Row Between Airlines And Fuel Firm Grounds Ukraine Domestic Flights

KIEV, Ukraine -- A row between two Ukrainian airlines and a pair of fuel supply companies grounded dozens of domestic flights, the Interfax news agency reported.

Ukraine-Mediterranean Air (UM Air), the country's third-largest carrier, cancelled all flights within the country until further notice, leaving passengers stranded in Kiev, Simferopol, and Kharkiv.

A UM Air statement accused two fuel supply companies servicing Kiev international airport Borispyl and five provincial airports of artificially inflating aviation fuel prices, making flights unprofitable.

Ukrainian aviation fuel providers servicing those cities' airports hiked aviation fuel prices in early January, citing increased demand for fuel and falling supplies. The hikes have not affected aircraft on international routes.

The cities affected are Kiev, Lviv, Ivano-Frankivsk, Kharkiv, Chernivtsi, and Simferpol. Flights not passing through those cities, or on international routes, have not been affected, according to Interfax.

"In the international market aviation fuel costs 560-570 dollars a ton, and here our domestic companies are being told to pay 720...and that is before Value Added Tax (VAT)," a UM Air statement said in part.

Aero Svit, Ukraine's largest carrier, cancelled its daily flight to the popular Lviv destination, and warned that other routes would be shut down as well, if the aviation fuel companies "continue to overcharge."

The cities Chernivtsi and Ivano-Frankivsk would likely fall by the wayside next, said Serhy Kutsy, an Aero Svit spokesman.

Aero Svit was offering grounded customers refunds, rescheduled flights, or free bus tickets, he said.

Aero Svit and UM Air spokesmen identified the service firms as SP Krebo and Luk-Avia Oil, and accused the two fuel companies of colluding to raise aviation prices artificially. There was no immediate comment from either fuel firm.

Ivan Boiko, Ukraine's Energy Minister, said the problem lay not in a direct fuel price hike, as in a dispute between the fuel companies' and the air lines over which should pay VAT for fuel pumped into a plane flying a domestic route.

The loser in the conflict will owe the Ukrainian government the equivalent of 7.7 million dollars in back taxes, Boiko said.

"We hope to have this dispute resolved soon, and when that happens the planes will fly again," he predicted.

Source: DPA