Aircraft manufacturing remains outside Defence City: industry warns of risks of losing potential
Kyiv • UNN
Since January 2025, state benefits for aircraft manufacturing enterprises have ceased to operate in Ukraine. The aviation industry risks remaining outside the Defence City initiative, which could lead to a loss of potential.
Since January 2025, state benefits for aircraft manufacturing enterprises in Ukraine have ceased to be in effect, and no targeted support tools for the industry remain. Currently, a package of draft laws, Defence City, aimed at supporting the defense industry, is being prepared for consideration in parliament. However, as warned by experts in the field, the Ukrainian aviation industry, under the current version of the documents, risks being left out of this initiative, writes UNN.
Details
Since 2010, a law has been in effect in Ukraine that provided tax and customs benefits for aircraft manufacturing enterprises, including, in particular, exemption from income tax, VAT, and land tax. In addition, investment incentives were in place: the possibility of accelerated depreciation and tax credit for research and development. To strengthen the industry's foreign economic potential, export support in the form of state guarantees and insurance of export contracts was also provided. These preferences allowed companies not only to develop, modernize production, but also to maintain competitiveness, jobs, and export potential even during the war. However, as of January 1, 2025, benefits for aircraft manufacturing are no longer applicable.
At the same time, the aircraft manufacturing industry continues to play an important role in supporting Ukraine's defense capabilities — these are the enterprises that provide repair, modernization, and manufacturing of components for Soviet aircraft and helicopters that operate daily at the front and perform logistics missions around the world.
Viktor Popov, President of the Aerospace Association of Ukraine, in an exclusive comment to UNN, emphasized that the aircraft manufacturing industry needs support, especially in the current difficult conditions of a full-scale war.
Without support, technical re-equipment can be written off. It will be impossible to carry out technical re-equipment, and this entails a lack of working capital and funds to increase competitiveness. There is no compensation - there is nothing to trade, nothing to increase wages with. And this means that the industry will not slowly, but very quickly, decline in its potential and will be destroyed
In his opinion, the idea of Defence City is generally correct, especially in the context of stimulating small defense businesses. However, it has a critical gap - systemic aircraft manufacturing enterprises risk being left out of this initiative.
In my opinion, this initiative is similar to the well-known saying about throwing the baby out with the bathwater. This issue is very important. After all, those enterprises that have been creating unique samples of equipment for years are now actually deprived of state support
He reminded that it was thanks to long-term state incentives that a number of projects were implemented - from AN-140 (a regional cargo-passenger airliner designed and built in Ukraine after independence - ed.) to the modernized AN-178 (a Ukrainian short-haul transport aircraft with turbofan engines, the development of which began with the introduction of benefits for the aviation industry - ed.), new engines and systems were created, exports were expanded, and the industry was preserved despite all challenges.
According to the president of the Aerospace Association, there are currently two possible scenarios for supporting the aircraft manufacturing industry:
- Amend the Defence City draft laws and include aircraft manufacturing enterprises there. The Association has already prepared and submitted its proposals to the Verkhovna Rada Committee on Finance, Tax and Customs Policy.
- Adopt a separate law on state support for the industry. According to Popov, the relevant draft has already been registered, but it has not even passed the first reading.
I am confident that our comments on Defence City should be taken into account. And a very important issue is to include aircraft manufacturing enterprises. To include these systemic large enterprises here, which also fulfill orders for the Armed Forces of Ukraine. If we only take wartime, then "Motor Sich", and "Antonov", and "Ivchenko-Progress" (Zaporizhzhia Machine-Building Design Bureau "Progress" named after Academician O. H. Ivchenko - SE "Ivchenko-Progress" - ed.), and several others, they successfully purchased equipment and today fulfill orders for the Armed Forces of Ukraine and supply new samples of competitive equipment for export. Thus stabilizing the financial situation not only of their enterprises, but also of the state as a whole
The President of the Aerospace Association also warned against the misconception that a one-time allocation of funds can solve the problem. In his opinion, a systemic state policy is needed, which includes, in particular, tax benefits.
Recall
In the current version of the Defence City draft laws, the aircraft manufacturing industry may find itself outside the scope of new benefits and preferences. As explained by Ruslan Melnychenko, head of the legal committee of the Aerospace Association of Ukraine, none of the specialized enterprises — including "Antonov" or "Motor Sich" — meet the proposed inclusion criteria, as they are not purely defense enterprises, but are aircraft manufacturing entities that are engaged not only in scientific, scientific and technical developments, engineering, manufacturing of parts, but also in civil aviation maintenance. The Association proposes to include enterprises from the already existing government list of aircraft manufacturing entities that undergo strict verification in the list of Defence City residents.