumes declined by an estimated -7.5 million
tons in the first half of 2020 -12.8% From the airport industry perspective, the loss
exceeded the annual cargo volumes handled by the world’s busiest air cargo hub—
Hong Kong International Airport—which recorded 4.8 million tons of cargo in
2019.

32
 12

10

0
January February March April May June

Cargo 2019 Cargo 2020

Fig.1.4. Air cargo traffic volumes from January to June 2020 versus 2019 (in
millions)
The impact of the current crisis on commercial air transport movements
appeared as early as in January, when the growth in the number of landings and
takeoffs across the globe slipped into the negative territory at -1.2% as compared
to the year before. While some airlines continued flying to China while monitoring
the unfolding health crisis in the province of Hubei and its largest city Wuhan,
others started avoiding the epicenter of the outbreak and reducing the number of
flights to the country.
As the number of COVID-19 cases continued to grow in China, more
countries started reporting infections, particularly in neighbouring countries in the
Asia-Pacific region. An increasing number of flights connecting China with other
countries were cancelled. In February, the health outbreak resulted in a sizable -
4.3% reduction of air transport movements as compared to the year before.
By the middle of March, the majority of countries had imposed lockdowns
implying restrictions that limit the free movement of people across borders in an
effort to contain the spread of the virus, sharply curtailing aviation activity.
Nevertheless, unlike passenger traffic that fell of a cliff by a sharp -56.7%, airlines

33
were still operating an approximate two-thirds of flights, reflected in a -32.4%
decline in movements.
In the first quarter of 2020 air transport movements recorded a -13.2%
decline year- over-year. In the second quarter, the dynamic was very similar to
passenger traffic, even though with a 20% differential reflecting flights under
social distancing measures and hence unusually low seat occupancy rates. In a
number of countries, regulators mandated blocking the middle seat, resulting in a
de-facto reduction of airline capacity by roughly a one-third.
As a significant proportion of the world’s population spent all of April in
strict lockdown, the number of air transport movements was reduced by three-
quarters as compared to the year before (-75.3%). In the month of May, a slight
uptick was recorded in the number of movements, as the figure recoiled slightly to
-70.8%. The positive trend continued in June, as about one-third of flights were
back, and the fall in air transport movements was reduced to -62.9%. In Q2 2020,
the reduction of air transport movement totaled to -69.6% year-over-year.
Nevertheless, the industry recorded a considerable loss of -43% in air
transport movements, equivalent of -21.4 million of landings and takeoffs
combined. From the industry perspective, this would be also equivalent to a
complete wiping out of about 26 airports comparable to the size of Hartsfield–
Jackson Atlanta International Airport—the world’s busiest airport by both
movements and passenger traffic.

1.2.4. Impact on revenues

Air traffic is the very lifeblood of the airport business. Airports generate
more than 95% of all revenue from two operating sources—the two primary
business activities—namely aeronautical and non-aeronautical services. The
residual 5% of income come from non- operating sources and are not directly
related to the volume of traffic handled by airports.

34
 Practically all aeronautical revenues are a direct function of traffic:
passenger-related charges from passengers and aircraft-related charges from
aircraft operators, respectively. An additional portion of aeronautical revenues may
arise from the provision of ancillary aviation -related services such as ground
handling, if performed by the airport operator itself. As traffic dried up, airports
left off getting the charges proceeds.
Before the crisis, the airport industry was expected to generate about $172
billion in 2020. Consistent with the seasonality pattern whereby most of traffic is
concentrated in second and third quarters, under normal circumstances the world’s
airports would have generated about 53% of annual revenues from April to
September. On the contrary, these two quarters are estimated to suffer from record
losses of $39.5 and $33.6 billion respectively—the figures consider foregone or
reduced airport revenues.
The third quarter, referring to the northern hemisphere summer months of
July, August, and September, have been traditionally considered the money-
making season in the entire air transport value chain and related industries such as
hospitality and tourism. A significant proportion of the world population, but
particularly in Europe and North America, take vacations, many of which imply air
travel.
However, the vacation season has largely eroded due to the epidemiological
situation, administrative complications and uncertainties, fear to travel and bleak
macroeconomic conditions. The hopes for air travel rebound during summertime
did not materialize, and the recovery remained sluggish.
Airports in Europe and Asia-Pacific were hit particularly hard by the
COVID-19-induced crisis in air transportation, falling short of $13.9 billion and
$7.7 billion in Q3 alone.
Proportionate to the respective size of the three major aviation markets,
airports of Europe, Asia-Pacific and North America are expected to incur a revenue
deficit of $38.8, $27.6 and $21.0 billion accordingly in the full year 2020. The
other aviation markets, namely Middle East, Latin America-Caribbean, and Africa,
35
follow suit with $8.0, $6.5 and $2.6 billion respectively. As such, the revenues
shortfalls pull down the previously projected industry revenue figure by 60%.
The current assessment assumes constant airport revenues on a per-
passenger basis, even though preliminary evidence suggests that unit revenues may
both increase or decrease depending on a combination of airport-specific factors.
Every airport has a unique portfolio of non-aeronautical activities , but as a rule of
thumb, a higher proportion of passenger-related activities, such as retail or food
and beverage concessions, lead to a steeper reduction in commercial revenues,
while higher reliance on real estate income and rents acts as a cushion in times of
crisis.

1.2.5. Covid-19 impact on Ukraine

The largest victim of quarantine measures is the type of transport. In January-July

2020, air traffic in Ukraine decreased by 69.3%.
In 2019, the total volume of air traffic will be about 24 million people. In 2020,
according to optimistic forecasts, there will be 14-15 million people for excellent
lists in August-September 2020. At the same time, Aerorukh captures almost the
entire central zone of aviation over our country (97% drop).
The industry's losses will amount to about UAH 10-15 billion. Airlines have a
strength of at least three months. Further space could lead to the bankruptcy of
small and medium-sized airlines. There is a high risk of mass layoffs of workers
working in this field. Yes, one option for downtime is 4-5 crews, or 36-50 people.
More domestic companies send staff on unpaid leave. Exit from the aviation crisis
should be expected no earlier than 2021-2022.

1.3. Analyzing forecasts air traffic from ACI

Before the beginning of summer 2020, most experts in the field of aviation
agreed that passenger traffic volumes would not reach 2019 levels before 2023.
However, as the industry remains on the ground for much longer than anticipated

36
in the first months of the crisis coupled with ongoing quarantine measures, current
projections on international market segments signal that passenger volumes will
likely not return to 2019 levels until 2024. Markets that have significant domestic
traffic, on the other hand, are expected to recover in 2023 back to pre-COVID-19
levels.
While the second quarter of 2020 was the worst the industry had seen, with a
loss of almost 90% of global airport passenger traffic, the third and fourth quarter
are expectedto show sustained—albeit partial—recovery. Compared to the
business-as-usual forecast (pre-COVID-19 forecast for 2020), the loss in global
passenger traffic for Q3 is expected to be close to 70%, and that of Q4
approximately 50%. This brings the full 2020 year at a 60% loss in global
passenger traffic.
Much uncertainty still surrounds the situation of the aviation industry and
projecting the path to recovery at this point is an exercise requiring prudence. A
faster launch of a potential vaccine that can easily be mass-produced could bring
us a much brighter future than we can now reasonably expect. Likewise, many
factors could contribute to a more pessimistic turn of events— unsuccessful
vaccine research, a large second wave resurging across the globe, supply side
shocks such as escalating aviation -related bankruptcies, a deepening economic
crisis, to name a few. This uncertainty is represented in Chart 4, which features
low, mid and high projected scenarios.

37
 Fig 1.5. Global passenger traffic in 2020
The three scenarios suggest that by December 2020, monthly traffic may
reach above 60% compared to the projected baseline for December 2020 under
favourable conditions but may remain as low as 27% in a less favourable setting
highlight the high degree of uncertainty in the forecast. The most likely mid
scenario points towards the passenger traffic reaching 56% of the projected
baseline for December 2020.
For the full year, the high and mid scenarios show that passenger traffic
volumes will reach around 42% of the projected baseline volumes for 2020. The
low scenario brings the passenger volume to 34% of the 2020 volumes under
normal circumstances.
After international travel restrictions are relaxed along with quarantine
measures, recovery is expected to be strong after this, reflecting the industry’s
restart from almost nothing.
However, given the mid- to long-term adjustments that will need to be made
to many well-established processes, a full recovery to 2019 levels of traffic is
likely not going to happen for several years. As shown in Chart 5, global passenger
traffic is not expected to recover to 2019 levels before 2023 with international
38
traffic likely not returning to 2019 levels until 2024. Markets that have significant
domestic traffic are expected however to recover in 2023 to pre-COVID-19 levels.
On the longer run, it is predicted that the global traffic will not return to previously
projected levels within the next two decades, pointing to a potential structural
change.
Fig 1.6 Global passenger traffic projection long-term

39
 2. ANALYTICAL PART

Air Transportation Management NAU.20.10.14 003EN

Department
Done by: Revin V.V. Letter Sheet. Sheets
Ivannikova V.Yu. D 40 38
Supеrvіsor
Analytical part
Standards
Inspector
Yuliia V. Shevchenko FTML 275 OП-202Ma
Head of the
Shevchuk D. O.
Department

40
 2.1. Global trends in the aviation industry

In the last few years, airlines seem to have reined in the challenges to some
extent. They continue to expand their top-line and bottom-line at a healthy pace, by
overcoming the barriers posed by growing competition, rising fuel prices, changing
regulatory norms and rapidly evolving passenger expectations.
The International Air Transport Association (IATA) forecasts the sector's net
profit to rise to USD 38.4 Billion in 2018 making this the fourth consecutive year
of sustainable profits. As airlines pursue wider market share, and adopt new
technologies to re-imagine their offerings and operations, here are six technology
trends that will have a significant impact on their business outcomes. Fig. 2.1
presents the main trends in the aviation industry, according to IATA.

Fig. 2.1. Top trends for the global airline industry

Trend 1: Enabling Frictionless Travel With Biometrics.

The adoption of biometrics is still at a nascent stage in the industry. But a few
airlines have already begun investing in fingerprint and facial recognition
technology. Currently, the technology is being tested in areas such as check-in,
security, lounge access and boarding.
41
 Long queues for security check or at the baggage carousel continue to be the
foremost pain point for passengers. Also, having to constantly show their
passports, identity cards or boarding passes for verification add to their
frustrations. Airlines are increasingly experimenting with biometrics to address
these issues and make the journey as frictionless as possible for passengers.
In the long run, paper and mobile boarding passes will become obsolete as
airlines use facial, iris or fingerprint scans to identify passengers. A European
airline has already piloted facial-recognition programs to reduce check-in and
boarding time. The U.S. Transportation Security Administration (TSA) has
unveiled an initiative across 30 domestic airports to use passengers' fingerprints for
identification and issuing boarding passes.
If the associated privacy concerns around data are addressed by airlines,
biometrics will deliver multiple benefits including shorter waiting time for
passengers.
Trend 2: Humanizing the experience through artificial intelligence.
Globally, the market for Artificial Intelligence (AI) in airlines is expected to
touch USD 2.2 Billion by 2025. Different use cases for AI adoption across the
industry are gradually taking shape. The most common one, of course, are chatbots
that are becoming increasingly sophisticated in resolving passenger queries.
Some airlines are looking beyond chatbots to leverage the true potential of AI.
For example, a leading Asian airline is using AI to estimate the average lifespan of
the parts on its planes. The airline has been able to quicken inspections, optimize
the inventory for parts and improve operational efficiency. Airlines are also using
AI and predictive analytics to create personalized promotional campaigns to
improve upsell / cross-sell opportunities. Airline revenue management is another
area where AI and machine learning are expected to drive transformation in the
long term.
Trend 3: Robotic revolution and automatization.
Over the next decade, the global robotics and automation market is expected
to touch USD 1.2 Trillion. The airline industry is expected to make up a significant
42
chunk of this rapidly growing market. Automation of workflows has been a major
focus area for the industry in recent years. And, this focus is only accelerating with
the early-stage adoption of robots.
For instance, a Korean airport has tied up with a leading electronics company
to test two prototype robots that will deliver boarding information and directions to
passengers. A global IT company that offers services to the air transport industry
has designed an intelligent check-in kiosk that can autonomously move to
congested areas of the airport to reduce the waiting time for passengers. Robots at
a Japanese airport, meanwhile, are automating several tasks including flagging
security risks and transporting luggage.
Trend 4: Seamless data sharing via blockchain.
The airline industry is characterized by data sharing among multiple players
across the entire value chain. At every touchpoint of the passengers' journeys,
complex data reconciliations happen in the background. However, given airlines'
siloed systems for storing data, this data exchange is rarely seamless. This is one
area where blockchain – often referred to as the “Internet of Trust” - can enable
airlines to conduct smoother data sharing and eliminate multiple transaction costs.
Often, in the event of flight delays, passengers get inaccurate status updates.
Blockchain's inherent ability to provide a single source of truth can help airlines
provide accurate flight updates in real time across multiple channels during delays.
A prominent German airline has formed an alliance with many companies to
explore blockchain-centric distribution, while other airlines are figuring out use
cases for retail, distribution and baggage handling. A leading South Asian airline
has launched a blockchain-based loyalty wallet that allows members to redeem
airline miles at point-of-sale.
Trend 5: Traveling in augmented / virtual reality.
The excitement around Augmented Reality (AR) and Virtual Reality (VR)
cuts across industries — market research firm IDC pegs the worldwide revenue
from AR / VR at USD 162 Billion by 2020.5 Airlines are also exploring different

43
implementation scenarios for AR and VR ranging from airport wayfinding to
remote airport operational control centers to immersive in-flight entertainment.
Gatwick airport in the U.K., for instance, has launched a beacon-based AR
wayfinding tool that shows direction to passengers through their mobile phone
cameras.6 The AR tool makes it easier for passengers to navigate within the
terminal and locate check-in desks, departure gates and baggage carousels.
Passengers aboard Airbus A380 flights are using the AR-led iOS app
iflyA3807 to take 360-degree virtual tours of the cabin, have a closer look inside
the cockpit or to know more about landmarks they are flying over. At New York's
JFK airport, passengers waiting for budget flights are given VR headsets by a
European airline to 'show' them its competing offerings for upselling opportunities.
With increasing adoption, airline mechanics will most likely use AR to carry
out quick, accurate repairs and maintenance that can be signed off remotely by
supervisors. This improvement in efficiency and accuracy will translate into faster
repairs, minimal equipment breakdowns and fewer delayed flights for airlines.
Trend 6: Passenger experience and the Internet of things.
Though airlines are still struggling to bring their legacy systems up-to-speed,
many have rolled out Internet of Things (IoT) initiatives to re-define the passenger
experience. Airlines are looking at leveraging IoT for operational areas ranging
from baggage management to in-flight entertainment.
A leading U.S. airline has invested millions of dollars for the deployment of
IoT to track baggage in real time thereby improving both reliability and
transparency. Airlines are also offering personalized navigation at airports by
integrating their native mobile apps with airports' beacons. As passengers move
across terminals, their locations can be used to guide them toward departure gates,
push customized offers, or direct them to lounges at discounted rates.
IoT combined with advanced analytics can also open up several upsell / cross-
sell opportunities for airlines. Historical data around passengers' preferences can be
used to make personalized in-flight offers such as upgrades. Curated entertainment

44
content can also be made available with all charges seamlessly debited from digital
payment accounts.
Summarizing it may be noted, as digital technologies continue to transform
the industry and re-shape consumer expectations, airlines will have to regularly re-
visit their core operating assumptions to stay relevant. They will have to re-
imagine key operations and functions to deliver compelling and differentiated
passenger experience. With the 'consumerization' wave transforming many service
sectors including media, transportation and retail, airlines too will have to harness
cutting-edge technologies in a 'smart' way. They will have to aggressively
experiment with different use cases to address pressing passenger pain points and
use the learnings to continuously refine their approach.

2.2. Aviation during the COVID-19 pandemic

Perhaps the biggest blow the coronavirus pandemic has dealt to airlines. The
quarantine and the ban on international passenger transportation left airlines
without their main source of income, forcing them to freeze their activities and
"burn" the reserves they had put off for years so as not to go bankrupt.
The travel and tourism industry has been one of the biggest victims of the
coronavirus crisis. The first decisions made by the governments of the countries in
connection with the pandemic concerned precisely the closure of passenger flights
and borders for foreigners. Therefore, millions of people around the world have
had to cancel vacations or work trips and return tickets.
According to the calculations of the World Travel and Tourism Council
(WTTC), the tourism industry and the passenger transportation sector by the end of
2020 may receive less than $ 2.1 trillion. This amount is equivalent to the GDP of
the Netherlands and Mexico combined.
Because of lost profits and the inability to run a business, companies are
starting to lay off workers. All in all, travel companies could lay off 75 million
workers because of the pandemic.
45
 The impact of the coronavirus on airlines will also be significant. According
to the calculations of the International Civil Aviation Organization (ICAO), losses
of passenger airlines from the pandemic could range from $ 160 billion to $ 253
billion, depending on the scenario of the exit from quarantine. The total passenger
traffic of airlines in the world could fall by more than 1 billion passengers.
According to the International Air Transport Association (IATA), due to the
coronavirus, the passenger turnover of world aviation may be halved, and the
revenues of passenger airlines may fall by $ 314 billion.
The drop in airline activity has already affected other industries, for example,
the energy sector: due to the fact that planes do not fly and do not consume fuel,
the demand for oil has dropped to a record, which has led to a drop in the price of
American oil to negative values.
Airports were also affected. The blow was especially painful for Ukrainian
airports, which have been increasing passenger traffic and actively developing over
the past few years. In particular, the Boryspil airport was forced to send 70% of its
employees to idle time, and the losses due to quarantine are estimated there at
UAH 380 million ($ 13.9 million) per month.
In connection with the coronavirus, the state even had to reconsider its plans
to attract investments in the aviation industry: if earlier the government planned to
transfer at least 4 regional airports to private investors, now this idea has been
abandoned, because they do not expect that such assets will be able to anyone
something to interest.
Over the years, most of the passenger airlines have been able to accumulate
enough reserves that allow them to stay “afloat” during the coronavirus crisis.
However, the volumes of these reserves are not unlimited.
Back in March, experts from the analytical company CAPA, which
specializes in the aviation industry, predicted that due to quarantine, most of the
world's airlines could go bankrupt by the end of May. According to analysts, only
large airlines can survive and only if they are supported by the governments of the
countries.
46
 Such decisions are already being made. In particular, the US government
recently allocated $ 9.5 billion in support to ten large and 83 small carriers. The
governments of the EU countries also plan to allocate about 20 billion euros to the
two largest airlines - Air France and Lufthansa.
However, not everyone can count on state aid, because the aviation industry,
despite its importance, employs relatively few people, so the amount of its support
is still limited.
In Ukraine, they don't talk about subsidies or cheap loans to air carriers at all:
state aid to businesses affected by quarantine is aimed primarily at small and
medium-sized businesses. This forces domestic airlines to seek a way out of the
crisis on their own.
One of the options is conversion for freight transportation. Moreover, there is
a demand for them now, because the governments of not only Ukraine, but all over
the world are actively transporting medical supplies on airplanes.
Thus, Ukraine's largest airline, UIA, announced the start of air cargo
transportation by passenger aircraft. Now the cargo is carried by two UIA aircraft,
but they claim that they are ready to allocate 10 aircraft for these purposes.
SkyUp, a relatively new company on the Ukrainian aviation market, is much
more active in transporting goods. Before the quarantine, the company operated
according to the low-cost airline model, but due to the crisis, they quickly received
a license to carry out cargo transportation. Carrying out cargo transportation as part
of its activities was planned by the airline even before the start of the coronavirus
pandemic. The introduction of quarantine measures on a global scale, as well as
the related crisis in the passenger air transportation market, accelerated the internal
preparation processes and gave impetus to the more rapid development of a new
direction in the work of SkyUp.
Now, out of 11 planes of the Ukrainian low-cost airline, 7 have been
converted for cargo transportation, 4 more planes are used for irregular special
flights, on which Ukrainians are evacuated from different parts of the world. The
airline, despite the crisis, did not mothball any of its aircraft.
47
 Despite the fact that passenger airlines operate cargo or evacuation flights, the
volume of such traffic is incomparably lower than before the coronavirus crisis.
According to the Flightradar system, which tracks the movements of aircraft, the
number of flights in the world has dropped from 176 thousand to 67 thousand per
day (when comparing the beginning of March and mid-April 2020). The size of the
workload of airlines dropped significantly, so many of them had to lay off their
employees.
In particular, the Hungarian low-cost airline Wizz Air announced that it will
lay off 1,000 of its employees - this is almost every fifth employee of the company.
The decision was made due to the fact that the airline is using only 3% of its
operating capacity, which was before the COVID-19 pandemic.
Potential cuts have also been reported at Europe's largest low-cost airline,
Ryanair.
The reduction of workers was also reported in Ukrainian airlines, in particular
in SkyUp: despite everything, unfortunately, these are not the volumes of traffic
that the fleet counted on and collected the flight personnel. And today there is no
clear understanding of when passenger traffic will be restored and to what extent it
will be carried out. Therefore, the company has to take a step with the reduction of
flight personnel.
At the same time, the airline expects a gradual restoration of jobs after
quarantine.
They do not exclude staff cuts at UIA. When regular air traffic begins to
recover, it will be possible to analyze the demand, respectively - the number of
aircraft, the frequency of flights, the directions in which they will be operated, and
the like. Thus, it will become clear how much staff is needed. Today we cannot
rule out restructuring in the airline's divisions and the reduction of individual
positions. The airline loses $ 14.5 million monthly due to downtime and
quarantine.
The situation is not so dramatic in the company "Windrose", which is mainly
engaged in charter air transportation. "Windrose" is more of a charter company and
48
receives the main income in the summer season, starting in May. However, the
longer the quarantine is, the more dramatic the situation will become.
The company is preparing for the crisis by negotiating with partners. In
particular, Windrose managed to agree on the extension of the payment terms for
aircraft leasing and other property lease.
The situation with coronavirus and quarantine restrictions in the world is very
dynamic, therefore experts, international organizations, and airlines themselves do
not undertake to predict when and how the industry will return to normal.
Now the Ukrainian government has extended the quarantine until May 11.
Until that time, the ban on air travel will also be in effect. Most likely, this ban will
remain in effect after May 11, because Ukraine's exit from quarantine will be
gradual, and they plan to restore, first of all, urban and suburban transport.
ICAO predicts two options for the world aviation to overcome the crisis.
According to the first, the restoration of air transportation may occur at the end of
May 2020. In this scenario, the losses of the aviation industry could reach $ 218
billion, and the drop in passenger traffic - to 963 million people (based on the
results of 9 months of 2020).
In a less optimistic scenario, ICAO expects the restoration of air traffic
according to a scheme similar to the Latin letter U: after a sharp drop, the period
during which air traffic will be at a minimum level will continue. In this case, the
restoration of the aviation industry should be expected no earlier than September
2020, the drop in passenger traffic will be 1.11 billion people, and the industry's
losses will be $ 218-253 billion.
Covid-19 changed main role of personal safety. Multiple Layers of Safety
throughout the Journey are presented in fig. 2.2.

49
 Fig. 2.2. Multiple Layers of Safety Throughout the Journey

When assessing the economic impacts on civil aviation, ICAO works with
many different scenarios in order to reflect the very uncertain nature of the current
situation and the rapidly changing environment. The actual path will eventually
depend upon various factors, inter alia, duration and magnitude of the outbreak and
containment measures, availability of government assistance, consumers'
confidence and economic conditions.
1. Baseline: hypothetical situation without COVID-19 outbreak with
forecasts as originally planned;
2. Indicative Scenario 1 – «V-Shaped»: follows the normal shape for
recession where a brief period of contraction is followed by quick/smooth
recovery - most optimistic path indicated with a down
3. Indicative Scenario 2 – «U-Shaped» : indicates prolonged contraction
and muted recovery with a possibility of no return to trend line of growth (L-
shaped) - most pessimistic path indicated with a down.
Global Estimates of Impacts in brief is presented in fig. 2.3.
The analytical focus revolves around two scenarios, which shall not be
considered as forecasts of what is likely to happen, but merely indicators
of possible paths or consequential outcomes out of many. Each scenario considers

50
4 different paths to take into account differentiated terms of supply (output) and
demand (spending).

Fig. 2.3. Global Estimates of Impacts in brief

The analytical timeframe has now been extended to Mar 2021 and therefore
covers the full year of 2020 and Q1 2021.
ICAO is working alongside the Airport Council International (ACI) in
monitoring the developments and to leverage their expertise and analysis
conducted on the economic impacts of COVID-19 on airports. Global-level
Analysis of Impacts on International Traffic and Domestic Traffic are shown in
fig. 2.4 – 2.5.
The COVID-19 virus has spread worldwide without acknowledging borders.
It has impacted all industries, all sectors and all aspects of our lives with
devastating economic and financial losses and significant uncertainties.
Within the spirit of collaboration, the below chart gathers information from
international organizations representing the impacted industries. This information
is subject to frequent change and you are invited to visit the official website of
each organization for most up-to-date figures.

51
 Fig. 2.4. Global-level Analysis of Impacts on International Traffic

Fig. 2.5. Global-level Analysis of Impacts on Domestic Traffic

Figures are sourced from the International Civil Aviation Organization

(ICAO), the International Air Transport Association (IATA), the Airports Council
International (ACI), the UN World Tourism Organization (UNWTO), the World
Trade Organization (WTO) and the International Monetary Fund (IMF).

52
 ICAO reports on the effect of Covid-19 on civil aviation during 2020 we can
see in fig. 2.6.

Fig. 2.6. ICAO reports on the effect of Covid-19 on civil aviation

Let’s consider the global impact of COVID‐19 on aviation, tourism, trade

and economy in 2020. Analytical data can be seen in fig. 2.7.

Fig. 2.7. Estimated impact on domestic passenger traffic and revenues by

region for 2020

53
 Air passenger traffic: An overall reduction of air passengers (both
international and domestic) ranging from 59% to 60% in 2020 compared to 2019
(by ICAO).
Airports: An estimated loss of approximately 60% of passenger traffic and
61% or over USD 104.5 billion airport revenues in 2020 compared to business as
usual (by ACI).
Airlines: A 54.7% decline of revenue passenger kilometres (RPKs, both
international and domestic) in 2020 compared to 2019 (by IATA).
Tourism: A decline in international tourism receipts of between USD 910 to
1,170 billion in 2020, compared to the USD 1.5 trillion generated in 2019, with
100% of worldwide destinations having travel restrictions (by UNWTO).
Trade: A fall of global merchandise trade volume by 9.2% in 2020 compared
to 2019 (by WTO).
Global economy: A projected -4.4% to -5.2% contraction in world GDP in
2020, far worse than during the 2008–09 financial crisis (by IMF and World
Bank).

2.3. Analysis of passenger and freight traffic in the world

According to ICAO’s preliminary compilation of annual global statistics, the

total number of passengers carried on scheduled services rose to 4.1 billion in
2019, which is 7.2 per cent higher than the previous year, while the number of
departures reached 36.7 million in 2019, a 3.1 per cent increase compared to 2018.
Passenger traffic, expressed in terms of total scheduled revenue passenger-
kilometres performed (RPKs), posted an increase of 7.9 per cent, with
approximately 7 699 billion RPKs performed in 2019. Asia/Pacific remained the
largest region with 34 per cent of world traffic, posting a 10.7 per cent growth in
2018, followed by Europe with 27 per cent of world traffic and a growth of 8.6 per
cent. North America, which accounts for 23 per cent of world traffic, grew at 4.1
per cent. The Middle East region, representing 9 per cent of world traffic, recorded
54
a growth rate of 6.5 per cent. The Latin America/Caribbean region accounted for 5
per cent of world traffic and grew at 7.4 per cent. The remaining 2 per cent of
world traffic was undertaken by African region airlines, which recorded a growth
of 7.2 per cent (fig. 2.8).

9000 25

8000
20
Passenger-kilometers performed (billions)

7000
15
6000

Annual growth rate, %

5000 10

4000 5

3000
0
2000

-5
1000

0 -10
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Fig. 2.8. Passenger-kilometers performed, total scheduled traffic (2010 –

2019)

International scheduled passenger traffic grew by 8.4 per cent in RPKs

(Revenue passenger kilometres (RPKs) in 2019, compared to the 7.7 per cent
growth recorded in 2018. European air carriers saw growth of 8.8 per cent and
accounted for the largest share of international RPKs, at 37 per cent of the total.
Asia/Pacific retained the second largest share at 29 per cent. The growth for this
region was 10.5 per cent. The Middle East accounted for 14 per cent of
international RPKs and recorded a growth of 6.5 per cent in 2019, significantly
lower than the double-digit growth recorded in 2018. North America which
accounts for a share of 13 per cent of international RPKs, grew by 4.9 per cent.

55
African carriers, which account for 3 per cent of international RPKs, grew by 8.1
per cent. Carriers of Latin America/Caribbean which account for a share of 4 per
cent of international RPKs experienced a 9.1 per cent growth in 2019.
Domestic scheduled passenger traffic grew by 7.1 per cent in RPKs in 2019,
up from the 6.9 per cent growth recorded in 2018. The main drivers of this growth
were the carriers of the United States, China and India which saw increased growth
by 3.6, 13.2 and 17.7 per cent, respectively. The Asia/Pacific region, with a share
of 42 per cent, overtook North America to become the world’s largest domestic
market and grew strongly by 11.0 per cent in 2019. North America, with a 41 per
cent share of domestic RPKs, experienced a 3.7 per cent growth in 2019. Carriers
of Europe, accounting for 9 per cent of domestic RPKs, saw a growth of 7.3 per
cent in 2019. The Latin America/Caribbean region, which accounts for a 7 per cent
share, saw growth of 5.6 per cent while carriers of the Middle East and Africa, saw
a growth of 5.9 per cent and 2.2 per cent, respectively.
Low-cost carriers carried an estimated 1.2 billion passengers in 2019, which
was approximately 30 per cent of the world total scheduled passengers. This
indicated a 11.4 per cent growth when compared to the number of passengers
carried by low-cost carriers in 2018, around one and a half times the rate of the
world total average passenger growth.
Capacity offered by the world’s airlines, expressed as available seat-
kilometers, increased globally by 6.5 per cent in 2019. The capacity growth ranged
from 3.8 per cent in Africa to 8.8 per cent in the Asia/Pacific. The average 2019
global passenger load factor at 81.3 per cent was a per cent higher than achieved in
the previous year, and ranged from 70.8 per cent for Africa to 83.6 per cent for
Europe.
Approximately 56 million tons of freight was carried in 2019. Growth of
scheduled total freight traffic, expressed in terms of scheduled total freight tons-
kilometers performed (FTKs), was at 9.5 per cent in 2019, significantly higher than
the 3.6 per cent recorded in 2018. This growth was mainly due to the improving
trade activity in 2019 (fig. 2.9).
56
 250 20

200 15
Freight tonne-kilometers (billions)

Annual growth rate, %

150 10

100 5

50 0

0 -5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Fig. 2.9. Freight ton-kilometers (billions), total scheduled traffic (2010 –

2019)

Scheduled international FTKs posted an increase of 10.4 per cent in 2019,

compared to the 3.5 per cent growth of 2018. International air freight represented
around 87 per cent of total scheduled FTKs. Air carriers in Asia/Pacific carried
nearly 40 per cent of scheduled international FTKs; the figure was 26 per cent for
carriers in Europe, 16 per cent for the Middle East, and 14 per cent for those in
North America. This indicated that nearly 80 per cent of long-haul freight traffic
flowed on the East-West trade lane that connects Asia to Europe, Asia to North
America, and Europe to North America.
Scheduled international freight capacity in 2019, expressed in available
freight ton-kilometres, was approximately 351 billion, a 6.1 per cent growth
compared to 2018. The scheduled international freight load factor increased from
53.2 per cent in 2017 to 55.4 per cent in 2019. A combination of improving

57
economic activity, trade and growth in e-commerce contributed to the net positives
for air freight in 2019.
In 2019, the operating profit of scheduled airlines of Member States was
estimated at about 7.9 per cent of operating revenues. The operating profit was
expected to be around USD 60 billion in 2019 based on operating revenues of USD
758 billion. Nearly 49 per cent of the net profits came from the performance of air
carriers in North America, followed by carriers of Asia/Pacific and Europe with 25
and 26 per cent, respectively. The 24 per cent increase in jet fuel price in 2018 led
to an increase in unit costs compared to the decline seen in 2018. Higher traffic
growth, a more efficient utilization of capacity and slowing of the decline in yields
compared to previous years offset the negative of the increase in unit costs and
contributed to another profitable year for the air carrier industry in 2019.
After an estimated 3.1 per cent growth in real Gross Domestic Product (GDP)
in 2018, the World Bank has forecasted the growth to remain unchanged at 3.1 per
cent GDP for 2019. Accordingly, ICAO has forecasted that total passenger traffic
will grow by about 7.5 per cent in 2019. The operating profit for the industry is
expected to be around USD 56 billion in 2019 due to the combined effects of
improving economic growth, continuing traffic growth and better capacity
utilization that is expected to offset the increase in jet fuel prices in 2019.
According to the latest ICAO long-term air traffic forecasts, the 4.1 billion
airline passengers carried in 2018 are expected to grow to about 10.0 billion by
2040, and the number of departures is projected to rise to some 90 million in 2040.
With regard to aircraft, the world’s major manufacturers delivered 1 481 new
commercial aircraft in 2019 and recorded 2 131 new aircraft net orders. Book-to-
bill ratios for two of the largest aircraft manufacturers increased to around 1.4:1 in
2019 from 1:1 in the previous year, providing an indicator of the increasing pace of
aircraft orders. Strong traffic growth projections, low to stable borrowing costs,
improving airline profitability, growth of low-cost carriers and the fleet
replacement programs of carriers are expected to maintain the strength of the
aircraft market.
58
 As for aviation safety, there were 88 aircraft accidents for scheduled
commercial air transport operations in 2019, an increase of 17 per cent from 2018,
when 75 accidents were reported. This is according to an analysis of global
accident data involving commercial air transport aircraft with a maximum
certificated take-off mass of more than 5 700 kilograms. The number of fatalities
in scheduled operations worldwide decreased to 50 fatalities, which represents a
substantial decrease from 182 in 2018 and the lowest level on record of the past ten
years. The number of fatal accidents decreased from 7 in 2018 to 5, also the lowest
in recent records. The global accident rate increased to 2.4 accidents per million
schedule departures versus 2.1 accidents per million scheduled departures in 2018.
IATA has launched an industry Simplifying the Business (StB) Cargo
Transformation program in 2016. StB Cargo is the umbrella for transformational
initiatives in air cargo. The 6 projects under StB Cargo are:
- e-freight & e-AWB, led by the Digital Cargo team;
- ONE Record, led by the Digital Cargo team;
- Interactive Cargo;
- Smart Facility, led by the Cargo Operations team;
- ACID – Air Cargo Incident Database;
- Cargo Connect, led by the Digital Cargo team.
The Interactive Cargo project aims at developing responsive air cargo services
based on intelligent systems that are able to self-monitor, send real-time alerts,
respond to deviation to meet customers' expectations and report on the cargo
journey to allow data-driven improvements.
In addition to global forecasts, regional estimates have been developed for
Asia-Pacific, Africa, Europe, Latin America-Caribbean, Middle East and North
America. Airport traffic projections are also presented for major economic
groupings such as emerging versus advanced economies, BRICS (Brazil, Russia,
India, China and South Africa), G7 (Canada, France, Germany, Italy, Japan, the
United Kingdom and the United States), MINT (Mexico, Indonesia, Nigeria and
Turkey) and more.
59
 2.4. Results of the aviation industry in Ukraine

Statistics on the activities of the aviation industry in 2019 indicate its stable
development. So, during the reporting year, the transportation of passengers, cargo
and mail was carried out by 34 domestic airlines, which carried out 100.3 thousand
commercial flights (as of 2017 - 93 thousand flights). At the same time, the
number of transported passengers increased compared with 2018 by 18.7 percent
and amounted to 12529 thousand people. At the same time, the volume of cargo
and mail transportation by the air transport of Ukraine increased by 19.7 percent
and amounted to 99.1 thousand tons (table 2.1).
Table 2.1
Analysis of the activities of airlines and airports in Ukraine during 2018-
2019
Indicators Total including international
Units of % %
measurement 2018 2019 2019/ 2018 2019 2019/
2018 2018
1 2 3 4 5 6 7 8
Airline activities
Passengers transported ths. people 10556,3 12529,0 118,7 9614,9 11446,1 119,0
including on regular lines ths. people 6768,2 7867,6 116,2 5837,2 6796,2 116,4
Performed passengers- billion pass
kilometers km 20,3 25,9 127,6 19,9 25,4 127,6
including on regular lines billion pass km 12,6 15,6 123,8 12,1 15,1 124,8
Transported cargo and mail ths. tons 82,8 99,1 119,7 82,6 98,8 119,6
including on regular lines ths. tons 19,2 21,1 109,9 18,9 20,8 110,1
Performed tons-kilometers million ton-
(cargo + mail) km 275,3 339,7 123,4 275,2 339,6 123,4
including on regular lines million ton-
km 70,5 92,0 130,5 70,4 91,9 130,5
Performed commercial flights ths. units 93,0 100,3 107,8 78,1 84,1 107,7
including regular ths. units 63,3 67,0 105,8 49,9 52,3 104,8
Airports activities
Aircraft Departure / Arrival ths. units 159,9 182,8 114,3 125,6 145,6 115,9
including on regular lines ths. units 121,4 140,3 115,6 95,0 111,5 117,4
Passenger traffic ths. people 14591,
16498,9 20545,4 124,5 1 18357,5 125,8
including on regular lines ths. people 10770,
12646,1 15811,1 125,0 3 13658,7 126,8
Mail and cargo traffic ths. tons 52,3 56,4 107,8 51,1 55,2 108,0
including on regular lines ths. tons 47,3 51,3 108,5 46,0 50,1 108,9

60
 It should be noted that since 2017, the passenger market has developed quite
dynamically. Thus, the number of passengers who used the services of Ukrainian
airlines grew annually by an average of a quarter. Over the three years, the volume
of passenger traffic has almost doubled compared with the 2016 figure, and at the
same time, it exceeded the level of the “pre-crisis” level by more than one and a
half year 2014.
Passengers were transported by 21 domestic airlines, among which the
leading position was occupied by Ukraine International Airlines, Windrose, Azur
Air Ukraine, YanEyr and Bravo (fig. 2.10). At the end of the year, 5,220.6
thousand people were transported by the five largest passenger airlines, which is
20.2 percent more than in 2018 and accounts for almost 93 percent of the total
passenger traffic of Ukrainian airlines.
More than half (54.2 percent) of all passenger traffic of domestic airlines are
international scheduled flights. In 2019, in accordance with the approved
timetable, regular international flights were carried out by 10 domestic airlines in
46 countries of the world, the number of passengers who used the services of
Ukrainian air carriers increased by 16.4 percent and amounted to 6796.2 thousand
people. Simultaneously with the increase in the intensity of flights in many
developed directions, a network of routes of domestic airlines developed. Thus,
during the year, 17 new regular routes were opened by Ukrainian carriers. At the
same time, the average occupancy rate of passenger seats on international regular
flights of Ukrainian airlines increased from 77.7% in 2018 to 78.8% in 2019.

61
 14000
12529

12000
10556,3
11446,1
10000
9614,9
Thousands passengers

8106,3 8110,4 8367,8

8000 7504,8
6475,2 6304,3 7475,3
6106,5
6820,9 6900,3
6000
5131,1 6328,5
5828,6 5679,6
5144,3
4000
4135,9

2000 1176,3 1285,4 1210,1

995,2 962,2 892,5 941,4 1082,9
646,6 624,7

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total International Domestic

Fig. 2.10. Dynamics of passenger transportation by air transport in Ukraine

during 2010 – 2019 years

At the same time, there was an expansion of activity on the Ukrainian market
of foreign airlines, and 5 new foreign airlines began to operate regular flights to
Ukraine. 2019 also distinguished itself by the development of the route network of
foreign airlines, which began operating 27 international airlines. In general, during
2019, 38 foreign airlines from 37 countries of the world operated flights to our
country. 6,857.3 ths. passengers used their services, which is 37.8 percent more
than in 2018 and accounts for 50.2 percent of the total regular passenger traffic
between Ukraine and the countries of the world.
A significant increase (by 23.1 percent) was observed in this segment of the
passenger airline market as international flights on an irregular basis, during the
reporting period, 4649,9 ths. passengers were transported by 16 Ukrainian airlines.
At the same time, almost 84 percent of such traffic was carried out by the five
aforementioned leading airlines.

62
 During the year, the intensification of regular shipments within Ukraine
continued. Domestic passenger traffic on a regular basis was performed by four
domestic airlines, which provided air services to ten cities of Ukraine. During the
reporting year, 1071.4 thousand air passengers were transported, which is 15.1
percent more than in the previous 2018. At the same time, the average employment
rate of passenger seats on domestic scheduled flights increased from 73.5% in
2017 to 79.3% in 2019.
This year, 22 domestic airlines carried cargo and mail. It should be noted that
most of the cargo transportation has traditionally been charter flights to other states
within the framework of UN humanitarian and peacekeeping programs, as well as
in accordance with contracts and agreements with other customers. The leaders of
transportation are “Antonov” (an increase of 15.3 percent compared to 2018),
Ukraine International Airlines (an increase of 10.2 percent), ZetAvia (an increase
of 36.8 percent), “Maximus Flight” (2.2 times increase). In the reporting period,
these airlines carried out 78 percent of the total freight and mail traffic (fig. 2.11).
Commercial flights of domestic and foreign airlines served 20 Ukrainian
airports and airfields, for the reporting period, the total number of aircraft
departure and arrived was 182,800 units, which is 14.3 percent more than in 2018.
At the same time, passenger traffic through the airports of Ukraine, exceeding the
20-million mark, reached 20,545.4 thousand people, which ensured an increase of
24.5 percent. Post-freight flows increased by 7.8 percent and amounted to 56.4
thousand tons.
According to statistics, in 2019 there was an increase in the number of served
passengers at all major airports in Kiev (Zhuliany) (by 51.9 percent), Lviv (by 47.9
percent), Boryspil (by 19.4 percent), Kharkiv (by 19, 3 percent), Odessa (by 17.8
percent), Zaporizhia (by 14.9 percent) and Dnipropetrovsk (by 8.1 percent). Also, a
significant increase in passenger traffic was recorded at the airports of the cities of
Chernivtsi (by 53 percent) and Kherson (by 41.8 percent) (fig. 2.12).

63
 45000

40000 2187,9

35000
1907,8
30000 18357,5
Thousands passengers

2433,9
2632,6
25000 1635,4
2363,8 14591,1
12700,7 1326,8 1273,9
20000 1945,9 11474,4
11294,5
10101
1978,7 9569,7 9421,2
15000 8296,6
6676,2
10000 20545,4
16498,9
14107 15134,6 12929,9
12464,8
5000 8654,9 10242,5 10896,5 10695,1

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Total International Domestic

Fig. 2.11. Passenger traffic through the airports of Ukraine, thousand pas

Others; 2

Boryspil; 61 Kyiv (Zhulyany); 14

Odessa; 7

Lviv; 8

Kharkiv; 5
Zaporizhzhia; 2 Dnipropetrovsk; 1

Fig. 2.12. Share of leading airports in total passenger transportation through

Ukraine's airports
64
 It should be noted that today almost 98 percent of total passenger traffic and
99 percent of cargo traffic flows are concentrated in 7 airports of the country -
Boryspil, Kiev (Zhulyany), Lviv, Odessa, Kharkiv, Zaporozhye and
Dnipropetrovsk.
Summing up, we can say that aviation is developing in Ukraine. The annual
growth rate of passenger and cargo traffic increases by an average of 7%, which is
a good trend.
Statistical data on the activities of the aviation industry in 2019 indicate its
stable development despite the negative trends in the entire transport sector.
Significant promotion of the positive dynamics of activity of enterprises of
aviation industry introduced the introduction of a visa-free regime with EU
countries, which led to an increase in the mobility of Ukrainian citizens. Greatly
popular trips abroad for the weekend is given to aviation transport to save time in
such trips.
Thus during the reporting year 34 domestic airlines performed transportation
of passengers, cargo and mail which carried out 100.3 thousand commercial flights
(2019 - 93 thousand flights).
Cargo and mail transportation.
The cargo and mail traffic in 2019 was carried out by 22 domestic airlines. It
should be noted that most of the freight was traditionally charter flights in other
states within the framework of the UN humanitarian and peacekeeping programs,
as well as in accordance with contracts and agreements with other customers.
Transportation leaders - ATP Antonov (growth by 15.3 percent compared to 2018),
International Airlines of Ukraine (growth - by 10.2 percent), ZetAvia (growth - by
36.8 percent), "Maximus Airlines" (growth - 2.2 times). The aforementioned
airlines in the reporting period carried out 78 percent of the total volume of cargo
and mail.
Activities of airports.
Commercial flights of domestic and foreign airlines served 20 Ukrainian
airports and airfields (Table 2.2), during the reporting period, the total number of
65
shipments and arrivals of aircraft amounted to 182.8 thousand units, which is
14.3% higher than the figure for 2018.
Table 2.9
List of airports in Ukraine
№ City of location Official name
1 Kyiv State Enterprise "Boryspil International Airport"
2 Lviv State Enterprise "Lviv International Airport" Danila Galitsky
3 Dnipro Limited Liability Company "International Airport
Dnipropetrovsk"
4 Zaporizhzhia Communal Enterprise "International Airport of Zaporozhye"
5 Mykolayiv Communal Enterprise "Nikolaev International Airport"
6 Ivano-Frankivsk International airport Ivano-Frankivsk (Scorzonera)
7 Kyiv Communal Enterprise "International Airport Kyiv (Zhulyany)"
8 Kryviy Rih Municipal Enterprise "International Airport Kryviy Rih"
9 Odessa Communal Enterprise "Odessa International Airport"
10 Rivne Regional Municipal Enterprise "International Airport Rivne"
11 Sumy Oblast utility company "Airport Sumy"
12 Uzhhorod Transcarpathian Regional Utility Enterprise "Uzhhorod
International Airport"
13 Ternopil Ternopil Oblast Municipal Enterprise "Ternopil Avia Avtotrans")
14 Kharkiv Limited Liability Company "New Systems AM" (International
Airport Kharkiv)
15 Chernivtsi Communal Enterprise "Chernivtsi International Airport named
after Leonid Kadenyuk"
16 Kherson Communal Enterprise of Kherson Oblast Council "Kherson
Airlines"
17 Poltava Poltava Oblast Municipal Enterprise "Poltava Airport"
18 Vinnytsia Communal Enterprise "Airport Vinnitsa"
19 Cherkasy Communal Enterprise "Cherkasy Regional Airport Cherkasy
Regional Council"
20 Zhytomyr Subsidiary Enterprise "International Airport Zhytomyr named after
SP" Koroleva "Limited Liability Company" Accord "

At the same time, passenger traffic through Ukraine's airports, exceeding the
20-millionth milestone, reached 20545.4 thousand people, which provided a
growth of 24.5 percent. The cargo turnover increased by 7.8 percent and amounted
to 56.4 thousand tons.
It should be noted that today almost 98 percent of total passenger traffic and
99 percent of postal traffic flows are concentrated in 7 airports of the country -
Boryspil, Kyiv (Zhulyany), Lviv, Odessa, Kharkiv, Zaporizhia and Dnipro.
Application of aviation in the branches of the economy.

66
 In 2019, aviation enterprises processed 569.2 thousand hectares of
agricultural land, the total flight during aviation works in the economic sectors was
11.8 thousand hours (540.9 thousand hectares and 9 thousand hours respectively,
in the previous year).
Air Traffic Service of Ukraine.
Ukrainian State Air Traffic Services Enterprise “UkSATSE” for the reporting
year served 300.9 thousand flights versus 254 thousand for 2019. The number of
serviced flights performed by aircrafts and helicopters of airlines of Ukraine (by
9.7 percent) and foreign airlines increased (by 23.9 percent).

2.5. Analysis of operating and financial activity of “Boryspil

International Airport”

Boryspil International Airport is the largest and most powerful in Ukraine. It

provides over 67% of aviation passenger transportation in Ukraine and serves over
10 million passengers per year.
The main activities: auxiliary service of aviation transport; activities of
intermediaries in food, beverages and tobacco products trade; activities of
intermediaries in the trade of goods of a wide range; other kinds of education;
retail sale of beverages in specialized stores; warehousing; activities of hotels and
similar means of temporary placement; leasing and exploitation of own or leased
property; supply of steam, hot water and air-conditioned air.
Organizational and Legal Form: State Enterprise.
Subjects of management: Ministry of Infrastructure of Ukraine.
According to the resolution of the Cabinet of Ministers of Ukraine dated
December 23, 2004 No. 1734 "On approval of a list of enterprises of strategic
importance to the economy and security of the state", the State Enterprise
"Boryspil" is included in the list of enterprises that are strategically important for
the state's economy and security.

67
 Boryspil is well located at the intersection of many air routes connecting Asia
with Europe and America. More than 25 national and foreign airlines carry from
Boryspil passenger and cargo transportation on 75 regular routes around the world.
The airport has two runways. The technical capabilities of the airport
"Boryspil" remain unique for Ukraine, CIS countries and Eastern Europe. A
runway length of 4000 m and a width of 60 m allows receiving aircrafts of all
types round the clock, including in conditions of limited visibility. Boryspil is also
the only airport in Ukraine that operates regular transcontinental flights.
The airport is a member of the International Association of International
Airports of the European Regions (ACI EUROPE), the Club of Quality Leaders of
Ukraine, the Association of Airports of Ukraine CA (AAUCA), the Kyiv Chamber
of Commerce and Industry and the Ukrainian Chamber of Commerce and Industry,
the Ukrainian Association of Excellence and quality ", Public Association"
Ukrainian Air Transport Association ", Association of hotel associations.
Boryspil International Airport is the hub airport of Ukraine International
Airlines. In the early 50's of the 20th century, the development of civil aviation in
the Soviet Union was at an extremely high pace. The transition to the era of jet
passenger aircraft, discovered by the Soviet Tu-104 on June 17, 1955, required
new approaches to the construction of airports and runways.
In order to comply with safety standards and overcome the limitations that
existed for airports within cities, a project for the joint use of a military airfield
near the city of Boryspil was proposed. After obtaining a permit for civilian
aircraft based on a military aerodrome preparation of the airport before the opening
was very fast. The opening of the airport was carried out around the clock.
On June 30, 1959, an order was signed on the creation of the airport by the
head of the General Directorate of the State Tax Inspectorate No. 265. Already on
July 7, 1959, the first flight was accepted. During the first year of its activity,
which was initially carried out in field conditions (six tents), and later in temporary
premises, Boryspil Airport was ranked third in terms of passenger traffic among

68
Ukrainian airports (after Simferopol airport and Zhulyany airport). Since 1960,
Boryspil Airport has begun to take international flights.
The project of the terminal was developed already in 1961 by the Kyivproekt
Institute. And in 1965 the premises were solemnly opened and put into operation.
Capacity, at the time, was 1,400 passengers on domestic flights and 200 on
international flights. The terminal was the second largest after the Moscow
Domodedovo Airport and one of the largest in Europe.
Every year the number of passengers grew rapidly. This necessitated the
construction of a second runway, which was opened in 1971. In addition, there
were built radio electrical workshops, laboratory building ATB, emergency rescue
station, a set of secondary radar equipment, and others.
In 1982 the construction of the "Arrow" center for the automated air traffic
control system in Ukraine was launched. It significantly facilitated the work of air
traffic controllers and crews and covered almost the entire territory of Ukraine.
Until 1990, Boryspil Airport had the best production performance among
Ukrainian airports. The crisis, caused by the collapse of the Soviet Union, could
not but affect the activity of the airport. However, the company does not close, but
begins to seek investors. The Cabinet of Ministers of Ukraine issued a resolution
that had historical significance about the reconstruction of the Boryspil airport. The
regulation stipulated that 60% of the funds would be drawn from investor firms.
This gave a new impetus to the development of the company: March 11, 1993, the
airport "Borispil" receives the status of a state international airport.
April 1, 1993 was the second legal establishment of the airport "Boryspil".
According to the order of the Minister of Transport of Ukraine on the basis of
Boryspil Air Company, the Boryspil State International Airport was created as a
legal entity, the regional directorate of Ukraine Airlines and Kyivcentraero.
In 1995, Terminal C was opened to service VIP passengers. In 1998, the
President of ICAO (International Civil Aviation Organization) President Dr. Assad
Kotait officially confirmed the status of the airport training center as the ICAO

69
Aviation Safety Training Center (today, this airport division is one of the 21
similar centers in the world).
The runway №1 was reconstructed to the 10th anniversary of Independence of
Ukraine. The funds were attracted by the European Bank for Reconstruction and
Development. Incidentally, this was the first EBRD loan for Ukraine. The previous
RW, which was designed for liners weighing up to 47 tons, can now accept any
type of aircraft, even promising. Runway No.1 meets the requirements of ICAO
Category III A.
On September 21, 2010, a new terminal F (ap. A) was opened, with an hourly
capacity of 900 passengers per arrival flights and 900 f per departure flights.
Enterprise development does not stop there. May 28, 2012, the largest passenger
terminal D in Ukraine with the capacity of 3000 passengers on the departure and
3000 on arrival (addendum B) was opened. The general airport plan is shown in
fig. 2.13.
Terminal F was closed in October 2013, having worked only three years (the
opening took place in September 2010). The reason was the passenger traffic at the
airport - for its maintenance is enough only one terminal D, which is designed for
15 million passengers.

The route Kiev-

Borispil

Fig. 2.13. General plan of Boryspil airport

70
 During Euro 2012, on the day of the final match in Kiev, Boryspil Airport set
a new record - served 630 flights. The total number of passengers who took
advantage of this day's airport services amounted to 39,317 people (the previous
record was set in 2008 - then the airport received 423 flights).
In 2019, at the Boryspil airport, a railway station was opened, and a rail link
was introduced between the airport and the central railway station of Kyiv.
In the State Enterprise "Boryspil" there are the following high-risk objects:
- The warehouse of the centralized refueling of aircraft, located at the address:
Ukraine, Kiev region, Boryspil-7, the code in the state register of increased danger
- 32.20572069.02.2, which has a category of danger 2 (the second).
- The basic structure of the FL (fuel and lubricants), located at the address:
Ukraine, Kiev region, Boryspil-7, the code in the state register of increased danger
- 32.20572069.01.2, which has a category of danger 2 (the second).
- Gas station №1, located at the address: Ukraine, Kiev region - Boryspil-7,
the code in the state register of increased danger - 32.20572069.02.2, which has a
category of danger 2 (the second).
- Gas station №2, located at the address: Ukraine, Kiev region, Boryspil-7,
the code in the state register of increased danger - 32.20572069.02.2, which has a
category of danger 2 (the second).
We will conduct an analysis of the financial indicators of the Boryspil airport.
The analysis is based on the financial plan for 2019 (table 2.3).
The increase in the cost of production is due to an increase in production
volumes, the introduction of an additional terminal, which leads to an increase in
the cost of purchasing materials and raw materials (spare parts for special
equipment of foreign production, a liquid for processing runway and aircraft
(TYPE-2), etc.). The growth of the planned passenger flow, improvement of the
services quality, as well as the opening of an additional terminal to ensure growing
demand leads to an increase in the cost of food for passengers, cleaning, etc.

71
 Table 2.3
Financial plan of the airport "Boryspil" for 2019, ths. UAH

№ Name of indicator 2017 y. 2018 y. 2019 y.

1. Net income from sales of goods (goods,

3 870 048 3 930 861 4 501 215
works, services)
2. Cost of sold products (goods, works,
.1 350 288 1 774 770 2 579 272
services)
3. Gross profit / loss 2 519 760 2 156 091 1 921 943
4. Administrative expenses 95 627 152 965 217 141
5. Selling expenses 5 504 9 587 12 009
6. Other operating income 151 694 109 202 103 310
7. Other operating expenses 209 761 77 767 86 341
8. Financial result from operating activities 2 360 562 2 024 974 1 709 762
9. Other financial income 10 787 13 627 16 865
10. Financial expenses 283 270 301 721 388 222
11. Other income 64 015 53 120 65 487
12. Other expenses 37 803 62 366 59 064
13. Financial result before tax 2 114 291 1 727 634 1 344 828
14. Income tax expense 382 871 312 457 243 137
15. Net financial result 1 731 420 1 415 177 1 101 691
16. Profit 1 731 420 1 415 177 1 101 691

At the same time, an increase in the cost of services purchased in the currency
(SITA services, baggage handling and other specialized infrastructure services,
etc.) and increase in their volumes as a result of the opening of an additional
terminal. Other expenses include the costs of compulsory airport liability
insurance, which were previously accounted for in other operating expenses and
travel expenses of production personnel.
The dynamics of the main financial indicators is shown in fig. 2.14.
In table 2.4 data on the financial condition of the Boryspil airport are given.
Due to modernization of the airport, financial borrowings and liabilities increase.
72
 5 000 000 4 686 877
4 500 000
4 096 544 4 106 810
4 000 000
3 585 186
3 500 000

3 000 000 2 691 633

Ths Uah

2 500 000 2 365 124

2 000 000 1 731 420

1 500 000 1 415 177
1 101 691
1 000 000

500 000

0
2017 y. 2018 y. Plan 2019 y.

Total income Total Costs Profit

Fig. 2.14. Dynamics of total income, expenses and profit of Boryspil airport,
ths. UAH.

Table 2.4
Report on the financial condition of the Boryspil airport, ths. UAH

№ Name of indicator 2017 y. 2018 y. 2019 y.

Non-current assets, total, including:

1 7 578 406 9 555 902 11 086 520

2 fixed assets 5 484 605 7 255 902 7 260 213

3 initial value 13 157 436 15 144 893 15 926 228
4 wear and tear 7 672 831 7 888 991 8 666 015
5 Total current assets, including: 1 381 493 1 339 033 1 550 771
6 money and their equivalents 479 146 106 292 192 038
7 Total assets 8 959 899 10 894 935 12 637 291
8 Long-term liabilities and collateral 1 401 901 1 918 080 3 332 486
9 Current liabilities and security 1 345 994 1 264 623 1 420 160
10 Total commitment and security 2 747 895 3 182 703 4 752 646
11 Including financial borrowing 1 799 249 2 749 258 3 920 378
12 Equity capital 6 212 029 7 712 232 7 884 645

73
 The airport staff has increased by 9.1% in 2018 compared to last year; in
2019, it is planned to increase staff by 7.6% (see table 2.5).

Table 2.5
Data on staff and labor costs

№ Name of indicator 2017 y. 2018 y. 2019 y.

Average number of employees (full-time

employees, external contractors and
1. 3 937 4 295 4 623
employees working under civil contracts),
including:
2. Head 1 1 1
3. Administrative and managerial staff 319 342 354
4. Employees 3 617 3 952 4 265
5. Salary expenses 578 318 757 710 1 114 810
Average monthly labor costs per employee
6. 12 241 14 701 20 095
(UAH), total, including:
7. Member of the supervisory board - - 114 167
8. Head 318 809 588 750 588 750
9. Administrative and managerial staff 25 685 35 173 48 892
10. Employee 10 971 12 785 17 506

The wages of workers in 2018 were increased by 16.5% compared to 2017,

wages of administrative and managerial personnel increased by 36.9%. In fig. 2.14
and 2.15 shows the dynamics of the average number of Boryspil airport employees
and their wages.
On July 28, 2015, the order of the Ministry of Infrastructure of Ukraine
approved an order for a strategic plan for the development of the Boryspil airport.
The main factors for implementing the strategy are:
- a strong base air carrier that follows the hub strategy;
- flexible system of motivation of air carriers, aimed at developing new
directions, long-distance program, transfer passenger traffic;
- development of the sphere of non-aeronautical activity;

74
 - ensuring operational efficiency primarily in the service of transfer
passengers, ensuring a minimum connection time.

5 000
4 623
4 500 4 295 4 265
3 937 3 952
4 000
3 617
3 500
Number, person

3 000

2 500

2 000
1 500

1 000

500 319 342 354

1 1 1
0
2 017р. 2 018р. План 2019 р.

Average number of employees Head

Administrative and managerial staff Employees

Fig. 2.15. Dynamics of the number of employees of the airport "Boryspil"

700 000

600 000 588 750 588 750

500 000

400 000
318 809
Uah

300 000

200 000

100 000
35 173 48 892
25 68510 971 12 785 17 506
0
2 017р. 2 018р. План 2019 р.

Head Administrative and managerial staff

Employee

Fig. 2.16. Dynamics of wages of employees of Boryspil airport

75
 Implementation of the airport development strategy will allow passenger
traffic to reach 8.0 million passengers in 2019, which is 22.6% higher than the
2015 target. The airport in 2019 will receive income in the amount of 3.2 billion
UAH. and according to the financial model, it will be able to obtain net profit of
UAH 760 million in 2019, which is more than UAH 593 million exceeds the 2015
plan. The critical element of the airport strategy is the introduction of a system of
motivation of air carriers, which will be aimed at the development of new
destinations and transfer air transportation.
The following is a SWOT analysis of the Boryspil airport, based on the
analysis of the market and airport development opportunities (table 2.6)

Table 2.6
SWOT - analysis of Boryspil airport
Strong side Weak side
- Possibilities of a flight field (RW № 1 allows - High level of formalities when crossing the
to serve long-distance flights); State border (border and customs), which
- Hub airport for the leading Ukrainian airlines; prevents an increase in transfer passenger
traffic;
- Possibilities for expanding the infrastructure - Insufficiently developed transfer
without significant additional costs; infrastructure;
- A large share of international air - Relatively high cost of services provided by
transportation; the airport;
- Availability of a network of transcontinental - Insufficient development of affordable
flights. commercial infrastructure (shops, catering,
transport)
Opportunities Threats
- Geographical position that facilitates the - The fall of Ukraine's attractiveness for
development of a network of routes; potential passengers as a result of combat
- Strengthening the position of the basic operations, a complex socio-political situation
airline (increase of volumes of transportations in the country;
and connecting flights); - Economic crisis, falling consumer purchasing
- Visa-free regime with the countries of the power;
European Union; - More successful and dynamic development of
- Delayed demand for air transportation, which competitive airports.
will be satisfied after the stabilization of the
situation in the country.

76
 Based on the SWOT analysis, the following priority directions were
identified:
– cooperation with airlines in terms of encouraging the opening of new
destinations and preserving existing routes in order to restore passenger flows and
increase the share of transfer passenger traffic;
– development of infrastructure for servicing transfer passengers;
– introduction of measures to improve the level of passenger service, in the
first place, in the provision of non-aviation services;
– enhancement of security measures;
– cost cutting (cost cutting), including reduction of the cost of services;
– approaching the profile of successful foreign airports without increasing
debt burden (application of outsourcing).
In the plans of the management of the airport "Borispil" to open the terminal
F in the spring. This may provide an opportunity to continue the construction of
the road to terminal D. Also, it is planned to begin construction of the cargo
terminal in May and complete the construction in 8 months. In the spring of 2018,
the reconstruction of the runway began, which turned into a modernization of the
aerodrome infrastructure.
Among the plans for the development and modernization of the airport are
intentions to build a bus station on 16 platforms near the Boryspil Airport.

77
 3. DESIGN PART

Air Transportation Management NAU.20.10.14 004EN

Department
Done by: Revin V.V. Letter Sheet. Sheets
Ivannikova V.Yu. D 78 42
Supеrvіsor
DESIGN PART
Standards
Yuliia V. Shevchenko FTML 275 OП-202Ma
Inspector
Head of the
Shevchuk D. O.
Department

78
 3.1. IATA and ICAO scenarios and forecast of COVID-19 influences on
aviation

Experts of IATA calculated, UATA Airlines Expect Slow Return To Growth,

With Demand Down 41% In 2021. Also IATA presented forecasts Wednesday for
a slow recovery for the airline industry, with demand expected to be up to 41%
below previously projected levels in 2021, and the industry lagging 10% behind
previous growth projections as far off as 2025. Forecast for global PRK before and
after Covid is presented in fig. 3.1.

Fig. 3.1. Forecast for global PRK before and after Covi19
[Sourse: IATA report Economic-Impacts-of-COVID-19]

IATA’s Chief Economist, Brian Pearce, presented new figures that show the
average trip length falling sharply, favoring domestic markets opening first.
A barrier to the recovery of the aviation sector continues to be the need to
establish universal protocols for safe air travel that are agreed upon by
governments. Instead, recent developments, like the new imposition of a 14-day

79
quarantine period for visitors announced in the UK and in Spain, are likely to have
a dampening effect on demand.
Average trip length in fig. 3.2 shows that domestic market open first and
initial preference for short-haul trips.

Fig. 3.2. Avaerage trip length

[Sourse: IATA report Economic-Impacts-of-COVID-19]

IATA specialist note that International PRKs will lag domestic air travel
markets, that shown in fig. 3.3.
Airlines will lose $100 billion through 2021 due to coronavirus: IATA
With Europe beginning the process of reopening to air travel, the European
Commission granted airlines an important win, of sorts, by not requiring that
airlines keep an empty seat between passengers on aircraft, leaving the decision to
individual EU governments instead. But there are still many details for airlines to
sort out as each government considers what is in their best interest and for the time
being the burden is falling on airlines to draft individual health and safety
protocols.
IATA has been working with ICAO to draft a common approach to ensuring
passenger health and safety, while the pandemic is still ongoing. However, it will

80
be up to governments to decide how they will best protect their citizens and
prevent new spikes in coronavirus infections as air travel resumes. Airlines argue
that the lack of a harmonized approach will only discourage and confuse
passengers.

Fig. 3.3. International demand is not expected to return to 2019 levels until
2023-24
[Sourse: IATA report Economic-Impacts-of-COVID-19]

The return of transatlantic travel, particularly between North America and

Europe, which is a strong driver of profitability for airlines on both sides of the
pond, will still be delayed.
That’s going to depend on what we see happening to travel restrictions..on
agreed protocols to ensure that there isn’t a risk. One would think that European
nations and European economies, which are very close to North American
economies on trade, would be open in the near future, but it does depend on
governments agreeing on these protocols.
The impact of COVID-19 has already surpassed the 2003 SARS (Severe
acute respiratory syndrome-related coronavirus) outbreak which had resulted in
reduction of annual RPKs by 8% and USD 6 billion revenues for Asia/Pacific

81
airlines. The 6-month recovery path of SARS might not apply to today’s situation
(fig. 3.4).

Fig. 3.4. Impact of past disease outbreaks on aviation

As overall severity and duration of the COVID-19 pandemic are still

uncertain, four (4) different recovery paths under two (2) indicative scenarios are
developed:
Baseline: counterfactual scenario, in which the COVID-19 pandemic does not
occur, that is, originally-planned or business as usual
- Scenario 1: two (2) different paths (similar to Nike swoosh- and W-shaped).
- Scenario 2: two (2) different paths (similar to U- and L-shaped)
Reference: information only, based on latest airline schedules (similar to V-
shaped).
Let’s consider what Scenario means.
Notwithstanding the elevated uncertainty surrounding the outlook, a scenario
analysis could help gauge potential economic implications of the pandemic.
Scenarios are not forecasts of what is most likely to happen. Given rapidly
changing circumstances, they are merely indicative of possible paths or
consequential outcomes out of many.
The exact path (depth, length and shape) will depend upon various factors,
inter alia, duration and magnitude of the outbreak and containment measures,

82
availability of government assistance, consumer confidence, and economic
conditions
With the situation evolving and more information available, scenarios will be
adjusted as necessary.
International and domestic passenger traffic has separate scenarios/paths
Scenarios/paths are differentiated in terms of supply and demand, i.e.
– Scale of output or seat capacity change.
– Degree of consumer confidence that can be translated into demand or load
factor as a proxy.
Supply and demand are influenced by:
– Different timing and speed of recovery by region, international/domestic,
and intra-/inter-region.
No consideration is made to social distancing requirements on aircraft, etc.
Baseline: originally-planned or business as usual.
– Counterfactual hypothesis that are expected to occur in the absence of
COVID-19 pandemic
– Supply: airlines’ originally-planned schedules supplemented by trend line
growth
– Demand: trend line growth of demand from 2019 (pre-COVID-19) level
Reference: V-shaped
– Information-only scenario that reflects airlines’ most recent expectation or
a “signal” of airlines’ plan to the market (not necessarily realistic)
– Supply: based on latest update of airline schedules filed, which are adjusted
weekly by airlines according to the expectation of the evolving situation (quite
often managing capacity for a short period due to the uncertainties)
– Demand: quickly returning to Baseline level.
Scenario 1: Nike swoosh- and W-shaped
• International
– Path 1: Smooth capacity recovery by picking up pent-up demand but at a
diminishing rate of growth
83
 – Path 1a: Capacity to start with smooth recovery but then turn back down
due to over-capacity
• Domestic
– Path 1: Swift capacity rebound pushed by pent-up demand but at a
diminishing rate of growth
– Path 1a: Capacity to start with smooth recovery but then turn back down
due to over-capacity
Scenario 2:
U- and L-shaped
• International
– Path 2: Accelerating the return to trend growth after slow progression of
capacity recovery
– Path 2a: Capacity recovery at diminishing speed due to respite and
continuous demand slump
• Domestic
– Path 2: Gradual capacity recovery, followed by the acceleration of growth.
– Path 2a: Capacity recovery at diminishing speed due to sluggish demand
growth.
In the following analysis, international and domestic scenarios having the
same path number are linked with each other, although different combination of
scenarios/paths would be possible.
Scenario Estimates: Global.
Estimation based on actual results of January to October 2020 re used for the
key impact indicators.
• Three (3) key impact indicators under four (4) paths of two (2) scenarios:
– Change of passenger seat capacity (supply, %)
– Change of passenger numbers (demand)
– Change of gross passenger operating revenues of airlines
• Comparison to:
– Baseline scenario
84
 – 2019 level
– 2020 level (for 2021 estimates)
• Break-down by:
– International and domestic.
– Month, quarter and year.
Estimated impacts compared to Baseline & 2019 presented in fig. 3.5. Seat
capacity changes we can see in fig. 3.6 – 3.9.

Fig. 3.5. Estimated impacts compared to Baseline & 2019

Fig. 3.6. Seat capacity change compared to Baseline: International +

Domestic

85
 Fig. 3.7. Seat capacity change compared to Baseline: International

Fig. 3.8. Seat capacity change compared to Baseline: Domestic

Passenger numbers compared to Baseline & 2019 and Passenger revenues

presented in fig. 3.9- 3.13.
Scenario Estimates: Region Breakdown. Breakdown by ICAO statistical
region.
Breakdown by ICAO statistical region.
• Regional breakdown follows ICAO’s six (6) statistical regions (Doc 9060).

86
 Fig. 3.9. Seat capacity change: International +Domestic

Fig. 3.10. Passenger numbers compared to Baseline & 2019: International

+Domestic

• The same key impact indicators are presented under four (4) paths of two (2)
scenarios, in comparison to Baseline scenario, 2019 level and 2020 level, and by
international and domestic, as well as month, quarter and year.
• To avoid double counting:
– Number of “international” passengers departing from each country and
territory are aggregated in each region.
87
 – Gross passenger operating revenues of all airlines serving “international”
routes from each country and territory are aggregated at regional level.

Fig. 3.11. Passenger number change: International +Domestic

Fig. 3.12. Passenger revenues compared to Baseline & 2019: International +

Domestic

Consider assumptions underlying Scenarios.

Baseline (Originally‐planned, business as usual).

88
 Seat capacity: Airlines' winter schedules filed with OAG as of 6 January
2020. Maximum number of seats taken from airlines' summer schedules filed with
OAG during the period from 6 January 2020 to 20 April 2020. Maximum number
of seats taken from airlines' summer schedules filed with OAG during the period
from 6 January 2020 to 20 April 2020. Using 2019 winter schedule as the base,
and applying the pre‐COVID‐19 trend line growth, i.e. growth rate of 2019/2018
as proxy. Using "2020 Baseline "as the base, and applying the baseline growth of
2020/2019, or growth rate of 2019/2018, whichever is smaller.

Fig. 3.13. Passenger number change: International + Domestic

Passenger load factor: Forecasted 2020 load factor by region/route group,

based on ICAO long-term traffic forecasts (LTF), which was adjusted monthly by
difference between 2019 actual monthly results (ICAO, IATA) and 2019 LTF
forecasted load factor; Forecasted 2021 load factor by region/route group, based on
ICAO long-term traffic forecasts (LTF), which was adjusted monthly by difference
between 2019 actual monthly results (ICAO, IATA) and 2019 LTF forecasted load
factor.
Assumptions underlying Scenarios for Baseline (Originally-planned, business
as usual) and for Scenarios 1/1a, 2/2a we put in table 3.1-3.2.

89
 Table 3.1
Assumptions underlying Scenarios for Baseline (Originally-planned,
business as usual)
(International and
Baseline (Originally‐planned, business as usual)
domestic) Seat capacity Passenger load factor
January to March Airlines' winter schedules filed Forecasted 2020 load factor by
2020 with OAG as of 6 January 2020 region/route group, based on ICAO
Maximum number of seats taken long‐term traffic forecasts (LTF),
April to September
2020 from airlines' summer schedules which was adjusted monthly by
filed with OAG during the difference between 2019 actual
period from 6 January 2020 to monthly results (ICAO, IATA) and
20 April 2020 2019 LTF forecasted load factor
October to Using 2019 winter schedule as
December 2020 the base, and applying the pre‐
COVID‐19 trend line growth, i.e.
growth rate of 2019/2018 as
proxy.
January to June Using "2020 Baseline "as the Forecasted 2021 load factor by
2021 base, and applying the baseline region/route group, based on ICAO
growth of 2020/2019, or growth long‐term traffic forecasts (LTF),
rate of 2019/2018, whichever is which was adjusted monthly by
smaller difference between 2019 actual
monthly results (ICAO, IATA) and
2019 LTF forecasted load factor

Table 3.2
Assumptions underlying Scenarios for 1/1a, 2/2a
(International Scenarios 1/1a, 2/2a
and domestic) Seat capacity Passenger load factor
January to Actual capacity based on ICAO Actual estimated results by
September 202 ADS‐B data region/route group
0
October 2020 Average 35 (international) and 13
(domestic) percentage points lower
than October 2019 load factor with
adjustment of GDP impact by
region/route group
November 2020 Scenarios 1/1a & 2/2a: Application of "base percentage"
to June 2021 Application of monthly "base which incorporates GDP impact by
percentage" which incorporates region/route group
impacts of intra‐/inter‐regional
share difference (2019) Reference:
Most recent airlines' schedules
filed with OAG

Data usd for scenario analysis:

90
 • Base percentages of seat capacity already take into consideration short/long
haul (intra/inter region) impacts and will be applied ton Baseline level of seat
capacity.
• Base percentages of load factor already take into consideration economic
(GDP) factors and will by added ton 2019 load factor %.
• Seat capacity (seats available for sale): OAG airlines schedule data; Route
Online; airline websites and ICAO ADS-B operational data.
• Load factor (RPKs/ASKs): ICAO long-term traffic forecasts (LTF); ICAO
statistical reporting forms; IATA economics data; and airline news release.
• Historical passenger traffic (including ASKs, RPKs, passenger numbers and
operating revenues): ICO Annual Report of the Council; and ICAO statistical
reporting forms.
• Yield (passenger revenues/RPK): ICAO revenue-cost analysis of airlines
(RCA); and ICAO-ICM Marketing Information Data Transfer (MIDT passenger
origin-destination).
• Macroeconomic factors (GDP impact): Income elasticity of demand
estimated for ICAO LTF; and IMF and World Bank economic outlook data.

3.2. Scenarios of forecast and economic modeling approach in aviation

Aviation will transform more between today and 2035 than it has over its first
80 years as a commercial industry By 2035, Aviation will experience a greater
change than it went through over its first 80 years as a commercial industry. It has
already been through three strategic eras, from the era of monopolies (until the
1980s), to the eras of continental competition, until the mid-2000s. Then it entered
the era of hyper-competition, which is now at its peak. The industry will soon go
through a transition phase between hyper-competition and the next era, hyper-
cooperation, which we can foresee now thanks to early signs.
The previous eras saw great changes, such as hub & spoke and low-cost
airline operations, new generations of narrow and widebody aircraft, the
91
emergence of commercial activities at airports, and the first cooperation between
“different species” (e.g., interline agreements between low-cost carriers and legacy
airlines, joint ventures to develop new aircraft programs). But the pace of change is
much faster now, and most of all, none of the previous changes triggered major
changes among the different (a) clusters and (b) players in each cluster that
compose the aviation industry ecosystem.
In 2035 we will see a fundamentally different aviation industry in terms of
business and operating models, driven by demand evolution, technological
breakthroughs and changes in regulation.
We scrutinized the above-listed megatrends in order to estimate their potential
impact on the growth or value sharing of the majority of players within the aviation
industry and the degree of likelihood or uncertainty of each. This categorization is
the second step of our scenario-building approach.
Our scenario and economic modeling approach shows very different total
revenue and value creation for the aviation industry by 2035 – and possibly even
more differentiated revenue and value sharing among players of the ecosystem.
Indeed, the total revenue growth of aviation will be driven by demand
evolution, which will mostly be impacted by regulation (competition law,
allowance of last-mile aviation, environmental tax, etc.) and pricing power of
airlines. Profit for aviation players in 2035 will be also driven by new operating
models, enabling reduction of CAPEX and OPEX – up to the point that each
player will be able to retain profit instead of sharing it with its customers.
This value capture will be driven by the ability of players to expand in the
value chain and consolidate their own industry while keeping away new entrants.
Hence, the very different revenue and profit pools associated with each scenario:
Lets highlights key factors that aviation stakeholders (clients, regulators and
industrial players) should monitor and influence in order to shape the future of
aviation:

92
 - Overall, environmental performance is key to ensuring long-term growth for
the entire ecosystem, with new energy storage, AI, cybersecurity and connectivity
as cornerstones for “last-mile aviation”
- Airlines must keep control of scarce resources and clients due to a new
perspective of “mediatization”/“platform play”. In addition, Ownership and
personal data regulation will be key for transport providers to transfer data from
airlines to gatekeepers and consolidate the industry.
- Aircraft-as-a-service is the new goal of aircraft providers, and cooperation is
the best way to achieve it.
- Economic regulation of infrastructure providers will be key to driving profit
sharing with clients, while automation and concentration will create a larger profit
pool.
Our aviation 2035 scenarios are a basis from which to identify actions to be
taken at industry and organization levels, in order to facilitate and take advantage
of a preferred scenario (thanks to bold strategic moves) or mitigate potential risks
(by grasping “strategic insurance”).

Fig. 3.14. Key economics

93
 Five-step methodology (fig. 3.15). Our approach is thus based on five key
steps:
Step 1: drafting a panorama of the ecosystem today: its key players, their
economics and their revenue and value shares. We actually considered three
strategic clusters and the main players within them: aircraft providers (tier 1s,
OEMs, MROs, lessors), air transport service providers (airlines, IT & distribution)
and infrastructure providers (airports, air navigation services, ground handlers and
caterers).
Step 2: Identifying key trends and disruption that could impact players by
2035 in several domains: demand, competitors’ strategies, offerings, regulations,
and technology.
Step 3: Assessing the potential impact of each megatrend and disruption in
terms of strategic positioning and value capture for players of the ecosystem, and
their likelihood of occurrence.
Step 4: Framing scenarios based on those trends from a 2035 perspective.
Step 5: Evaluating the impact of those scenarios on the strategic added value
of each player in the aviation ecosystem, and how the revenue and value shares
among players could be transformed.

Fig. 3.15. Scenario building Methodology to imagine Aviation in 2035

94
 Today, aviation is a major global industry accelerating growth and socio-
economic development across the planet. But since its debut 70–80 years ago, the
commercial civil aviation industry has been through three strategic eras: it has
evolved from (1) local monopolies to (2) continental competition, and is now in the
middle of (3) the era of hyper-competition.
Today’s era of hyper-competition is the result of entry barriers for new
airlines being at a historical low, thanks to easier-than-ever accessibility to scarce
resources (namely airport slots, traffic rights, aircrafts, IT solutions, qualified crew
and technicians, and capital).
Of course, some tensions will arise for the supply and control of some
resources (such as airport slots at mega-hubs, technicians and pilots), but looking
long-term, these have never been as abundant as they are today, and neither has
supply been so “fluid”. In this era of hyper-competition, a growing number of
competitors are addressing all strategic and tactical segments of the commercial air
transport market: medium-haul or long-haul markets, point-to-point or connecting
flows, premium or ultrabasic customers. No niche is immune.
Coming up now and certainly enduring until 2025–2030 is (4) the era of
hyper-cooperation, in which all clusters in the aviation industry will try to limit
internal competitive intensity thanks to consolidation.
Strategic clusters and key players in the aviation industry presented in fig.
3.16.

95
 Fig. 3.16. Strategic clusters and key players in the aviation industry
[Source: aviationbenefits.org , Oxford Economics]
In fig. 3.17 we can see the four eras of the commercial aviation industry.

Fig. 3.17. The four eras of the commercial aviation industry

We thus see aircraft tier 1s and OEMs consolidating. It will be the same with
top 10 players in industries such as MRO, ground handling and airline catering, as
these already control between 50 and 80 percent of the accessible market and are
pursuing dynamic merger & acquisition strategies.
Airlines themselves are initiating a movement towards consolidation because
of market exit, acquisition and creation of multi-airline groups and new forms of
alliances and cooperation, such as medium-haul, low-cost airlines feeding long-
haul operations of peers or even legacy airlines.
Each “cluster” of the aviation industry has its own economics. They can be
labor- or capital intensive, and they can be exposed to the increasing number of
units composing the commercial aviation fleet, the actual asset utilization, or the

96
number of passengers transported. Each of these must also deal with very different
internal competitive intensity.
However, the fight between parties to capture the largest share of the
industry’s revenues and profit pools is intense, and so far the battle has ended up at
the expense of airlines: their share of the profit pool has been much lower than
their revenue share, as shown above.
Although they are the cornerstone of the industry, airlines have not managed
to protect their share of value. They have seen aircraft suppliers preserving their
margins and infrastructure providers converting their rather small share of
revenues into a large share of profits.

3.3. Aviation-as-a service: Five scenarios for 2035

Three groups of trends were built (see illustration fig. 3.17):

- All macro-trends that we believed had high certainty were considered to
create a “base scenario”.
- Macro-trends with low impact and high uncertainty of occurrence were not
considered.
- Macro-trends with high impact but high uncertainty of occurrence were
considered to derive future scenarios for aviation 2035.
Our base scenario comprised all highly probable trends, and disruption is very
unstable. This cannot be a possible future for aviation in 2035 that will be changed
by other, more uncertain megatrends and disruptions.
The top six key disruptions in the blue area are therefore the critical ones to
be considered. They all correspond to two major themes: (a) aviation
(de)regulation and (b) strategic moves of players along the value chain of the
aviation industry, within existing clusters or beyond the frontiers of current clusters
(fig. 3.18).
To embrace the full scope of the future of aviation de-regulation, the two
extreme possible scenarios, Open World and Closed.
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 Fig. 3.17. Mapping of megatrends and disruptions

Fig. 3.18. Deregulation scenarios

World, are proposed, combining different options among the following

parameters:
2. Environmental regulation: High (or low) carbon tax or quotas.
6. Sovereign deregulation: Lifting traffic rights and ownership rights (or not)
7. Economic deregulation: allowing (or not) a seats marketplace and yield
management for infrastructure pricing (airports, ANSPs, etc.)
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 In this option space, we excluded a scenario in which environmental
regulations would no longer only apply to goods & services producers (as they do
today by imposing better environmental performance), but also directly to
consumers. In such a scenario each individual would be allocated a yearly quota of
pollution/CO2 emissions and be free to arbitrate how to use it without going over
the limit, or they would be heavily taxed. This scenario would be a major rupture
to aviation growth, but we consider it improbable by 2035 from a global
perspective. Aviation value chain recomposition scenarios is presented in 3.19.

Fig. 3.19. Aviation value chain recomposition scenarios

Aviation value chain recomposition patterns can be grouped into four possible
scenarios that combine options for either air transport providers or aircraft
providers:
10. Airline fragmentation: Breakdown (or not) of airlines into capex, opex
and customer owners
12. Manufacturers’ vertical integration: OEMs, tier 1s, MROs and lessors
becoming single players (or not)
13. Aircraft-as-a-service: Manufacturing pivoting towards services and full
management (even operation) of airlines’ fleets.

99
 To embrace the full scope for the future of the aviation value chain
recomposition, the two possible extreme scenarios were taken into account in the
report. White-label airlines and integrated aircraft-as-a-service were considered on
one side, and integrated airlines and fragmented aircraft suppliers on the other.
An integrated airline would look at technology blocks aiming to differentiate,
and should resist OEM/MRO integration. Conversely, in a fragmented air service
industry, white-label airlines, reduced to only operating aircrafts, would most
likely need integrated OEMs to provide aircraft-as-a-service.
Combining uncertain megatrends and disruptions to define five scenarios.
The combination of the “certain” and “uncertain” megatrends and disruptions
described above leads to five scenarios for aviation in 2035 (fig. 3.20).

Fig. 3.20: 5 possible scenarios for Aviation in 2035

Base scenario: lean through automation.

In this scenario, the whole industry moves towards automation of processes
and improves margins by leveraging new technologies (data analytics, AI, 3D
printing, etc.). Cybersecurity and connectivity enablers become critical for the

100
industry and facilitate UAV emergence. Consolidated regional, multi-brand airline
groups cover numerous customer segments. Airlines have also twisted their
revenue generation models towards becoming media platforms, with the most
advanced players offering free tickets. Aircraft OEMs compete with mega-tier 1s
to capture value-add in the aircraft supply cluster and in the market for last-mile
aviation. Infrastructure providers are becoming more efficient, but keeping a stable
role and value in the ecosystem.
A. Aviation as oligopolies: Integrated global airlines and fragmented aircraft
production industry in a deregulated world In this scenario, limited environmental
regulations, coupled with low energy prices, stimulate aviation demand and
growth. Thanks to (de)regulated ownership rights, airlines are concentrated into a
few groups of global players, which enables them to meet the competitive
challenge with distribution service providers and regain huge bargaining power
versus the rest of the value chain. However, infrastructure providers are still able to
diversify profit generation sources thanks to deregulation. In this scenario, aircraft
providers are in a tougher situation, as they are still fragmented and have failed to
regain added value against their clients.
B. Aviation as utilities: Integrated regional airlines and a fragmented aircraft
production industry in a constrained environment
In this scenario, heavy carbon and energy taxation limits aviation growth and
pressures producers. Consequently, the aviation industry is structured around
regional groups – limited by national or regional control. Customers still value
differentiated experience to a certain extent, although environmental concerns
moderate expectations. Intense competition exists between airlines that must deal
with lower growth and higher cost bases, although operating according to different
models (LCC versus customer experience). In any case, airlines remain in control
of the customer relationship.
Infrastructure service providers are strictly regulated and can’t aggressively
capture value, while aircraft providers focus on green and autonomous products to
make a difference.
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 C. Aviation-as-a-service: White-label airlines and OEMs offering aircraft-as-
a-service in a deregulated world.
In this scenario, limited environmental regulations coupled with low energy
prices stimulate aviation growth. Low entry barriers stimulate competition, while
the lifting of ownership restrictions enables the emergence of global players in
each segment of the value chain. The market is embracing “mass-customization”,
with price as a key selection criterion, while customers are still looking for
personalized add-ons and experience. Thanks to economics and personal data
deregulation, distribution players have succeeded in owning the customers. OEMs
are concentrated into a few total fleet provider and manager groups, providing
modular assets as services. The cost of infrastructure is getting higher, with
airports disrupted on non-aero revenues and ANSPs introducing yield management
on routes. As a result, airlines are cornered, as pure asset operators and their
economics are thus under strong pressure from both downstream and upstream
stakeholders
D. Aviation-as-a-department store: White-label airlines and OEMs integrated
as services in a constrained environment.
In this scenario, heavy carbon and energy taxation limits aviation growth and
pressures producers. The aviation industry is structured around regional groups –
and limited by national controls. The market is commoditized with standard
products to which customers can add handpicked options.
Air transport has become a media provider through which various brands
express themselves in different parts of the cabin. This is just like today, when
luxury hospitality or cosmetics brands “franchise” the first class of airlines.
Air transport service providers procure aircrafts from total fleet providers and
managers, which capture an even greater profit pool versus infrastructure
providers.
Major moves along the value chain ahead. The illustration summarizes the
major shifts in the value-chain positioning of key players that correspond to each
scenario. It is thereafter explicit which clusters and players are gaining strategic
102
added value. In the base case no major shift is expected; today’s situation
continues. (For players such as airlines and OEMs, the landscape might change
significantly, but we are looking at this from the ecosystem perspective.)
In other scenarios, the strategic roles fulfilled by airlines, OEMs, distributors
and infrastructure providers can change a lot. This can include associated impact
on their economic models, revenue generation and profit capture.

3.4. Impact of the five scenarios on value sharing in the aviation industry

Our scenario and economic modeling approach shows very different total
revenue and value creation for the aviation industry by 2035 – and possibly even
more differentiated revenue and value sharing among players in the ecosystem.
Indeed, by 2035, aviation will experience a greater change than it has already gone
through over its first 80 years as a commercial industry.
Demand will continue to grow at a fast pace, but “masscustomization” that
travelers expect, emergence of “last-mile aviation for people and goods”, and
regulation could shape very different growth trajectories.
Technology will also play a leading role in enabling the future of aviation.
Connectivity, cyber-security, block-chain, artificial intelligence and automation
have the greatest impact at the ecosystem level, because they are key enablers of
moves along the value chain and reinventing operations and revenue generation
models. Other technologies, such as green energy and new materials, are
important, of course, but have more limited impact; this stimulates the emergence
of “new products”.
However, most possible changes are to be considered within the aviation
ecosystem itself.

103
 3.21. Impact of the five scenarios on value sharing in the aviation industry

Fig. 3.22. Impact of the five scenarios on value sharing in the aviation industry
(continue)

104
 Airlines’ business models could move from fully integrated and consolidated
players or white-label aircraft operators, generating revenues and profits from
selling transportation services, towards becoming media offering “free tickets” but
monetizing their client bases to third parties.
Aircraft providers are seeking to offer aircraft-as-a-service while investing to
consolidate horizontally and offer nextgeneration smarter and more versatile flying
machines.
Finally, infrastructure providers will see fundamental changes in their
operating models to cope with anticipated growth and price pressures.

3.5. Forecast of passenger traffic at Boryspil airport depending on the

development scenarios impact of the pandemic in the world

Due to the spread of the coronavirus, airlines around the world are rapidly
reducing passenger traffic. Widespread border closures are putting carriers at risk
of bankruptcy. The British IAG is forced to cut the volume of traffic by 75%,
Ryanair - by 80%, Air France-KLM - by 90%, American Airlines Group
announced a 75% reduction in international flights. In connection with the closure
of borders, United Airlines predicts a drop in bookings of air tickets by $ 1.5
billion in March. The salaries of top managers will be cut by 50% at least until the
end of spring, and possibly until the end of summer.
Companies operating mainly in Europe have suffered the most from the
situation around the coronavirus. Due to the dire consequences for the industry,
European states will discuss subsidies or direct assistance to bail out some airlines
before the end of the six months. Due to the shutdown of flights around the world,
the industry will suffer major losses. We assume that the average annual profit will
fall from at least 24% to 40 - 55%. In addition, a number of airlines will receive
negative free cash flow for 2020. For example, for Air France, this figure will go
into the negative by almost a billion dollars. We advise long-term investors not to
consider buying assets from this sector. However, the right moment may come
105
after three to six months against the backdrop of a decline in the spread of the virus
in developed countries.
To make a forecast and to choose a right model we need input data of traffic
passenger flaw in Boryspil for last period with comparison of the same period in
previous year (table 3.3 and fig. 3.23).

Table 3.3
Passenger traffic at Boryspil airport in 2020 compared to the same
months of 2019
January February March April May June July August September
798,766
2020 5 906,6 486,5 900,6 28,2 48,4 328,7 656 554,5
727,317
2019 897,2 793,4 5 1155,1 1357,8 1512,5 1625,3 1648,6 922,688

1800,00
1625,3 1648,6
1600,00
1512,5

1400,00 1357,8

1200,00 1155,1
Thousand passengers

1000,00 922,69
897,2 906,6 900,6
2020
798,77 793,4 2019
800,00 727,32
656
600,00 554,5
486,5

400,00 328,7

200,00
28,2 48,4
0,00
January February March April May June July August September

Fig. 3.23. Passenger traffic at Boryspil airport in 2020 compared to the same
months of 2019, ths

106
 Boryspil Airport in July 2020 increased passenger traffic almost 7 times
compared to June to 328.7 thousand people, the press service of the enterprise
reported to avianews.com.
This happened against the background of a gradual increase in the number of
regular and charter flights from Kiev, both on domestic and international routes.
Tourist flights were resumed to Bulgaria, Turkey, Egypt, Montenegro and Croatia.
However, compared to July 2019, the drop in passenger traffic at Boryspil
airport was 79.8%.
International flights in July 2020 were used by 284.9 thousand people,
domestic - 43.8 thousand people, which is 81.2% and 60.4% less compared to July
2019.
A more intensive restoration of flights on domestic routes was due to the
deployment of the regional program "Wind Rose" on small aircraft.
According to the State Aviation Administration, the forecast of passenger
traffic at Ukrainian airports in 2020 is about 27 million, of which about 2.5-3
million are passengers on domestic flights. The passenger traffic will be supported
by attracting new airlines and modernizing regional airports. MIU plans to abolish
VAT on domestic flights. the airline wants to remove VAT on domestic flights
(this document has already been approved by the committees of the Verkhovna
Rada), and the excise tax on aviation fuel (the document is still under
consideration). It is also planned to remove certification of air ticket sales.
The passenger traffic of Boryspil International Airport from January to
September 2020 fell to 4.058 million passengers. This figure is 65% less than for
the same period in 2019. Moreover, the indicators for September also decreased: if
this year the airport served almost 555 thousand passengers, then last year there
were more than 1.6 million of them. Due to the restrictions adopted by the
Ukrainian government in August, the September Hasidic program did not take
place. , together with which "Borispol" received less than 30% of the passenger
traffic.

107
 The hub model has become unrealistic - the Borispol airport missed about 3
million transfer passengers. The aviation industry has cut its costs as much as
possible in order to withstand a difficult period. Quarantine restrictions continue to
be a stop factor for passengers. By analyzing the statistics for January - September
2020, we can more accurately predict the expected passenger traffic, which will
end the year: it will fall to the level of 2009, which will lead to a multiple decrease
in airport revenues compared to 2019.
The American airline American Airlines has begun to simulate the
transportation of the COVID-19 vaccine. The tests took place in late November
using Boeing 777-200 aircraft based in Miami. All relevant protocols were
followed prior to approval of the COVID-19 vaccine.
Recall that companies around the world are working on the certification of
vaccines against COVID-19. It is hoped that such vaccines will provide immunity
and end the pandemic. However, once the vaccine is available, it will need
assistance with transportation around the world. This is where airlines come to the
rescue, which can quickly distribute such cargo, maintaining the right temperature
on board so that vaccines do not spoil.
At American Airlines, a dedicated team of employees works exclusively to
ensure that such temperature-sensitive cargo can travel thousands of kilometers
without problems. Before such difficult flights, the crew on board had to prepare
thoroughly. After all, if something goes wrong during the flight, it's best to deal
with it before the vaccine itself is at stake. As such, the airline worked in tandem
with its cargo and pharmaceutical partners. Stress tests were carried out on the
packaging in which vaccines will be shipped, as well as the cargo handling process
at airports.
Traffic forecasting is an integral part of the Decision Support System (DSS);
it is a systematic review of the company's resources, allowing you to more fully
exploit its advantages and identify potential threats in a timely manner. The
company must constantly monitor the dynamics of the volume of traffic and
alternative opportunities for the development of the situation in the air
108
transportation market in order to best allocate available resources and choose the
most appropriate areas of its activities.
Forecasting the volume of passenger traffic (both long-term and short-term) is
one of the aspects of management activities for a modern airline. Long-term
forecasting takes into account the tendencies of the world air transportation market,
which are reflected in the increase or decrease of the frequency of flights on
various directions when drawing up the flight schedule. Short-term forecasting
allows you to quickly respond to changes in the situation on the air transportation
market and build an airline strategy based on the expected volume of passenger
traffic (for example, change the degree of "aggressiveness" of booking, prepare
and conduct special promotions to attract passengers, etc.).
The total volume of air transport traffic is formed from individual passenger
flows between corresponding points in the forward and backward directions. The
volume of traffic for a certain period of time and the distance of transportation
determine the most important indicator - passenger turnover.
It is almost impossible to identify the influence of numerous factors on
passenger traffic and take into account the transport needs of each individual
passenger due to the enormous scale of such work, therefore, they resort to
establishing the determining integral factors that can serve as the basis for
predicting the population's demand for transportation.
The initial passenger-forming factors are the population size and its needs for
spatial movement (potential factor). Potential travel needs are determined by goals
(personal or government), the balance of free time, the availability of funds and
other factors that cannot be predicted in a pure form.
In modern conditions, when justifying the volume of passenger traffic, two
types of forecast are used: a forecast of demand for air transportation and a forecast
of possible traffic volumes (passenger turnover), obtained on the basis of data on
actual demand. The difference between these values is the volume of unmet
demand. In the practice of planning air transportation, in most cases, they are
guided by data on actually performed transportation. Further improvement of
109
methods for forecasting passenger traffic is aimed at identifying unmet demand,
and planning is aimed at meeting it in an economically justified amount.
There are the following most famous forecasting software on the market:
STATISTICA, STATGRAPHICS, SPSS, Forecast Expert, STADIA, MetaStock,
Statistica Neural Networks, Neuro Shell, Poly Analyst, Matlab & Simulink,
Forecast PRO, etc.
To predict the demand for passenger transportation, various methods of
economic and mathematical modeling can be applied, which are built in the form
of equations characterizing the dependence of the consumption of goods or
services on certain factors (economic, natural). Such models can be univariate and
multivariate. An example of one-factor models for passenger transportation can be
the dependence of sales volumes on advertising costs, as well as the dependence of
sales volumes on prices. As a result of processing hypothetical data with graphical
models and the least squares algorithm, an equation for the dependence of sales
volume on advertising costs and an equation for the dependence of sales volumes
on the price of passenger transportation were obtained.
In world and domestic practice, there are models used to predict the passenger
traffic of airlines, based, as a rule, on a regression analysis of retrospective
dynamics of passenger traffic and a set of macroeconomic indicators. However, the
degree of applicability of such models for the Ukrainian market turned out to be
limited both due to the lack of the required volume of statistical data and the long
period of stabilization of the air services market in Ukraine.
The simplest way to predict the traffic volume is extrapolation, i.e.
propagation of past trends into the future. The method of linear extrapolation is
used in cases where it is necessary to determine the indicator of the prospective
period and at the same time, fundamental changes in the nature and conditions of
the action of factors affecting passenger traffic are not expected. The established
objective tendencies to a certain extent predetermine their size in the future. In
addition, many market processes have some inertia. This is especially evident in
short-term forecasting. At the same time, the forecast for the long-term period
110
should take into account as much as possible the likelihood of changes in the
conditions in which the airline will operate.
The use of the extrapolation method for forecasting assumes that the pattern
that was in effect in the past will continue in the forecast period, but it is expected
that the general trend in the development of transportation in the airline should not
undergo major changes in the future (for example, the schedule parameters should
remain relatively stable), since the theoretical basis for the spread of the trend to
the future is the inertia property, which allows one to identify the existing
relationships between the levels of the time series. But this is true only when
building short-term forecasts, since in a short period the conditions for the
development of the phenomenon and the nature of its dynamics do not have time to
change significantly. With long-term forecasts, the dynamism of processes comes
into conflict with the inertia of their development, therefore, in these cases, the
extrapolation method is not enough.
Methods of analysis and forecasting of time series are associated with the
study of indicators isolated from each other, each of which consists of two
elements: the forecast of the deterministic component and the forecast of the
random component. The development of the first forecast does not present great
difficulties if the main development trend is determined and its further
extrapolation is possible. The prediction of the random component is more
difficult, since its appearance can be estimated only with a certain probability.
At the heart of casual methods is an attempt to find the factors that determine
the behavior of the predicted indicator. The search for these factors leads actually
to economic and mathematical modeling - the construction of a model of the
behavior of an economic object, taking into account the development of
interrelated phenomena and processes. It should be noted that the use of
multivariate forecasting requires solving a complex problem of choosing factors,
which cannot be solved purely by statistical means, but is associated with the need
for a deep study of the economic content of the phenomenon or process under
consideration.
111
 Casual forecasting methods require determining factor indicators, assessing
their changes and establishing a relationship between them and the volume of
traffic.
Of all the casual forecasting methods, we will consider only those that can be
used with the greatest effect to predict the traffic volume.
These methods include:
- correlation and regression analysis;
- method of leading indicators;
- the method of surveying the intentions of consumers, etc.
Among the most widely used casual methods is correlation and regression
analysis.
Each of the considered groups of methods has certain advantages and
disadvantages. Their application is more effective in short-term forecasting, since
they simplify to a certain extent real processes and do not go beyond the present
day. The simultaneous use of quantitative and qualitative forecasting methods
should be ensured.
These factors, as well as changes in the structure of traffic at airports and a
sharp fluctuation in their volumes, do not make it possible to use simple methods
for forecasting and analyzing econometric dependencies (models).
Thus, the main task for Boryspil Airport is to develop a decision support
system for air transportation management, which, based on the analysis of
statistical data on the airline's passenger traffic, will make it possible to make
forecasts on the size of passenger traffic, revenue and profitability. Thus, this
system will enable the airline's management to make decisions regarding the
number of flights operated, requests for transport, ticket prices, etc.
Conclusions:
1. The use of the extrapolation method for forecasting is not suitable, since
the trend in the past is not related to the existing factors in connection with the
Covid-19 pandemic.

112
 2. Methods of analysis and forecasting of time series are difficult to apply
without the use of special information systems; it also contains a probabilistic
factor for the development of aviation in the future, for example, the emergence of
a vaccine against Covid-19 can have a positive effect on the growth of passenger
traffic due to vaccination of the population around the world.
Today IATA annalists commonly used quantitative forecasting methods and
decomposition methods.
Quantitative forecasting methods can be broadly classified into two major
subcategories: timeseries analysis and causal methods. Some of the more widely
used techniques in these two subcategories include trend projections,
decomposition methods and regression analysis (fig. 3.24).
The time-series analysis methods are largely based on the assumption that
historical patterns will continue, and they rely heavily on the availability of
historical data.
A first step when forecasting air traffic activity is usually to study the
historical data (time series) and determine the trend in traffic development. In the
context of medium-term or long-term forecasting, a traffic trend represents the
development in traffic over many years, isolated from short-term fluctuations in
traffic levels. When deriving a medium-term or long-term forecast by extrapolating
from the traffic trend, the forecaster assumes that the factors which determined the
historical development of the traffic will continue to operate in the future as in the
past, except that their impact may change gradually, and steady-state conditions
will continue into the future. The appropriateness of using trend analysis in
forecasting depends heavily on stability in past developments and the confidence
of the forecaster that the assumption of continuing trends is appropriate to the
particular operating environment.
In its simplest form, trend projection analysis is nothing more complicated
than plotting the traffic data series on a graph. The traffic variable to be forecast
(the dependent variable) is plotted on the vertical axis, and time (the explanatory or
independent variable) is plotted on the horizontal axis. When each point in the time
113
series is plotted, a smooth curve that seems to come close to all the points may
then be drawn in freehand style, or a straight edge can be used to put a line through
the data.
A trend may be stable in absolute terms (linear growth) or in percentage terms
(exponential growth), but it can also suggest an ultimate limit to growth,
particularly if the time span extends over several decades. The type of trend curve
that best fits a given time series of traffic data may be determined by using
different types of graph paper and different ways of plotting the data. Plotting the
data on ordinary graph paper with even spacing (or arithmetic grid paper) will
show a linear growth pattern as a straight line. An exponential growth pattern
(constant percentage growth rate) will appear as a straight line on linear-
logarithmic paper (linear timescale, logarithmic traffic scale), and the slope of the
curve at any point will be proportional to the percentage rate of growth or decline
at that point in time.
After the data are plotted on graph paper and a trend curve that appears to fit
the data is established, the forecaster can then simply extend the visually fitted
trend curve to the future period for which the forecast is desired. The forecast data
can then be read from the graph and presented in a table. This is considered to be a
simple linear extrapolation of the data.
Trend projection analysis methods use mathematical techniques to determine
the best fit line through the data, just as is done by using graph paper and a straight
edge. In the more sophisticated trend projection methods, the mathematics and the
shape of the line being fitted to the data are more complex.
The different types of trend curves can be represented by various
mathematical relationships. The mathematical formulations, which correspond to
the trend curves illustrated in Figure 1-2, are given below. In each case, the
dependent variable Y is traffic, the explanatory variable T is time (normally
measured in years) and a, b and c are all constants (sometimes called coefficients)
whose values can be estimated from the data (fig. 3.25).
a) Linear (or straight line):
114
 Y = a + bT, (3.1)

This implies a constant annual increment b in the traffic level, and a declining
rate of growth.
b) Exponential:

Y = a(1 + b) T log Y = log a + T log (1 + b), (3.2)

With b positive and normally less than one, this implies a constant annual
percentage increase in traffic at a rate 100b.
By taking logarithms, the exponential formulation can be converted to a linear
formulation.
c) Parabolic:
Y = a + bT + cT2 (3.3)

With three constants, this family of curves covers a wide variety of shapes
(either concave or convex). For c greater than zero, growth curves of this type have
the characteristics that growth in absolute terms per unit time increases linearly
with time while the rate of growth decreases with time.
d) Gompertz:

T c Y ab− = log Y = log a – c T log b, 0 < c < 1 (3.4)

This curve eventually approaches a saturation level a and may be found

appropriate to represent traffic developments over very long time periods.

115
 Fig. 3.25. Typical trend curves

During the appearance of a pandemic, IATA specialists use short-term

forecasts using and correcting given every week and month. IATA in forecasting
aviation in time for Covid - 19 uses decomposition methods. Decomposition
methods involve the dissection of the problem into various components. These
methods are particularly relevant when strong seasonality or cyclical patterns exist
in the historical data. These methods can be used to identify three aspects of the
underlying pattern of the data: the trend factor, the seasonal factor and any cyclical
factor that may exist.
Exponential smoothing. A general class of widely used forecasting techniques
that attempts to deal with the causes of fluctuations in a time series (trend,
seasonality and cyclical factors) is that of smoothing. The two most common
smoothing techniques are moving averages and exponential smoothing.
Exponential smoothing, in general, draws upon the philosophy of decomposition.
The exponential smoothing approach to time series is similar to the moving
averages approach. However, it places more emphasis on the most recent data, to
increase their influence on the forecast. In doing so, it is important to recognize the
116
seasonality inherent in the airline traffic data if monthly or quarterly forecasts are
considered. In such cases, depending upon the month of the year, data would have
to be de-seasonalized. A smoothing factor would determine how much weight is to
be placed on, for example, various months of the year. The notion of giving greater
weight to more recent data is one that has strong intuitive appeal to the analyst,
depending on the particular circumstances, and is straightforward to apply.
Moving averages. As mentioned above, the moving averages technique is
similar to exponential smoothing. The only conceptual difference is that each
observation is weighted equally. For example, a moving average of four
observations would be:
Y t −3 +Y t −2 +Y t − 1+ Y
Y t +1= (3.4)
4

Decomposition methods of forecast for Boryspil airport for 3 scenarios

presented in table 3.4 and fig. 3.26.
Because of the equal weighting, moving averages tend to lag the current
situation more than exponential smoothing. The advantage of the moving averages
approach compared to exponential smoothing is that the former is much simpler.

117
 Table 3.4.
Decomposition methods of forecast for Boryspil airport for 3 scenarios, thousand passengers

May 2021

Sept 2021
Nov 2020

Aug 2021

Nov 2021
Mar 2021
Dec 2020

Dec 2021
Apr 2021
Feb 2021

Oct 2021
Oct 2020

Jun 2021
Jan 2021

Jul 2021
Parameters/ factors of
forecast

Moving averages.

522,8563

489,5703

473,3379

492,4474

487,4771

486,9538

490,3578

489,8354

488,6561

488,9508

489,2231
Pessimistic forecast. 484,025

494,553

489,45
396,9

Closing borders and

sky for tourists and
businesses.

Moving averages.
531,4491

547,3926

563,8144

580,7288

598,1506

616,0952

653,6154

673,2238

693,4205

714,2232

735,6498

757,7193

780,4509
Realistic forecast. The

634,578
515,97

emergence of a vaccine
and vaccination of 30-
50% of the population.

Moving averages.
Optimistic forecast.
The emergence of a
612,6152

643,2459

675,4082

709,1786

744,6375

781,8694

820,9629

905,1116

950,3672

997,8855

1100,169
583,443

862,011

1047,78
555,66

vaccine and
vaccination of 50-80%
of the population.
(Increase in passenger
traffic by 40%)

118
 1200

1000

800

600
Ths pas

400

200

Moving averages. Pessimistic forecast. Closing borders and sky for tourists and businesses.
Moving averages. Realistic forecast. The emergence of a vaccine and vaccination of 30-50%
0 of the population.
Oct Novaverages.
Moving Dec Jan Feb forecast.
Optimistic Mar Apr May Junof a vaccine
The emergence Jul Aug Sept Oct ofNov
and vaccination 50- Dec
2020
80% 2020 2020 2021 (Increase
of the population. 2021 2021 2021 2021
in passenger traffic2021 2021 2021 2021 2021 2021 2021
by 40%)

Fig. 3.26. Results of using the decomposition methods of forecast for

Boryspil airport for 3 scenarios

A disadvantage of the moving averages approach is that a longer data series is

required for the analysis. Forecasts from moving averages can be used, as those
from exponential smoothing, for short-term forecasts. This can be achieved by
deviating from the standard formulation and assigning a relatively higher weight to
the most recent observation, provided there is justification for doing so. A
technique called auto regressive moving average (ARMA) can also be used, where
the forecasts are expressed as a linear combination of past actual values and/or past

119
computed error, since each new forecast based on a moving average is an
adjustment of the preceding forecast .
The crisis triggered by the coronavirus pandemic dealt a severe blow to civil
aviation. Airlines around the world are cutting staff, and some have already filed
for bankruptcy. The governments of the world's leading countries are allocating
enormous funds to help one of the key industries. International flights from
Ukraine should not be expected before mid-June.
It is difficult to imagine what will happen to airlines and airports during this
time. After all, Ukrainian passenger aircraft have been on standby since the end of
March, when the borders were closed for regular passenger flights due to the threat
of the spread of the coronavirus. As a result, the number of flights in the airspace
of Ukraine decreased by 96 percent. And according to the results of April, air
traffic decreased by 90 percent.
Such a tremendous fall has befallen not only our state. Due to the coronavirus
pandemic, the number of daily flights has dropped many times around the world.
For example, in Europe, according to the International Air Transport Association
(IATA), air traffic fell by 90 percent compared to the previous year.

120
 SUMMARY

Air Transportation Management NAU.20.10.14 001EN

Department
Done by: Revin V.V. Letter Sheet. Sheets
Ivannikova V.Yu. D 121 3
Supеrvіsor
Summary
Standards
Yuliia V. Shevchenko FTML 275 OП-202Ma
Inspector
Head of the
Shevchuk D. O.
Department

121
 The impact of the Covid-19 crisis on all aspects of the economy and society is
well known. Aviation has been particularly acutely impacted, accumulating the
effects of previous shocks (9/11, SARS, the global financial crisis and eruption
airspace closure) into one ‘black swan’ event which will have farreaching
implications on the industry for many years. There have been reductions in
passenger traffic caused by shocks in the past, but never a near total shutdown of
the global system. At the peak of the stoppage in mid-April 2020, the number of
flights operating globally was a quarter the number operating just six weeks earlier
(and many of these flights were operating with very limited passengers: revenue
passenger kilometres fell some 94% compared with April 2019). This has had a
devastating impact on travel and tourism and on the frontline companies operating
the aviation system and the rest of the supply chain. However, shocks to air traffic
growth in the past have always been followed by a rebound in traffic and, while
this may take longer than in previous crises, traffic will come back. In order to
make that happen more rapidly and get back to the level of jobs and economic
activity provided by aviation, governments must ensure that air transport is given
appropriate levels of assistance and support so that aviation’s benefits can bounce
back strongly, once the pandemic is under control. The aviation sector welcomes
the support governments around the world have provided to the industry so far to
help reduce the impacts of the Covid-19 crisis.
Ukraine government did not support aviation sector during pandemic. If we
assess the impact of the pandemic on passenger traffic in Ukraine, Ukraine
suffered devastating losses in the second quarter of 2020.
At the beginning of the year, in January 2020, passenger traffic in Ukraine
showed an increase (+ 8.9%) compared to January 2019. Although, it was already
clear that the increase is not as active as the average for 2019, namely 19.45%.
In February, passenger traffic was even higher than in the same month in
2019, but the increase was only 3.8%.
At the end of March, a full lockdown was introduced by the Ukrainian
government and international flights were suspended, which almost immediately
122
affected passenger traffic in Ukraine. In April, losses amounted to -99.3%
compared to April for 2019, May -97%, in June -98%. Although domestic flights
were restored on June 5 and international flights on June 15, the European Union
and most other countries did not open their borders, which prevented the revival of
commercial aviation.
Slow growth began in the 3rd quarter. In July, the main destinations with 15
countries were restored, which allowed to slightly increase passenger traffic to
556.3 thousand passes, which is -81% less than in July 2019.
The best result was in August and September 1376 thousand passes and 1198
thousand passes, respectively, during the high season.
The scenarios are based on both observed routes and flights cancellation using
a mix of flight tracking data and on-line booking data, as well as hypotheses based
on previous pandemic experience that affected aviation.
The use of the extrapolation method for forecasting is not suitable, since the
trend in the past is not related to the existing factors in connection with the Covid-
19 pandemic.
Methods of analysis and forecasting of time series are difficult to apply
without the use of special information systems; it also contains a probabilistic
factor for the development of aviation in the future, for example, the emergence of
a vaccine against Covid-19 can have a positive effect on the growth of passenger
traffic due to vaccination of the population around the world.
the forecast seems to portrait not-unrealistic figures. Among the caveats
list the following cavets that could happen in future:
1) The duration of the Covid-19 pandemic is not known. In our analysis we
assume that, in most scenarios, by December 2021 the aviation recovers its
previous business levels in Boryspil airport ;
2) Measures such as national and regional lock-downs have a major impact on
the aviation and the temporal length of these measures cannot be foreseen and may
vary across different regions and countries. Countries have different lock-down
strategies from extreme lock-downs as in Ukrainian, mild lock-downs in Europe
123
and (early) light lock-downs in the UK, USA. Lock-downs aims at postponing the
epidemic wave (“flattening the curve”) to reduce pressure on the health system.
Different lock-down strategies impact the duration of pandemic and thus the
impact on the aviation. Our scenarios should be intended as the result of an
average of all these measures on a global scale;
3) in our scenarios we assume that no second wave of Sars-CoV-2 epidemic
will happen building on the past experience from Sars-2003 and Mers-2013.
However, this is a new virus and could have a different seasonal behaviour;
4) the start and the end of the impact of Covid-19 pandemic on aviation
differs and it will differ (given the different strategies in place) across different
countries. Once again, our scenarios should be considered as average effects.

124
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