Aviation Trends in Europe and Post-War Ukraine. “Infrastructure Talk” with Chief Executive Officers of SuperNova, SkyUp, and Bees Airlines

The “Infrastructure Talk” is held by Dmytro Pavlenko, Partner at Deloitte Ukraine, Leader of Infrastructure Industry Group.

The skies of Ukraine have been completely closed to civil aviation for more than two and a half years since the start of the full-scale invasion. The situation is unprecedented in terms of causes and scale in a single European country since World War II. It is especially painful, considering how rapidly our aviation market has been developing and what potential it had.

At the same time, global aviation is actively “flying” forward and is subject to regular global research by Deloitte. In particular, we have released two reports: Europe’s Aviation Landscape in 2040 and Retooling to Take Flight: Technology Trends and the Airline Industry.

On the one hand, studying those trends does not seem to be relevant for Ukraine today. On the other hand, the war will end, after which we are going to resolve issues of the industry’s quick restoration (not only aviation, but also all related services, tourism, insurance, etc.) and catching up with innovations that are, at the moment, passing us by. And, as well, we simply miss the skies and would like to talk about them with like-minded people.

But then, it is hard to talk about the skies without trying to answer the main question: when will they open up? We think we know the answer (see more on that below). But, of course, we would be interested to hear other opinions as well.

Let us start by talking about key global trends in the industry. In the peaceful world, they are as follows: decarbonization and digital development.

Trend 1. Preparing for decarbonization of air transportation

Using hydrogen and electric engines, compared to kerosene-fueled aircraft, has a potential to cover up to 89% of air transportation market within the EU in 2040, which could potentially decrease the impact of carbon dioxide emissions on the climate by up to 59%. Such companies as ZeroAvia, Eviation, Heart Aerospace have presented, in the test mode, hydrogen and electric engine powered aircraft which can accommodate from 9 to 30 passengers. Manufacturers are planning to fully use such aircraft for short distances by 2040. On the other hand, the aviation industry’s giants have their own ambitious goals. Airbus has developed a strategy of launching the first hydrogen powered commercial aircraft by 2035, and Boeing notes a possibility of launching small regional and sub-regional aircraft using batteries and hydrogen engines by 2030. Decarbonization depends on the speed of infrastructure development, political decisions, and investments.

Trend 2. Digital innovations and evolution in technologies 

The topic became even more relevant this July, when, due to a software update error, the work of airlines and airports around the world was partially paralyzed for several days (without Ukraine again and, unfortunately, it was not a good luck). 

Global digital challenges of aviation are as follows:

1)       Taking modernized mainframes (servers) to a new level: Should airlines upgrade to a new mainframe model or break down the existing systems into components and upgrade them separately? It is believed that moving carriers from legacy systems to powerful mainframes will significantly accelerate their digital transformation. E.g., an airline’s loyalty program application is hosted in the cloud, but its management system uses references to the data stored on the airline’s mainframe without changing them. This allows the airline to change proposals and functionality as needed, without having to completely update its data platform.

2)       Involving artificial intelligence (AI): The industry currently encounters some barriers in using AI. However, its penetration seems inevitable and will allow for optimizing and improving the quality of transportation, in particular, in flight planning, air traffic control, support in decision making when working with large volumes of flight information. For instance, American Airlines decreased the process of assigning passengers to boarding gates from 4 hours to 2.5 minutes with the help of AI.

3)       Taming multi-cloud chaos: The combination of multiple cloud environments and providers, as well as their interoperability, will help ensure a more resilient, cost-effective, and secure IT infrastructure. For example, Deloitte has been involved in developing an airline travel application that spans both cloud and mainframe environments. The service uses data from the main server, such as changes in arrival and departure times, as well as data from other sources, to ensure new functionality is mostly managed in the cloud.

4)       Flexibility and agility in attracting labor: Talent shortage is a widespread problem (and not only in aviation). Therefore, rethinking approaches to personnel management, increasing automation in developing, testing, and operating software solutions will compensate for the shortage in specialists.

5)       Metaverse for airlines: Metaprograms will ensure communication between all teams, ground and flight, and also with passengers, in the virtual space. Those programs will help with collecting information and calculating data, reducing costs, increasing customer engagement and help create completely new offers for them.

We have asked Ukrainian experts to comment on aviation trends from Deloitte’s research. But first, let us consider prospects for domestic airspace development.

Deloitte is involved in a range of initiatives regarding Ukraine’s aviation infrastructure. We have received a response from the Ministry of Foreign Affairs to one of our official requests, which can be partially quoted as follows, “... Considering the position of the General Staff of the Armed Forces of Ukraine, implementing practical measures on development of Ukrainian airports will be possible only after the martial law regime is cancelled in Ukraine."

Based on this, we conclude that the government’s position, based on the position of the military, is simple: the skies and airports will open up only when the martial law ceases to apply.

P. S. When this material was almost ready, the topic gained (unexpected) publicity. In particular, Deloitte Ukraine had the honor of attending the Ukraine Aviation Recovery, a meeting in Warsaw held on 28 October 2024 under the support of the Ministry of Community and Territories Development of Ukraine and the US Embassy in Ukraine. The purpose of the meeting was to present a roadmap for opening up the Ukrainian airspace and discuss the prospect among the widest possible range of stakeholders. Those included representatives of the Ukrainian government, domestic and international specialized regulators, the military, airlines, leasing companies, aircraft manufacturers, and other key players in the industry. And, in the first hand, international insurance companies which are also doing their own homework on the topic.

So, what do you think about opening up the skies of Ukraine?

Yaroslav Krasnozhon, CEO of SuperNova Airlines 

Currently, several questions arise regarding opening up the Ukrainian airspace:

1.       Will we be able to guarantee that the martial law regime is abolished in the foreseeable future? It is clear that the issue is completely beyond the competence of the Ukrainian authorities. If we consider the current situation, it is obvious that the martial law is going to be extended many more times.

2.       If we understand that the military aggression against Ukraine will continue for an indefinite period of time, how can we ensure the safety of flights at least to Lviv airport, when the flight time to safe space is less than 10 minutes, and the enemy may well use the airspace of Belarus to launch air-to-air missiles?

3.       How will ground handling procedures be developed, considering the time required by ballistic missiles to reach targets (which is always less than 5 minutes). What should be done in the event of an attack, which, unfortunately, will almost certainly occur?

4.       In what way will cooperation with insurance companies be built? Who will be pilots/passengers of the first flights?

Actually, there are too many questions. Responses can be found through conducting an open discussion of the issues that are painful for the industry in order to find optimal and safe solutions.

Yevhenii Khainatskyi, CEO of Bees Airline

I would divide this process into several stages.

The first stage is obtaining necessary permits to open up the airspace of Ukraine. We should first recognize that certain areas of Ukraine will be safe for civil aircraft (ed.: hereinafter referred to as “aircraft”), and their landings at airports in those areas will be safe. Within the country, we can take such a decision for ourselves and fly, for instance, from Uzhhorod to Lviv or Chernivtsi on a Ukraine-made aircraft – An-24 (for this, it is enough to change the domestic legislation and insure such transportation with Ukrainian insurance companies), but if we are talking about international flights, then completely different procedures apply here. In international legal relations, we need coordination with European regulators (the EASA, Eurocontrol, etc.), as well as with owners of aircraft and equipment involved in flights (leasing companies, lessees of maintenance equipment, owners of engines or other spare parts that will be located in the territory of Ukraine to maintain the airworthiness of aircraft, etc.), aircraft insurance companies, passengers, personnel, third parties. Without such an international assessment and confirmation of flight safety to any airport in Ukraine, international flights are impossible.

The second stage is confirming readiness of airports to receive and service aircraft. In addition to the actual readiness to receive and service aircraft, passengers, and cargo, it is necessary to confirm an acceptable level of security at the airport under certain threats. It is not enough to have only the technology of services for evacuating personnel, passengers, and equipment during danger. Here, it is also required to ensure additional security measures regarding storage of flammable and explosive substances in the airport territory (fuel, chemical reagents, electrical substations, and everything else needed for the airport’s life), provide insurance for all property, personnel, and passengers located in the airport territory, and have highly qualified personnel to perform all necessary procedures.

The third stage is commencing commercial operation. Everything in aviation is structured like this: if Ukraine says that it is possible to fly and it is safe, the European regulator will confirm this, and Eurocontrol will open up the sky, with the decision about flights transferred to each of air carriers. Not only the decision to fly or not to fly, but also the responsibility for possible damage caused to both aircraft and personnel, and passengers. Then, we can say that everything is open, you may fly, and the question of whether there will be those who want to remains open. Today’s example is Israel, Tel Aviv airport. The airport is open, flights are being operated, there are recommendations from the EASA and FAA to refrain from flying. American Airlines, Lufthansa, and their group companies, British Airways, LOT, etc. have canceled their flights and are constantly postponing dates for their resumption, but, at the same time, a number of European carriers continue their flights, despite the recommendations. They have performed their own risk assessment and decided to operate flights. Thus, when everything is open and airports prove their safety, each air carrier will assess its risks, including financial ones, in particular:

-        Available free aircraft for flights to Ukraine;

-        Insurance of aircraft, passengers, crews (possible insurance, cost of insurance against war risks);

-        Permits of aircraft owners to perform flights, even with insurance available;

-        Consents of the company’s personnel to perform such flights (if pilots’ union decides that flying is still dangerous, then, there will be no flights);

-        Conditions for performing such flights (duration of staying at the airport, fuel supply, provision of the required set of services during the flight);

-        Characteristics and flight times to alternate airports, their readiness to receive aircraft and provide everything needed for the airline;

-        Category of passengers transported and the legislation peculiarities in the event of the aircraft’s landing at an alternate airport if it is located in another country;

-        Demand for transportation (whether there are passengers willing to fly despite the security threat);

-        Cost of tickets at which it would be advisable to operate flights (in addition to demand, it is needed to assess the economic feasibility of such flights and whether they will be purchased at the price set by the airline).

The airline will take a decision on flights only after assessing all its risks with such flights. When they are acceptable to it, we can talk about commencing flights.

I would like to emphasize separately that readiness of Ukrainian airports and airlines depends on the personnel. Over the past 2.5 years, we have lost most of our professional staff due to the fact that some of them left abroad, while others lost qualifications as a result of a long downtime. According to recommendations of international organizations, the ICAO and IATA, the personnel need to update their knowledge every 6 months to 2 years (6 months for pilots and flight attendants, 1-2 years for all airline, airport, dispatcher, etc. service personnel involved in servicing aircraft and passengers) by attending aviation courses. Those trainings are required not only to revise and consolidate knowledge in the process of work, but also to update it on innovations in aviation. Every year, new editions of all books and manuals from international organizations are published on all aviation rules and maintenance technologies, and aircraft manufacturers introduce new recommendations and rules for operating or maintaining equipment. Aviation is constantly evolving, and what was relevant 5-10 years ago is no longer as relevant today as the new technologies are being used. In addition, Ukrainian aviation is experiencing more significant problems than global aviation. Personnel layoffs began from the time of coronavirus restrictions. Our young specialists were able to gain at least some experience only during one year between coronavirus and the martial law imposed. Six years of aviation downtime – and Ukraine has lost personnel who should already be passing on their experience to young people. Only experienced specialists who are already almost 40+ years old can teach young people. We miss this middle level of experienced specialists that, for instance, European countries have. It is already urgent to emphasize that young people be trained and implemented into work processes immediately after flights are resumed. If we postpone those processes now, we will face long and labor-intensive processes of reviving Ukrainian aviation.

Dmytro Sieroukhov, CEO of SkyUp Airlines

Resumption of flights over Ukraine is a multifaceted and delicate issue that depends on several critically important factors.

On the one hand, airlines and passengers are waiting for the possibility of resuming flights, as this will allow returning to normal transport connections with the world. However, the main condition remains unchanged – ensuring safety.

Operations in any high-risk region require a comprehensive assessment of threats to civil aviation. To ensure full or partial opening up of Ukrainian airspace, cooperation is required with international aviation regulators, such as the European Aviation Safety Agency (EASA), as well as with partners specializing in aviation security. Only complete confidence in the stability of the situation will allow this step to be implemented.

At this point, military risks remain high, and any decision to even partially open up airspace will be taken depending on developments in the battlefield and at a political level. Strategic and technical planning, including potential routes and logistics, will require an in-depth threat analysis and coordination with Ukrainian and international structures.

Currently, we continue to operate outside Ukraine, staying in touch with partners and regulators, and are ready to return to Ukrainian skies as soon as possible.

What is your opinion on global aviation development trends? 

Yevhenii Khainatskyi, CEO of Bees Airline

The talk on trends and innovations is very extensive. After all, there are many questions: are low-cost airlines displacing classic carriers, why are global ticket sales distributors fading into the background, how are online resources developing in aviation, is it needed to keep a large staff, how are passenger service technologies changing, which airport development model is more profitable, what do air carriers want from airports in the future?

I would like to focus on a narrower issue. Why is there a great demand for air transportation in Europe and a shortage of aircraft in the market? How will Ukrainian aviation be rebuilt, and will we observe such a demand for flights in our country?

Over the recent two years, there has been rapid development of transportation across all EU countries, but not all airports have reached pre-coronavirus levels (2019). I will divide the question into parts.

1. Demand for transportation.

European carriers are not able to meet the demand for transportation during the summer months. Reasons:

-        Stable growth in air traffic is considered to be 7-12% per year. During the “coronavirus holidays”, many carriers reduced their capacities and, instead of growing, were forced to suspend many projects. Therefore, after the coronavirus, the market in the EU countries began to grow by 30-40% annually. Airlines were not ready for such a development, so all those years they have only been catching up with this demand.

-        Many passengers traveled through hub transfer hubs. The largest hub for travel from the EU countries was Moscow, one of leaders in Eastern Europe – Boryspil. After the start of the full-scale war, the closure of airspace in Ukraine, and the imposed sanctions against Russian airlines, Europe lost two large hubs, which led to redistribution of passenger traffic among other airports (Istanbul, Warsaw, Vienna, Riga, etc.). But, unfortunately, the production capabilities of carriers turned out to be limited and, therefore, there was a great demand for aircraft in “wet leasing” from carriers not only from the EU countries. All aircraft that could fly in the EU countries found work. And such a work was found for a few Ukrainian airlines.

2. Limited opportunities.

Over the past two years, there has been a significant decline in production capacity with manufacturers of aircraft and their components (engines, equipment, composite materials, etc.). And, in the recent period, safety problems have been added to the production of new aircraft by Boeing Corporation, problems with engines installed on Airbus 320/321 aircraft, which resulted in shutting down several dozen, or even hundreds of aircraft this year. If, in the pre-coronavirus period, manufacturers of Airbus and Boeing competed to see who would produce more aircraft per month, now it is a question of which air carriers will buy reliable and high-quality aircraft and in what quantity. Due to changes in suppliers of raw materials for the production of aircraft components (from metal to microchips), there are disruptions in delivery times. The production of new aircraft has decreased by 30-40%, while demand for transportation has increased by 30-40%. A significant problem will arise for Ukrainian airlines after skies are opened up.

3. What is the problem for Ukraine?

With such a demand for new and used aircraft, any lessor will give preference to supplying aircraft to financially reliable, risk-free, stable airlines in developed countries. Where can Ukrainian airlines be on this list? How will we resume work and develop rapidly without aircraft, and in the absence of personnel? Recovery for Ukrainian carriers may turn out to be very difficult if the state support programs are not introduced. If, during the coronavirus, despite the effective antimonopoly laws in the countries, carriers were able to receive such assistance (tax exemptions, bank loans, non-payment of airport fees, fuel benefits, customs exemptions, etc.), now is the time to think about rebuilding aviation and developing further Ukrainian entities. If the principle of “every man for himself” prevails, we will see only Ryanair, Turkish Airlines, and Wizz Air aircraft in our skies, with their financial capabilities, large fleet of aircraft, and lack of competition from Ukrainian carriers.

Dmytro Sieroukhov, CEO of SkyUp Airlines

Modern aviation industry lives through significant changes driven by both global economic trends and impact of new technologies.

After the difficult period of the coronavirus pandemic, global aviation industry experiences a significant increase in demand for air transportation. According to the International Civil Aviation Organization (ICAO), international air traffic volumes have returned to 2019 levels and even slightly increased them. In addition, the demand for domestic transportation is growing, which may indicate a change in consumer preferences in favor of more frequent, but shorter trips.

Due to the increased competition, airlines are actively implementing new technologies to improve customer service and optimize costs. Artificial intelligence and automated processes are becoming key tools for optimizing management decisions, improving passenger experience, and increasing flight safety. For instance, the use of systems analyzing passenger behavior data allows airlines to offer individual solutions, by adapting services to specific preferences.

The topic of sustainable development and environmental responsibility, in light of global environmental challenges, is not new and is only gaining momentum. Airlines are investing in new technologies to decrease carbon emissions and using alternative fuels. And although reducing environmental impact is a complex process, we strive to be leaders in this area.

SkyUp has become the first Ukrainian airline to use split winglets on its aircraft, thus, ensuring significant fuel savings and, accordingly, reducing CO₂ emissions. We have also implemented a range of social initiatives that embody our values ​​of sustainable development in all aspects of our activities. For example, recycling crew uniforms from materials in collaboration with Vereta gives old things a new life in the form of functional products, and proceeds from their sales go to support LEVCHYK SPECTRUM HUB remedial classes. In addition, we have introduced the process of restoring and selling crew suitcases, with the funds collected to help the Superhumans Foundation. We believe it is important to develop environmental awareness and support projects that change society for the better. This is our contribution to creating a more conscious and responsible aviation industry.

Traditional transportation models are gradually transforming. Low-cost models are becoming more popular, allowing more passengers to travel, but traditional airlines are also adapting their strategies, offering flexible fares and personalized services. This involves a greater focus on customer service, including through new digital platforms introduced for booking and managing travels.

Yaroslav Krasnozhon, CEO of SuperNova Airlines

Regarding decarbonization of air transportation, I would like to add that, currently, aviation is responsible for only 2.5% of total CO₂ emissions in the world, while motor vehicles are responsible for 48%. Accordingly, a 10% reduction in total emissions from aviation would result in the total “saving” in CO₂ emissions of 0.25%, while the same reduction in emissions from motor vehicles would result in the 4.8% reduction, which is almost twice as much as all emissions from aviation.

I should also note that aircraft engines today (I am talking about modern gas turbine engines) are extremely efficient. For instance, in a modern double-circuit aircraft engine, only 1/1,000 of the air volume passing through the engine is involved in oxidation reaction (i.e. fuel combustion), which is very little.

In addition, to convert aircraft to electricity, we need electric motors that are extremely powerful and, at the same time, very compact. You are all familiar with the size of generator sets that provide electricity to our shopping centers or other establishments. A 1-megawatt unit is about the size of a kiosk. There is no need to talk about aerodynamics of the kiosk and its weight-to-weight ratio. Meanwhile, a small DHC-6 Twin Otter (19-seat) has two such engines. It is difficult to imagine aerodynamic qualities of an airplane with two kiosks under its wings.

For such aircraft as Boeing 737 and A320, much more power is required. That is, we are already talking about tens of thousands of horsepower. I suggest you take a look at the size of generator sets in 10-20 megawatt power class. That is, currently, few effective solutions on this path are available. It is also worth noting large weight of batteries of such power, complexity in energy transmission, and temperature instability of such batteries during rapid discharge/rapid charging. Here, it seems, we have a classic example when technology has a certain limit to its scalability.

In the context of aviation sustainability, I would propose applying an approach that would measure the impact of aircraft’s life cycle, i.e. assess the environmental impact of every process – from manufacturing, operating to disposing the aircraft. I am sure that, by using this approach, the effect of CO₂ will be relatively insignificant.

There are several global factors regarding trends in aviation development.

1.       Despite the increased pace of aircraft production, which is gradually recovering after the coronavirus pandemic, demand still significantly outweighs supply. And this imbalance is unlikely to be overcome in the foreseeable future.

2.       Due to the increased technological complexity, new aircraft have many purely technical and technological problems that result in long and expensive repairs. Such examples include issues with the new PW1,000G series engines (Embraer 195-E2, Airbus A220, A320), the MCAS system, and, in general, with quality control during the production of Boeing 737 Max, problems with paint coating of A350. Moreover, such problems are often discovered when a significant number of aircraft are already in operation. This only deepens the shortage of aircraft. We should move to a significantly new level of quality control during the production process and introduce the latest aircraft into operation, and this is considering their increased complexity.

3.       Too much focus on only one part of environmental friendliness of aircraft – fuel consumption. Since aviation uses much more toxic substances in the course of manufacturing and operating aircraft, compared to which CO₂ is almost a gift to the environment: e.g., liquid used for de-icing treatment of aircraft, hydraulic fluid, liquid used to wash off paint from aircraft during repainting, etc. It is needless to say that, when producing aircraft components, chemical compounds can be even more aggressive. Therefore, I think it is worth moving on to assessing the environmental impact of the aircraft’s life cycle and not just assessing any one factor of its operation.

4.       Airlines should find a new way to be profitable. Traditional carriers can no longer compete with low-cost carriers because the financial model of low-cost carriers is different, and they no longer derive their main revenue from simply selling tickets. Aviation is increasingly becoming part of larger business processes, rather than a business in itself.

How can Ukrainian airlines catch up with global trends after the war?

Dmytro Sieroukhov, CEO of SkyUp Airlines

Global trends in aviation are catalysts for change that will require Ukrainian airlines to adapt to new conditions. It is important not only to resume operations after the war, but also to ensure readiness for implementing innovations that determine the future of the aviation industry. This will include modernizing the fleet, introducing new technologies based on AI, understanding consumer needs and adapting to those changes. That is, this is an extremely multifaceted process, with many factors that need to be taken into account.

Firstly, the state of aviation at the time of the end of hostilities will be critically important. It will be needed to perform a comprehensive assessment of infrastructure and readiness for resuming civil flights. This will require investments on behalf of airlines themselves. And, given the difference in operating conditions of Ukrainian and European companies, for further competition in the Ukrainian market, it will be important that domestic companies receive support from the state.

Secondly, the return of Ukrainian companies to their native skies will again cause changes in business models, and this, in turn, will mean restructuring operating processes. The ACMI market and operation of regular flights are two fundamentally different markets, approaches to planning a flight program, building crew schedules, different partnerships with airports, etc. Therefore, so that Ukrainian airlines be able to ensure all this in a short period of time, they will always need to be ready and have a plan for “transforming” their businesses at the time the Ukrainian skies are opened up. For foreign companies, it is much easier to open flights to Ukraine. After all, they flew and continue to fly as regular carriers, and Ukraine is one more market for them. As an airline, we have been successfully operating in the ACMI and charter markets for the recent two years, thus, proving our reliability as a partner. This presupposes actively attracting new partners and concluding agreements, which strengthens our position in the international market. However, to start flights from Ukraine, our business portfolio should also include regular programs, a reserved fleet, crews, etc. We are currently actively working on this.

Considering these challenges and opportunities, it is important that the state and business jointly develop a clear plan for the recovery of the aviation industry, focusing on support to Ukrainian airlines. This will create a stable environment for developing the aviation infrastructure, which is needed for Ukraine’s further growth and integration into the global aviation industry.

Yaroslav Krasnozhon, CEO of SuperNova Airlines

I think we should focus on two main areas here:

1.       We should try to preserve those carriers that have retained valid operator certificates, in particular, by involving them in transportation in the interests of government structures. That is, we should keep the industry operating, albeit not in Ukrainian skies. This will allow us to preserve qualified personnel for further recovery.

2.       Cooperation with aviation educational institutions should be built to train young specialists and attract them to the industry, because we risk losing an entire generation to this industry, which will have catastrophic consequences.

3.       Reasonable protectionism on behalf of the state should be maintained at the initial stages of opening up the airspace. After all, we will be in the same space, but in completely different conditions. For example, the increased insurance payments will apply only to part of the fleet for foreign airlines and to the entire fleet of Ukrainian ones. Such a disproportion will significantly affect the competitive ability of Ukrainian airlines. 

This interview contains the respondent's direct speech without curtailments, changes, corrections or retouching; it reflects the respondent’s subjective opinion and may not coincide with the position of Deloitte. Deloitte is not responsible for the information provided.

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