Monday, June 17, 2024
Impact of war looms over Ukraine’s cargo companies

Impact of war looms over Ukraine’s cargo companies

War is always something that radically changes people’s lives. Some lose homes, others tragically lose family and loved ones, while many lose businesses, clients, and profits. War is about loss but also about strength, courage, and struggle.

Kiy Avia Cargo, Ukraine’s largest cargo Company, knows this story all too well, having seen the personal and professional struggles caused by the ongoing Russian invasion. 

In the first year of the conflict, Ukraine lost 30 to 35 percent of its Gross Domestic Product (GDP), leading to the largest recession in the country’s history. While it rebounded slightly in 2023, Ukraine’s economy only managed growth of 4.8 percent due to improved electricity access, better harvest and increased government spending.

This financial impact pales in comparison to the human cost of conflict. Although estimates vary, it has been reported that over 31,000 Ukrainian military personnel have died in the fighting, while 10,500 civilians have been killed and nearly 20,000 wounded. However, the number may be higher, as reports are still awaiting confirmation, and some areas remain inaccessible due to the Russian occupation.

Closed gateway

The main office of Kiy Avia Cargo was located at the cargo terminal of Boryspil airport. 90% of all goods flying in and out of Ukraine went through the hub. The remaining 10% were handled by other airports such as Lviv, Odesa and Dnipro.

“Kiy Avia Cargo has been on the market of cargo air transport since 2002. 20 years by the time the war started,” Konstantin Hrynko, the director of Kiy Avia Cargo, told Air Cargo Week.

“Boryspil airport is the air gateway to Ukraine through which all the main air cargo flows. We were aware of certain escalations, but we could not have anticipated that military actions would begin from the Russian Federation.”

The company’s director learned about the full-scale war around 4-5 am on 24th February 2022, literally half an hour after the Battle of Hostomel began. Konstantin initially didn’t believe the war had started, but then he saw people running out of their houses with suitcases, getting into cars, and leaving, realising his country was under attack. About 20-30 minutes later, his employee, who lived in the city of Boryspil, called Hrynko to tell him that they were being bombed.

Russian military targeted Boryspil Airport. The strikes were precise, meaning they didn’t assault the entire airport but specifically took out aeronavigation elements.

“On that day, 24th February, we couldn’t access our offices and warehouse. Our office, located at Boryspil airport’s cargo terminal, was inaccessible. The National Guard, military, and security services didn’t allow us into the airport area. We couldn’t enter the airport until mid-April.

“The airport was closed. Additionally, Russian forces were close enough until mid-April, so the company couldn’t start working until then. We barely got permission to check our facilities. When Hrynko did finally arrive at the airport, they found many goods were stolen.

“Unfortunately, some of these cargoes, not only ours but also a large number of import and export cargoes at Boryspil airport, were looted. This was cargo of finished products that had arrived from other countries, intended to be sent abroad, and had been stolen. 

“According to the information, these were thieves who, under the guise of territorial defence, guarded the warehouse, but in fact, they were looting it extensively. We had a few cargoes left from, but cargo that was about to be shipped had been stolen.

 “This caused significant financial losses and damages. A criminal investigation into this matter is currently underway. I understand that some of the looters have been caught, but unfortunately, both exporters and importers have suffered greatly, with thefts potentially amounting to tens or even hundreds of millions of US dollars worth of goods.

READ: Geopolitical tensions ripple through airfreight operations

Changing strategy

With the war having broken out in the country, companies that operate at Boryspil faced a challenge: They do not have an airport and the seaports are no longer accessible.

“There is a real panic both in business and among clients,” Hrynko admitted.

There was only one way left for Kiy Avia Cargo: consolidating cargo and moving them individually or in small batches to hubs that were still in operation outside of Ukraine. For airfreight, this would primarily be Warsaw Airport and Budapest Airport, while seafreight moved to Gdynia and Gdansk in Poland or Constanta in Romania.

“The closer this airport is to you, the cheaper it will be. Therefore, we have only one way, we deliver goods to the nearest neighbouring countries.

“Chisinau is mostly used by Ukrainian carriers as a hub for transporting animals. A very large stream of animals goes from there on Turkish Airlines, but we have never used it for our company’s cargo. After all, the priorities are Warsaw and Budapest.”

The challenge would be getting the cargo from Kiy Avia Cargo’s facilities to those hubs, given the significant issues faced around securing transport and fuel supplies, with much of it requisitioned for military activities.

“We couldn’t drive. Gas stations were empty. There was no fuel. They were issuing only ten litres of gasoline per driver per car,” Hrynko revealed.

“Refuelling the car to send the freight to Poland, Hungary, Czech Republic, or Romania, where the main movement of cargo is happening, was impossible because there was nothing to refuel with”.

It was also problematic to find drivers because there was no transport, many drivers had gone to the frontline have been mobilised by the Ukrainian army to defend their country. 

The challenges of securing the resources and manpower for moving goods were also compounded by the attempts to remain safe amid constant bombing and regular interruptions to the power supply.

The border blockades by Polish carriers, a predicament that commenced in 2022, has also developed into a significant hurdle. 

As recounted by Hrynko, this situation has caused logistical nightmares with extensive queues at the border and a sharp increase in transportation costs, directly impacting the competitiveness of Ukrainian products on the international stage.

“The problem at the border, where carriers stand for weeks, necessitates a rise in the cost of transportation. Consequently, our products from Ukrainian manufacturers become uncompetitive due to the exorbitantly expensive logistics,” Hrynko said. 

Competition has also intensified, with express and private carriers utilising minibuses for cargo delivery. This informal sector, thriving on semi-legal cash transactions, offers a more attractive alternative to traditional import.

“Our border no longer resembles a sieve through which imports are probably like water that flows,” he laments, highlighting the challenges of operating within the legal framework in a market saturated with informal practices,” Hrynko warned.

READ: Mobilising for Ukraine

 Shrinking sector

In the face of escalating challenges at the border and within the logistical landscape of Ukraine, Kiy Avia Cargo has been navigating through tumultuous times. 

The evolving economic conditions, exacerbated by the war, blockades, and mobilisation, have forced the company and the wider logistics industry in Ukraine to adapt and innovate to sustain operations.

To keep afloat, the focus has shifted from food, a critical export, to general cargo, including industrial goods. 

With the escalated logistics costs rendering Ukrainian goods unaffordable, driving potential customers towards alternatives offered by other countries with more stable logistics and no conflict.

This logistical quagmire not only hampers Ukraine’s ability to export also forces a strategic realignment of its industries. Many enterprises are either shutting down or relocating their production from the southern and eastern regions of Ukraine to countries like Poland, the Czech Republic, Slovakia, the Baltic republics.

“This is a big problem because there are a lot of Ukrainian industries. Today, a lot of enterprises are closing, and production is being transferred to areas where there is no war,” Hrynko said.

“From those companies that remain on the Ukrainian market today, which were engaged in air transportation, about 25% of them remained from the pre-war level, that is, 75% were closed. They left this market,” Hrynko highlighted. 

This staggering closure rate underscores the profound impact of the current logistical challenges, not just on the present but the future of Ukraine’s cargo and freight sector.

Further exacerbating the issue is the dwindling number of clients relying on these services. “Our customers are only 10-15% from the pre-war level. Today, most companies are closing or have already closed.” 

The war and subsequent mobilisation have had a profound impact on logistics, reducing the number of employees available, as many professionals were either mobilised into the armed forces or moved to work from safer locations abroad.

 “Mobilisation is a danger for a large number of male staffers who remained in Ukraine,” Hrynko revealed, noting the drastic reduction in his staff to just seven workers. 

The shrinking team mirrors the broader trend of shrinking workforces in the sector, further straining the operational capabilities of logistics firms.

“The situation in the economy is very difficult,” Hrynko stated, reflecting on the company’s journey through these trying times. 

“2022 was better, ultimately, because we adapted to new types of transportation…So 2022 was better than 2023. And 2023 was better than 2024, but challenges have persisted this year.” 

Picture of Anastasiya Simsek

Anastasiya Simsek

Anastasiya Simsek started her journalism career in 2016 at Ukrainian TV-Channels: 24 Channel and 1+1 Media. Having worked across a number of different sectors, including news, medicine and lifestyle, she joined the Air Cargo Week editorial team in 2024. To share your news and exclusive insights, contact Anastasiya.Simsek@AirCargoWeek.com

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