Friday, 26 April 2013

Swissport versus Ukraine International Airlines

Swissport International's loss of Swissport Ukraine to Ukraine's flag carrier Ukranian International Airlines  has caused commotion and consternation in the aviation industry and media. Following a court ruling in Kiev on 27th March, the Swiss company was compelled to transfer its 70% stake in Swissport Ukraine to UIA at a fraction of its estimated worth.

Many have agreed with Swissport that these events constitute a "successful hostile raider" on the part of UIA and Kiev City Economic Court. Air Cargo Week labelled the court ruling "a shocking display of flawed and questionable legality." Unsurprisingly, news sources from within the Ukraine tend to adopt a different perspective, reporting UIA majority shareholder Aron Mayberg's comments that Swissport have behaved aggressively throughout the process. Here, we provide an overview of the topic on the lips of everyone in the aviation industry.

UIA and Swissport entered into partnership in March 2006 - when UIA was still state controlled -  in order to develop its passenger handling business. The recent dispute arose from UIA's complaints that Swissport were "depriving UIA of the right to participate in the management of the common business and tried to unilaterally dilute the share of UIA," accusations which Swissport deny.

Swissport claims the dispute arose from its desire to invest further to be able to cope with the double-digit growth in the country. When UIA declined, Swissport suggested it put up the full investment amount and dilute UIA’s shareholding in exchange. But Mark Skinner, Senior Vice President of Swissport groundhandling commented. “The decision had not been finalised and was due to be discussed in the next shareholders’ meeting. We were very surprised when UIA took us to court, and even more surprised when the court ruled against us.”

And what a ruling it was. After six separate hearings, Swissport was ordered to sell its 70% of Swissport Ukraine to UIA for $433,000 on 27th March. The business is estimated to be worth $25 to $30 million, meaning Swissport have suffered a $17 to $20 million loss as a result.

The Swiss company issued a press release on the 30th March condemning the ruling and refusing any future liabilities for Swissport Ukraine. Swissport appealed to the highest court in the Ukraine and reported the incident to the President and Vice President of the European Commission on 16th April. For its part, UIA condemned Swissport for disconnecting UIA from their passenger servicing system and IT systems on the  19th April.

Skinner initially declared: “We have appealed to the highest court in the Ukraine. We are going to fight to the end [...]We are 100 per cent convinced that Swissport is right and Ukraine International, along with its shareholders, are committing a crime and they have taken over our shares in an unfriendly way.” Nevertheless, after exhausting legal appeals within Ukraine, Swissport's attitude was much more muted in a statement by a spokesperson from the company early this week: "We see potential in the Ukraine but we have been burnt. Before we move we will need to carefully screen our partners for co-operation"

The story is ongoing.

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