In the face of Russian aggression, Ukraine cannot allow a protracted systemic crisis in the aviation industry

The aviation industry cannot allow a protracted systemic crisis in the context of a full-scale war. Its stability will be ensured by state support, technological modernization, import substitution and the development of export potential. This was discussed during the round table “Strategic Potential: Achievements, Challenges and Development Prospects”, initiated by the Aerospace Association of Ukraine, writes UNN.

Since the beginning of the full-scale invasion of Russia, the aviation industry has become one of the key outposts in containing enemy aggression, performing critical tasks for the country. In today’s environment, its strategic importance for national security and defense capabilities of Ukraine is only increasing.

In today’s environment, the development of aviation and the maintenance of its combat readiness is one of the most important issues for us. In the fourth year of the war, our equipment is combat-ready, even despite the harsh operating conditions, losses, etc. We maintain the level of combat readiness, support ground units, evacuate the wounded, perform air defense tasks, etc.

Bardakov explained that most of the Ukrainian aircraft fleet still consists of Soviet-era equipment, a significant part of the components for which were produced in Russia. In this regard, one of the key tasks of the industry is import substitution, establishing its own production and transition to Western technologies. The modernization of weapons and the integration of Western management, communication and protection systems are also underway, which is critical for the safety of crews and the effective operation of aviation in combat conditions.

Among the main challenges for the development of the aviation industry, the roundtable participants named the delay in the implementation of legislative initiatives, the lack of systemic tax preferences and the imperfection of import substitution mechanisms. At the same time, it was emphasized that the industry lacks not only financial support, but also flexible legal instruments that would allow to respond quickly to current challenges. According to the participants, it is crucial to form a holistic and high-quality legislative infrastructure – a legal ecosystem that will ensure stable support and sustainable development of Ukrainian aviation.

Aviation is an extremely financially, labor- and intellectually-intensive industry. At the same time, today, in the conditions of martial law, it has lost the exemption from taxation of profits of aircraft construction entities, customs privileges, VAT benefits and other preferences for the import of components for aircraft construction. A logical question arises: how is this even possible?

In turn, Hennadiy Yanul, Head of Aircraft Construction Department of Ukroboronprom State Concern, outlined that despite the existing state intentions to support aircraft construction, the industry, unfortunately, does not have a closed high-tech ecosystem, like, for example, the French one. Over the years of independence, it has not been possible to achieve full production independence, and legislative regulation remains fragmented. He recalled that in 2020, legislative initiatives were already adopted to support aircraft construction, in particular in terms of tax preferences. However, these mechanisms are not working now, which creates additional barriers for enterprises. For example, when importing components to replace Russian counterparts, Ukrainian companies are forced to pay the full cost with taxes, which makes the final product much more expensive.

To understand the level of technology in the aviation industry, the speaker gave a comparative example: one kilogram of an aircraft engine costs as much as 21 tons of wheat. The cost of one kilogram of aviation products reaches approximately $1,000, while tank products cost about $100, and automotive products cost only $50. These figures clearly demonstrate the complexity of production and the high scientific and technical level of the aviation industry

The roundtable participants emphasized that despite the inclusion of the aviation industry in the strategic areas and the adoption of the State Scientific and Technical Program for its development until 2030, the implementation of these initiatives remains limited due to insufficient funding and the lack of approval from the Ministry of Finance. This casts doubt on the sustainable development of the industry.

At the same time, the need to preserve production capacity in the context of martial law was emphasized, as well as the importance of synergy between civil and military aviation to effectively respond to modern challenges. The aviation industry must use all available opportunities to ensure the country’s defense capabilities.

Representatives of partner enterprises emphasized that they have all the necessary permits and approvals to carry out work on the modernization of aviation equipment. Since the beginning of the full-scale war, they have significantly expanded their production and technological capabilities and are now ready to actively participate in the common cause in the interests of the state.

It was emphasized that preparing for quality and reliable work in the aviation sector is a long and complex process that often takes years. That is why it is important not to waste time and make the most of the existing potential.

Partner enterprises together, as co-executors, perform the tasks of customers – operators of aviation equipment – in terms of modernization by installing both the latest promising models of avionics, aviation equipment and weapons, and restoring the standard weapons of aviation equipment for its operation in combat conditions (…) Among the most problematic issues is a deeper involvement of our organizations in the process of maintaining the combat capability of aviation equipment and its modernization, as well as the integration of enterprises into the national program for the modernization of equipment. Currently, the current workload of our production facilities does not correspond to the achieved level of their development (…) We need additional workload of production capacity

Summing up the discussion, Andriy Minakov, a representative of Incompass LLC, emphasized the need to make decisions taking into account the real context of the war and stressed the importance of creating effective communication between the government and the industry. He noted that the Aerospace Association of Ukraine could act as a coordination center for promoting initiatives to the level of the Cabinet of Ministers and parliamentary committees. At the same time, he drew attention to the discrepancies between customs and control procedures, which complicate the activities of enterprises, in particular during the registration of temporary import of units. According to Minakov, to overcome these barriers, regular working meetings with the participation of regulatory authorities and business are needed, as well as the appointment of an industry representative who would systematically represent the interests of the aviation industry in the decision-making process.

Thus, the aviation industry appears not only as one of the key elements of the state’s defense potential, but also as an indicator of its technological capacity and strategic independence. The roundtable participants stressed that further delays in solving urgent problems – from import substitution and tax incentives to the consistency of regulatory procedures – could lead to the loss of existing potential. That is why prompt decisions, systemic support from the state and effective coordination between all participants in the process are needed to ensure the sustainable development of the industry in the context of war and post-war reconstruction.