In its analytical report “What is happening to Ukrzaliznytsia?”, the Ukrainian Institute for the Future examines how the business and financial model that had sustained the country’s main infrastructure company for thirty years collapsed, and sets out an anti-crisis exit plan. The authors are Anatoliy Amelin, Executive Director and Co-Founder of the Ukrainian Institute for the Future and independent member of the Supervisory Board of JSC Ukrzaliznytsia, and Volodymyr Shulmeister, Director of the “Infrastructure of the Future” programme at the Ukrainian Institute for the Future and First Deputy Minister of Infrastructure in 2014–2015.
The model that held for thirty years has stopped working
For thirty years Ukrzaliznytsia operated as a cross-subsidisation mechanism: profitable freight services paid for cheap passenger tickets, whose fares the state deliberately kept low. When Russia launched its full-scale war against Ukraine, the company lost half of its freight, and with it the profit that financed passenger services, while its social-service obligations remained unchanged.
The scale of the fall is visible in the figures. Freight traffic fell from 314 to 161 million tonnes over 2021–2025, and the most profitable segment, transit, has all but disappeared.
Losses in the passenger segment grew from UAH 13.7 billion in 2021 to more than UAH 22 billion in 2025, with fares frozen since 2021 and covering less than a third of costs. The profit of the freight segment, which had financed all of this, contracted from UAH 20.4 billion in 2024 to UAH 3.2 billion in 2025, and in 2026 the freight segment itself is expected to become loss-making. This is compounded by a debt burden of USD 1.055 billion in eurobonds, which entered technical default in January 2026.
The tariff freeze applies separate pressure. The freight tariff was last indexed in July 2022, while producer prices have risen two and a half times since then and electricity for the company has become 2.4 times more expensive. According to Ukrzaliznytsia’s own estimate, the tariff freeze alone resulted in UAH 99.5 billion in forgone revenue between 2023 and the first quarter of 2026.
What happens if the railway stops
Ukrzaliznytsia is more than a transport company. It is the circulatory system of the economy, carrying 62–63% of the country’s freight turnover.
It is the largest employer, with roughly 170,000 staff. Ore, metals and grain travel to export markets by rail, and to produce and ship a single tonne of rolled metal the railway moves around four tonnes of cargo: raw material for metallurgy and the finished metal. With the skies closed, it also remains the main transport link with the EU: in 2025 long-distance services carried 28 million passengers.
A simple thought experiment shows what is at stake. Imagine Ukrzaliznytsia came to a halt:
- within the first day, blast furnaces would shut down, since ore and coke are not carried by road;
- within a week, grain exports would grind to a halt: replacing them with tens of thousands of lorries is physically impossible;
- within a month, thermal power plants would go offline for want of coal, military logistics would break down, and front-line cities would lose their only reliable link with the rest of the country.
The company and industry stand or fall together.
The Ukrainian Institute for the Future had warned about this as early as 2015–2019
The Institute cautioned against this course of events well in advance. In February 2019 its experts publicly forecast that, if the existing model were kept, Ukrzaliznytsia would cease to exist by 2025. And in 2025 the freight segment’s profit (UAH 3.2 billion) stopped covering the passenger segment’s loss (UAH 22 billion): the model failed precisely within the timeframe those calculations had predicted.
A way out: twelve months without a tariff increase
Without intervention, the company faces a loss of around UAH 33 billion over the next year and could run out of liquidity as early as spring 2027. The anti-crisis plan, built without any tariff increase at all, reduces that loss by a factor of 6.5, to UAH 5.1 billion, with positive EBITDA of UAH 14.3 billion. It consists of two parts.
Two thirds of the effect comes from decisions the company can take on its own: around UAH 15.4 billion in internal cuts and additional commercial revenue, namely completing the reduction of administrative staff and retraining specialists for track maintenance, mothballing up to 1,200 km of low-traffic lines, selling 370 thousand tonnes of scrap metal, and bringing up to 250 MW of the company’s own UZ Enerho generation capacity online. From the government, one decision is needed: raising funding for passenger services under the European Public Service Obligation (PSO) model from UAH 16 billion to UAH 24 billion. The state compensates the carrier for socially mandated services that it commissions and for which it sets the fares, and the sum merely covers the consequences of the tariff freeze.
Every step of the plan passes through a defence filter: the proposed cuts are subject to approval by the General Staff of the Armed Forces of Ukraine, while security-related capital expenditure (CAPEX), restoration after strikes and the continuity of military logistics remain outside the cuts. Reaching break-even without tariff reform, however, is impossible in principle: even the best combination in the model, PSO funding of UAH 26 billion together with 80% delivery of the optimisation programme, still leaves a loss of about UAH 1.4 billion. That remaining loss is the documented cost of the tariff freeze introduced in 2022.
The turnaround plan buys the company twelve months, but only tariff reform can save the underlying model.
European railways run losses in the passenger segment in exactly the same way. The difference is that there the state compensates the gap under PSO contracts (EU Regulation 1370/2007), whereas in Ukraine this loss still remains a hole in the carrier’s balance sheet.
It all comes down to time
Everything reduces to one question: whether the necessary decisions will be taken before the cash gap catches up with the company in spring 2027. Behind these figures stand the livelihoods of 170,000 employees and millions of passengers, for whom the train is often the only way to reach their families, a doctor, or home. The choice will be between managed change now and an unmanaged collapse that will cost those same people far more.
The full text of the report, with all calculations, the scenario model and the roadmap, is available on the website of the Ukrainian Institute for the Future.
This publication was produced by the NGO “Ukrainian Institute for the Future” with the support of the Askold and Dir Fund, administered by ISAR Ednannia within the project “Strong Civil Society of Ukraine as a Driver of Reform and Democracy”, funded by Norway and Sweden. The content of this publication is the responsibility of the NGO “Ukrainian Institute for the Future” and does not reflect the views of the governments of Norway or Sweden, or of ISAR Ednannia.
