Relatively unknown to people in the West, Ukrainian oligarch Ihor Kolomoisky once owned an airline empire that spanned Europe. But then, he threw it all away…
And whilst there are rumors he maintains ownership of a few airlines to this day, it is impossible to prove these claims and the fact of the matter remains: the airlines he once owned openly are no more.
Who is Ihor Kolomoisky?
Unlike other airline moguls like Michael O’Leary and Richard Branson, Ihor Kolomoisky isn’t exactly a household name in the West, even if he is in his native Ukraine.
Born into a Jewish family of engineers in Dnipropetrovsk (modern day Dnipro), then in the Ukrainian SSR in the Soviet Union, Ihor followed in his parent’s footsteps when he graduated from Dnipropetrovsk Metallurgical Institute in 1985.
Involved in the import-export business after graduation with fellow classmates, Alexsey Martynov and Gennady Bogolyubov, the trio’s luck changed in 1992 when they established PrivatBank.
Despite owning 49.99% of the shares (making him the largest single shareholder in the company) it wasn’t until 1997 that Ihor formally joined PrivatBank’s board of directors. Today, PrivatBank is Ukrain’s largest bank.
Aside from his involvement in PrivatBank, Ihor Kolomoisky is also involved in Privat Group, an informal holding company he leads and cofounded with the other cofounders of PrivatBank. And this is where his persona of being a legitimate businessman is traded for that of a post-Soviet oligarch.
Not opposed to using violence when he doesn’t get his way, Ihor has regularly used bribery and intimidation to acquire former nationalized companies – particularly in media and natural resources – for pennies on the dollar.
All this has made him one of the richest men in Ukraine, presently estimated by Forbes at $1.8 billion, though has previously been estimated at as much as $3 billion when the Ukrainian hryvnia (UAH) has been stronger.
Yet despite his great wealth, many in Ukraine not only have great respect for him, but seemingly love him as evident by his nickname of “Benya” after the cuddly cartoon lion from 1960’s Soviet television.
Like most oligarchs in former Soviet countries, Ihor Kolomoisky has maintained strong ties with Ukrainian Presidents.
Interestingly, despite running on an anti-oligarch position, Ukrainian President Volodymyr Zelenskyy was heavily associated with Ihor Kolomoisky, having worked for one of his TV stations before his political career and being personally endorsed by him.
A Typical Oligarch?
But Ihor’s business career has not been without controversy, however. In 2016, the Ukrainian government nationalized PrivatBank as a direct response to the 2014-15 Ukrainian financial crisis, which threatened the notoriously under-capitalized Ukrainian banking industry.
And unlike most other businessmen who find their companies facing nationalization, Ihor not only welcomed it but actively encouraged the Ukrainian government to do it, not even feigning a court battle.
Following the nationalization, the Ukrainian government hired Kroll Inc. to uncover any discrepancies in the bank’s filings, citing foul play by the bank’s former owners. What Kroll found was nothing short of criminal.
Discovering that the majority of the bank’s lending portfolio was to companies associated with the former shareholders (either a part of Privat Group, or their own personal investment/holding/shell companies).
To make matters worse, this loan portfolio totalled over $5.5 billion and comprised over 97% of the bank’s capital. In other words, Ihor and the previous owners had robbed $5.5 billion from the Ukrainian people and leaving the government to foot the bill.
Tracing the money pilfered by the shareholders, Kroll uncovered that Ihor had funneled most of his ill-gotten gains to the Midwestern United States, buying rundown industrial plants with the promise of delivering much-needed investment.
Perhaps unsurprisingly, however, that investment never came as Ihor Kolomoisky likely only ever bought them to get his money out of Ukraine. Speaking of Ukraine, what did the government do about it? Absolutely nothing.
It’s not that they wouldn’t do anything about it, it’s that they couldn’t. After all, to politicians in Ukraine, keeping oligarchs like Ihor on side is a necessity for re-election. They wouldn’t dare go after his money.
But where the Ukrainian government would do naught, the US government stepped in and sanctioned him in April 2021, banning him from entering the country due to his corruption and perceived threat to democracy.
Ihor Kolomoisky’s Airlines
- Windrose Airlines (acquired September 2010)
- Aerosvit Airlines (acquired in 2009 by Privat Group, defunct February 2013)
- Donbassaero (acquired in 2009 by Privat Group, defunct January 2013)
- Dniproavia (acquired in 2007 by Privat Group, ceased operations 2013, defunct 2017)
- Cimber Sterling (acquired August 2011 by Manswell Enterprises Limited*, defunct May 2012)
- City Airline (acquired 2010 by Manswell Enterprises Limited, merged into Skyways in 2012)
- Skyways (acquired in 2010 by Manswell Enterprises Limited, ceased operations May 2012)
* Manswell Enterprises Limited was a Hong Kong-based asset management company owned by Ihor Kolomoisky
In January 2013, it emerged that Ukraine International Airlines (UAI), the flag carrier of Ukraine and former state-owned company, had fallen into the ownership of Ukraine-based Capital Investment Project LLC and Cyrpus-based Ontobet Promotions Limited.
Owning 74% and 26% respectively, on the surface of it, UIA’s ownership would not be overly suspicious – just two funds attempting to make some money for their clients by owning an airline.
But here’s where it gets interesting: Capital Investment Project is owned by Ontobet, in effect making Ontobet the sole shareholder. And who owns Ontobet you might be asking? We don’t actually know.
The ownership of Ontobet itself is hidden, with the company being represented by Aron Mayberg, a former business partner of Ihor’s from PrivatBank.
But Myaberg may or may not own Ontobet, and several of Ihor’s now-defunct airlines gifted airliners and licenses to UIA after Ontobet’s takeover. PrivatBank also supplied UIA with billions of dollars in loans for expansion after the Ontobet takeover, where before they had denied UIA.
UIA, however, denies Ihor Kolomoisky is their beneficial owner.
Though not an airline per se, Ihor used his position as the owner of Dniproavia to create an own airline alliance known as the Ukrainian Aviation Group (UAG) in 2007.
Following his acquisitions of Aerosvit and Donbassaero, Ihor had a virtual monopoly on commercial aviation in Ukraine, something only strengthened by the code-sharing agreements afforded to his airlines under the UAG alliance.
Whilst never a formal member, Windrose Airlines long maintained a relationship with UAG and its members, partially due to them sharing the same owner. Ihor’s Scandinavian airlines (City Airline, Skyways and Cimber Sterling) were never a part of UAG.
Why They Failed
Looking at Ihor Kolomoisky’s airline empire, it would appear that 2012 and 2013 were not great years for him. Of the seven airlines he owned at the time, six went under during this period, all filing for bankruptcy in one way or another.
So it would seem as though something like poor management of the airlines or a local recession in Europe – perhaps a result of an aftershock of the 2008 Global Financial Crisis – was to blame.
Although these are most likely the reasons why Ihor’s airline empire came crashing down around him, it isn’t in the way you might think.
Poor Management
When each of Ihor’s airlines filed for bankruptcy, they cited their inability to pay back the huge loans that had been made to them by PrivatBank, something that’s quite interesting given their owners being one and the same.
Prior to Ihor’s acquisition, each of his airlines were in dire financial shape, owing millions of dollars to creditors with no possible way of paying it all back.
It was partly due to his immense fortune and background in finance that convinced the courts to allow Ihor to takeover these airlines, an especially enticing offer after Ihor promised to use all of PrivatBank’s resources to make them profitable again.
Pursuant to his promises, Ihor paid off his airlines’ debts… paid for by huge loans made from PrivatBank in the airlines’ name. But he gave the airlines more money than just what they needed to pay off their debts, allowing their management to purchase new aircraft and routes under the guise of expansion.
But these loans from PrivatBank were so extortionate that these airlines had little chance of paying these off even with the increase in revenue they were seeing as a result of their meagre expansion.
All Ihor had really done was kick the can of those airlines’ demise down the road by robbing Peter to pay Paul. Not exactly a sound business strategy.
Yet some claim this is more nefarious. Some claim that by his airlines defaulting on their loans, Ihor was able to reduce PrivatBank’s tax obligations, and through questionable accounting practices, allowed Ihor to abscond with the money he’d loaned to his airlines, in effect defrauding his own bank.
That being said, Kroll nor the Ukrainian government have ever formally accused Ihor of having done this.
Great Recession
You see, in the aftermath of the Great Recession, post-Soviet oligarchs like Ihor saw their wealth increase dramatically, especially those with extensive holdings in natural resource industries like Ihor had through Privat Group.
By contrast, the people in post-Soviet countries like Ukraine suffered immensely as a result of the recession. Born out of poverty and obvious wealth inequality, anti-oligarch sentiment began to rise.
Fearful that this sentiment may be tapped into by an anti-oligarch politician in the next presidential election, who might campaign on the seizure and redistribution of oligarchs’ wealth, many began preparing for this perceived eventuality.
Many began hiding their assets through shell corporations, gaining citizenship abroad (for example, Ihor is now a citizen of Cyprus and Israel, as well as his native Ukraine) and moving money abroad to places like the US and Switzerland.
And this is what Ihor Kolomoisky most likely did.
Under the guise of going bankrupt due to the loans from PrivatBank, Ihor dissolved the airlines whose ownership could be directly traced to him or Privat Group, forming new airlines to replace them.
He then transferred their assets, as he did with both Windrose (which itself has unclear ownership but is assumed to be indirectly Ihor Kolomoisky) and UIA, which were owned by shell companies in places where an open-source registry of companies doesn’t exist, Cyprus for example.
This way, if that anti-oligarch politician does ever win election and makes good on their campaign promise of seizing oligarchs’ assets in Ukraine, Ihor’s airline empire is more secure than it would be if he owned them openly.
What do you think about Ihor Kolomoisky’s airline empire? Tell me in the comments!