Commercial Viability: the UJBL Cover Story on Ukraine’s Transport Sector

Aviation & asset finance | JVS Law

In November 2019 Dr. Anna Tsirat was the cover story of The Ukrainian Journal of Business Law — Vol. 17 #11, an issue whose focus was Transport & Infrastructure. The interview, titled Commercial Viability, went through the things that actually stop money moving into Ukrainian transport.

The full interview is available as published: read the PDF. Below is what it argued, and — because six years have passed — where each of those problems stands today.

Domestic flights are taxed as if they were a luxury. The cost of flying inside Ukraine was high relative to international routes because the two were not treated alike for tax purposes. The Aviation Committee at the Ukrainian Chamber of Commerce and Industry had launched an initiative to equate them.

Importing the aircraft is its own problem. Ukraine calls itself an aircraft-producing country but imports commercial aircraft. Article 105 of the Customs Code lets Ukrainian airlines bring in commercial aircraft under a temporary-admission regime — that is, without VAT — under operating leases. The interview warned that this would be cut back from 1 January 2021 for aircraft over 30,000 kg with more than 110 seats, under the Law on the Development of the Aircraft Industry No. 1796-VIII of 20 December 2016. A separate trap: engines and parts imported separately from the aircraft may fall outside the regime and attract VAT anyway.

Cape Town is in force and does not work. Ukraine has been a party since 2012, and the Convention exists precisely so that a creditor can repossess quickly — an aircraft needs daily maintenance, and a stoppage of more than seven days makes returning it to service extremely expensive. In practice a lessor can de-register the aircraft with the State Aviation Service reasonably fast, then cannot get physical access to it or export it, because customs has no procedure for that. The interview cited Ukraine’s standing in the World Aircraft Repossession Index: 45%.

A securitised lessor looks like a criminal to a Ukrainian bank. Where an aircraft sits in a securitisation — sold off-balance to an SPV, notes issued against the lease payments — the Ukrainian bank running the mandatory know-your-client check treats the offshore SPV as a suspicious counterparty. The check could take up to two months: every document translated into Ukrainian, some apostilled, and the bank would not look at drafts, only executed documents — while the lessor needed the bank’s comfort before executing. The interview called it a vicious circle.

Rail liberalisation moved faster than the incumbent. Between 2017 and 2019 the private freight wagon fleet grew from 55,500 to 78,300 (+41%), while Ukrzaliznytsia’s working fleet fell from 61,500 to 57,700 (−6%) — and the incumbent, as a monopolist, gave priority to its own wagons.

The import VAT threat did not land the way it was feared. The current text of Article 105 still grants full conditional exemption to aircraft imported by Ukrainian airlines under operating leases — and carves out only aircraft with an empty equipped weight over 10,000 kg but not over 30,000 kg and a capacity of 44 to 110 seats. That is the segment domestic industry is aimed at, not the narrow-bodies Ukrainian carriers actually lease. The wording in force comes from Law No. 3345-IX of 23 August 2023.

The bank KYC problem was real enough to become its own body of work. It was set out in full in our September 2020 analysis of KYC risk assessments on aircraft leases, novations and ABS, and measured again in KYC in Aircraft Leasing, Five Years On — which is where the exemption almost nobody uses, and the currency-control regime as an EU accession problem, are dealt with.

Cape Town remains the strongest thing Ukraine has, and the weakest thing it enforces. Ukraine’s declarations are unusually creditor-friendly — including the one that lets a creditor use remedies without a court order — and we set them out in aircraft finance in Ukraine under the Cape Town Convention.

And the airspace closed. Everything above is now downstream of one fact: civil aviation has not operated in Ukrainian airspace since February 2022. Where the official position stands, and how to verify it before relying on it, is on our Ukrainian airspace status page.

The interview was published in The Ukrainian Journal of Business Law, Vol. 17 #11, November 2019. This page was rewritten in August 2026; the legal position is stated as at that date.