Survival Mission: Will the Defence City Special Regime Save Ukraine's Aircraft Manufacturing Industry?

In a situation where Russia is deliberately destroying Ukrainian aircraft manufacturing, domestic enterprises are striving to obtain residency in the new special legal regime – Defence City. This decision, according to experts, can not only preserve unique production capacities but also provide access to investments, international markets, and modern defense technologies, following the examples of successful international programs, writes UNN.

The path to development and investment Today, Ukraine’s aviation industry has become one of the main targets for enemy pressure and subversive work, aimed at destroying the Ukrainian defense-industrial complex. 

Over the past 4 years, the main focus of the Russian side has been precisely on the destruction, and indeed the total destruction, of the Ukrainian aviation industry. Because the Russians consider, in fact, the Ukrainian aviation industry as a primary competitor in terms of promoting their own production 

The expert considers the desire of Ukrainian aviation to preserve and develop its own capacities and to join the circle of Defence City residents as an absolutely logical step in such conditions. The corresponding initiative will be able to provide an opportunity to invest in research and development work aimed at supporting and strengthening Ukraine’s defense capabilities.

In addition, aviation’s participation in Defence City opens up strategic prospects for the industry and can become an impetus for Ukraine’s integration into the global market of high-tech solutions.

The development of the aerospace industry is a testament to the high-tech nature of the economy. If the Ukrainian side demonstrates positive progress in the development of the aerospace industry, it will, first of all, indicate the availability of relevant technologies, and therefore, the possibility of attracting even external investments in the development of both its own domestic aircraft manufacturing and, accordingly, the possibility of implementing joint projects 

The military expert also emphasized that Ukraine has a serious and powerful aviation industry and until recently was among the leading countries in the world in developing and mastering both domestic and foreign markets – thanks to the products of domestic manufacturers. Therefore, according to him, the primary task is to use the opportunities of Defence City to support and develop the Ukrainian aviation industry.

The development of the domestic aviation industry is both access to international markets and the possibility of attracting foreign currency revenues to the budget. But the main thing is the chance to actually restore the aviation industry 

“Who else but them, if they are unique” – Nina Yuzhanina on the prospects of aviation enterprises’ residency in Defence City11.08.25, 13:23 • 129300 views

Foreign experience: thorough support and convincing results It is worth noting that international practice also confirms that successful defense special regimes, similar in function to the Ukrainian Defence City, involve the integration of an aviation component. It is noteworthy that Ukrainian enterprises are already participating in some existing European projects.

Thus, one of the stakeholders of the European Defence Fund (EDF), which finances the development and implementation of critical defense technologies, including the aviation component, is the Ukrainian project “Small Unmanned Aerial Vehicles”. It focuses on the development of advanced AI-based aerial systems.

Among other flagship areas of the EDF is the European Next Generation Rotorcraft Technologies Phase II (ENGRT II), aimed at creating a new generation helicopter. The ENGRT II project received 100 million euros in funding from the EU with a total cost of 160 million euros. It is coordinated by Airbus Helicopters, leading a consortium of over 40 companies and institutions from various EU countries. The initiative’s goal is to enhance the mobility, interoperability, and technological independence of European armed forces.

In turn, the Hub for EU Defence Innovation (HEDI) is an intergovernmental initiative of the European Defence Agency, created to stimulate, develop, and implement innovative technologies in the field of security and defense. The initiative also includes an aviation component, which is considered a component of the strategic development of the defense industry and strengthening the region’s defense capabilities.

The examples of EDF and HEDI demonstrate that the integration of the aviation sector into special defense programs is a common international practice and one of the factors of their effectiveness. It is precisely according to this logic that aviation enterprises in Ukraine also seek to be part of Defence City for the development of high-tech solutions and strengthening the state’s defense capabilities.

Position of the aviation industry As of January 1, 2025, tax and other benefits for aircraft manufacturing enterprises in Ukraine ceased to be valid. The industry was left without any mechanisms of state support. Representatives of the Aerospace Association warn that without full amendments to the Defence City draft laws or the adoption of a separate law, the country risks losing one of its key high-tech industries.

One of the main points that aviation sought to take into account was the reduction of the requirement for the share of qualified income of Defence City residents from 90% to 50% for aircraft manufacturing entities. Experts explained that such enterprises as “Antonov” or “Motor Sich” could not meet the current criterion, as they combine defense activities with civil aviation maintenance. This proposal was taken into account, and the head of the parliamentary committee on finance, tax, and customs policy, Danylo Hetmantsev, announced the establishment of a 50% threshold of total income for aircraft manufacturers.

At the same time, among other proposals of the aviation industry, submitted by people’s deputies for the second reading of Defence City, other critical aspects remain – the extension of tax and other benefits to aircraft manufacturing entities, the reduction of the income threshold from defense activities for obtaining resident status, the expansion of the list of activities and grounds for including enterprises in the special regime, the simplification of requirements regarding debts and contract execution, as well as the possibility of directing released funds to research and development work in the field of aircraft manufacturing.

The second reading of the Defence City draft laws is just around the corner, and the adopted decisions will determine whether the aviation industry will receive its proper place among the residents of the special regime. In a situation where Russia is systematically trying to destroy Ukrainian aircraft manufacturing, the preservation and development of this strategic industry becomes a matter of national security. The inclusion of the aviation sector in Defence City is the most optimal and shortest way to protect and restore unique production capacities, attract investments, enter new international markets, and strengthen the state’s defense capabilities following the example of successful international programs.