Swissport Loses Out In Ukraine … For Now

Court rules in favor of Ukraine International Airlines over a $30 million joint venture gone very wrong.


With annual operating revenue of $2.6 million handling some 12,000 flights, Interavia was the biggest ground handler at Borispol International Airport in 2006. The company expected to grow by 20 percent by just the following year and planned to expand to other airports.

“With its strong economic growth and its rapidly rising air travel volumes, Ukraine fits ideally into the Swissport strategy of gaining key footholds in promising new markets,” the press release adds.

At the start of the JV, UIA held on to 29.4 percent and its original business partner, Airline Business Handling, kept a 19.6 percent stake.

Swissport, already providing ground handling for UIA at other airports, now had a prime position at KBP, UIA’s hub and the country’s largest airport serving its capital, Kiev.

At its March press conference, Swissport indicated the JV prospered until 2011 as Swissport Ukraine gained more customers and expanded to two other airports in Ukraine. By then, Swissport’s ownership in the ground service provider had grown to some 70 percent after buying out ABH in 2008.

But 2011 also marks a turning point in the JV when ownership in UIA changed hands to more private investors.

 

MR. MAYBERG

Or make that to one private investor.

Ukraine’s flag carrier was a state-run airline with foreign capital from its start in 1992. In 2011, the government sold its 61 percent stake to three existing minority shareholders with Aron Mayberg at the forefront.

Swissport takes the time to single out Mayberg, the airline’s main shareholder, in many of the statements the company has made during the lengthy judicial process and its aftermath.

Not much information can be found about Mayberg. For someone in charge of an airline, his bio and picture do not appear on UIA’s Web site alongside the 15 other executives listed under its management team.

He did start AeroSvit in 1994, a Ukrainian airline that’s currently in bankruptcy proceedings with debts of $534 million, three times the value of its assets.

But from there, even 20 pages into a Google search produces no more than that he is a “Ukrainian businessman” and suffice to say he isn’t on LinkedIn either.

A story in the Kyiv Post, the country’s leading English-language newspaper, on the UIA sell-off does bare out some of the bargain basement deals that, in this case, the Ukrainian government rather than its judicial system seems more than willing to dole out to compatriots who can hear the door knob turn on a back door about to open.

The country’s State Property Fund ended up selling its majority share in UIA for about $31 million – not much for a company that booked $371 million in business the year before. There was controversy at the time that the fund had the power to hold an auction that might have fetched a steeper price.

As the rules stood, minority shareholders had first dibs at buying up the airline, and Mayberg appears to have been first in line. Other long-time shareholders, such as Austrian Airlines and the European Bank for Reconstruction and Development, divested their shares in the process.

With Mayberg in control of UIA, his first decision was a curious one for an executive who also held a stake in a ground handler. Mayberg fired Swissport Ukraine and put the airline’s ramp handling and passenger handling contracts out for bid.

Oddly enough, Aerohandling, a ground handler Mayberg was once associated with, won the business despite concerns over the hallmark of a back room deal – lower quality delivered at a higher price.

Even with this turn of events, Swiss-port was still ready to finance the growth of Swissport Ukraine. After all, the ground service provider seemed to be doing quite well even after losing the UIA account. The company had picked up business with 20 other airlines and customers, and expanded its stations to the country’s major aviation sites:

  • Kiev Zhuliany International Airport, Kiev’s other passenger airport and the country’s major business aviation airport.
  • Kharkiv International Airport, serving the country’s second-largest city.

At its March press conference, Swissport said UIA struggled to meet its pro rata share obligations to support further growth right from the beginning of the JV.

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