Is Defence City launching without aviation? Why this jeopardizes Ukraine's strategic advantage

Ukraine, in today's conditions, has an ambitious and critically important goal for the state's survival – to deploy full-scale production in the defense-industrial complex, reduce dependence on external assistance, and give new life to Ukrainian enterprises. The government initiative Defence City should become a special legal regime for supporting defense industry enterprises. But there is a significant risk: one of the most powerful and strategically important industries – aviation – may be excluded from this arch-important transformation. UNN found out why ignoring it in Defence City could have consequences that would be difficult to compensate for with other support mechanisms.

6 billion dollars deficit and 20 billion potential losses

As reported by People's Deputy from the "Servant of the People" party, Chairman of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Danylo Hetmantsev, in 2025 Ukraine will lack 6 billion dollars to fully meet the needs of the army. The gap between the real and potential production capacities of the Ukrainian defense industry is even larger, at least 20 billion dollars.

Hetmantsev outlined a number of sources that can cover these gaps: de-shadowing, increasing cost efficiency, canceling ineffective expenditures, partial opening of arms exports, expanding lending to the defense industry, developing startups through the Brave1 platform, and issuing domestic government bonds.

This involves attracting the maximum range of internal resources capable of activating the defense economy. For this purpose, the Defence City initiative is also being created in Ukraine – as an institutional response to the existing challenges in the defense industry: it should provide a special legal regime that will allow reducing the tax burden, providing preferential lending, accelerating procurement and certification procedures, stimulating innovation and export. But the key question is – who exactly will be involved in this process? And who do we risk losing if certain strategic industries remain outside this framework?

Aviation industry: a flagship that is not seen?

One such strategically important industry that still remains outside the focus of the Defence City initiative is aviation. Ignoring its potential could cost Ukraine too much – both in terms of security and economy.

Ukrainian aviation is not just An-124, An-178 or Mi-8. It is also a whole complex of enterprises that, in wartime conditions, continue to perform critically important tasks: providing evacuation, logistics, army support, rescue missions, maintaining strategic directions and supporting Ukraine's image as an aviation state in international markets.

Aviation industry enterprises perform key functions for the state's defense capability. In particular, the repair and maintenance of helicopters and aircraft that operate daily in combat, evacuation, and logistical operations. Companies restore components and assemblies of aircraft – without them, this equipment simply will not take to the sky.

In parallel, import substitution programs for Soviet and Russian-made components are being developed – in particular, for control systems, power supply, navigation modules, and data transmission units. All this is to ensure that Ukrainian aviation can effectively perform tasks of covering ground troops, detecting and destroying enemy UAVs, and meeting the needs of the front line. Without this daily technical work on the ground, there will be no stable air superiority.

In addition, over the years of the war, Ukrainian airlines have participated in dozens of humanitarian and defense missions under the auspices of the UN in extremely difficult conditions, ensuring the country's high reputation at the global level. This is a unique case when private operators virtually single-handedly "carry" Ukraine's international image in the sky.

And despite all these factors and strategic importance for defense, aviation enterprises are currently at risk of not being included in the list of potential residents of Defence City. If the situation is not corrected before the second reading of the bills, the country may lose not just an industry, but one of the key resources in the war for survival – its own aviation capability.

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What Ukraine loses without considering the prospects of aviation in Defence City and the development of the defense industry

If the aviation sector is not integrated into the framework of Defence City, the consequences may be long-term and in some cases irreversible:

• Stoppage of production capacities: The aviation industry is one of the most complex and resource-intensive in the structure of the defense industry. It requires constant loading, stable financing, and highly qualified personnel. If an enterprise stops working, the costs of maintaining equipment and infrastructure remain, and restoring the production cycle after a long downtime is extremely difficult or even impossible. Without state support, orders, and integration into the defense strategy, the aviation industry risks stopping completely.
• Outflow of specialists and companies. The lack of predictable working conditions and systemic support deprives Ukrainian aviation companies of the ability to effectively respond to security challenges – to restore production after shelling, relocate capacities to safe regions, and create proper conditions for specialists. This leads to the loss of critically important human capital, without which the industry will not be able to function.
• Undermining international image. Aviation is an important part of Ukraine's reputational presence in the world. Aircraft under the Ukrainian flag operate in dozens of countries, performing humanitarian and technical missions. The loss of this presence will mean the loss of an important symbol of trust and professionalism.
• Decrease in tax revenues. During the period of tax preferences, the Ukrainian aviation industry demonstrated an increase in budget revenues. The disappearance or curtailment of the sector will automatically mean a reduction in the tax base, which contradicts the goals of developing the defense industry and the national economy.

And this is far from a complete list, because if a clear place for it in the system of the defense economy and the special legal regime of Defence City is not defined now, the consequences of ignoring the aviation industry will only multiply.

Working aviation – export, taxes, security

Preserve, scale, export – the same principle that underlies Defence City is consonant with the development of the aviation industry. Just one example: if exports are opened, enterprises that produce aviation components or provide maintenance can increase profits many times over. This means – taxes, jobs, new technologies, and most importantly – synergy with military needs.

The Ukrainian aviation industry demonstrates concrete results that form the basis of the modern defense-industrial complex. In particular, Motor Sich has created five new types of aircraft engines in recent years, which are already in demand on the international market. The state enterprise Antonov has carried out a deep modernization of the strategic transport aircraft An-124-100. In parallel, private companies are actively working on modernizing military equipment, developing unmanned systems, digital control platforms, and evacuation solutions. This is not about highly specialized initiatives, but about critically important components of modern defense infrastructure.

Second reading – last chance

The second reading of the Defence City bills is not long to wait. And the ability of Ukraine to preserve and multiply its own potential depends not only on the fate of individual enterprises, but also on which problematic aspects and refinements will be taken into account.

All possible measures, which the Head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Danylo Hetmantsev talks about, will be effective only when they take into account the real structure of the Ukrainian economy. The aviation industry is not the past. It is the future of defense, logistics, rescue operations, international partnership and budget. And its place in the system of the defense economy should be not only symbolic, but legally fixed.

Recall

Before the second reading of the Defence City bills, MPs have already submitted a number of amendments that should eliminate the risk of excluding the aviation industry from the circle of potential residents. In particular, it is proposed to officially include aircraft manufacturing and aviation equipment maintenance enterprises, defined by the government as critically important. Softening of excessively strict selection criteria has also been initiated: lowering the defense income threshold from 90% to 40–50%, taking into account the annual, not just quarterly, indicator, and canceling restrictions that exclude companies due to debt or delays in contracts. Instead, it is proposed to provide a three-year period for settling obligations. Separate amendments provide for the expansion of tax and customs preferences for the industry, the introduction of state guarantees for exports, and the fixation that benefits can be used exclusively for development – from production modernization to investments in new technologies and personnel.