In Focus
Air Astana succeeds through measured growth
Now approaching its tenth anniversary, Kazakhstan’s flag carrier Air Astana has big plans for the future, writes Kok Chwee Sim.
The geography of Kazakhstan – the largest land-locked country in the world – is as unique as it is challenging. The shores of the Indian and Arctic Oceans are equally far from its borders and while it depended on the Silk Route in ancient times for trade, it is today highly dependent on aviation for the movement of all commerce, trade, capital and people.
Today, the responsibility for maintaining air connectivity with the world rests on the shoulders of Air Astana.
When it was established in 2001, Air Astana was tasked with operating domestic services to an international standard, as the now-defunct Air Kazakhstan was then the country’s designated flag carrier. As it approaches the tenth anniversary of the start of its operations in February 2012, Air Astana is a profitable, expanding global carrier with a clear vision for its future growth strategy.
Air Astana is the only Kazakhstan-based carrier to be exempted from the European Union’s blanket ban on airlines from that country – a strong endorsement of the airline’s focus on safety and security. The airline first passed IATA’s Operational Safety Audit in 2007 and continues to be strictly compliant with the latest audit in September 2011. It also maintains its fleet to the uncompromising standards of the EU’s EASA 145 regulations.
[Subhead:] Expanding fleet, network
Air Astana operates a fleet of aircraft that is tailored specifically to the routes it serves. As of October, this included two Boeing 767-300ER jetliners, four 757-200s, two Airbus A321s, seven A320s, one A319, two Embraer 190s and six Fokker 50 turboprops. Another E-190 and a 757 will join the fleet before the end of the year, with three more E-190s scheduled to arrive in 2012 and a further six A320s over the next two calendar years.
The airline’s President Peter Foster confirms that negotiations are ongoing with Boeing to firm up its Letter of Intent, signed in December 2007, for three of the company’s latest 787 ‘Dreamliners’, with purchase rights for three more. Pending the delivery of these aircraft, Air Astana is considering a firm order for six 767-300ERs, equipped with blended winglets, with an option for four more. If ordered by 2012, these could be delivered in late-2013.
The company’s two ex-KLM 767s are currently being fitted with such drag-reducing winglets and having their cabins updated.
“The 757s will remain in the fleet until 2015 or 2016,” Foster says. “These have fantastic engines, long legs and are ideally suited for long, thin routes to Europe and Asia. Similarly irreplaceable are the [turboprop] Fokker 50s.”
The company’s newer E-190 regional jets are, for now, unable to operate to Uralsk airport – a region with huge oil and gas fields – because of runway length restrictions.
“We will maintain F50 operation into Uralsk until end-2012 and hopefully by then, its runway will be extended to permit jet operations,” Foster says. He adds that Air Astana is talking to Airbus about the re-engined A320neo, but is not considering the A321neo as a 757 replacement.
Air Astana now serves 23 cities in Kazakhstan, with a trio of hubs that include Astana, Almaty and Atyrau. Its international network covers 31 destinations in Europe, the Middle East and Asia. While Asian operations currently account for 40 percent of revenue, Foster says this market is growing fast.
In December 2011, flights from Almaty to Bangkok, Delhi and Kuala Lumpur will each be increased by one weekly frequency to five, four and three times weekly respectively. A new, twice-weekly service to Hong Kong will be launched in February 2012 and a new winter-season only service to Ho Chi Minh City will also be added in October 2012.
[Subhead:] ‘Increasingly important’
According to Foster: “Immediate frequency increases on existing services and the launch of new services to Hong Kong and Ho Chi Minh City in 2012 reflect the fact that Asia is playing an increasingly important part in the strategic long-term development of Air Astana.” Eventually, the carrier plans to operate twice daily to Beijing and Urumqi and a daily service into Bangkok.
In the Middle East, Air Astana serves Abu Dhabi and is looking to add services, possibly to Amman. Foster believes traffic to Israel is better served through Amman than with a direct service.
Unlike many airlines that are increasingly out-sourcing engineering jobs, Air Astana is planning to acquire the expertise to maintain its own fleet. While it provides line maintenance for various foreign carriers, it does not actively pursue third-party work. Even so, it has carried out maintenance for Cargolux, Berkut, Delta Air Lines, SCAT and Prime Aviation.
Air Astana’s engineering division is currently being approached by eight Kazakh airlines for long-term engineering contracts.
Engineering Group Senior Vice-President John Wainwright confirms that negotiations are on-going to lease a hangar in Almaty and acquire land in Astana for a new hangar, with a view to being able to perform C-checks on the airline’s A321/A320/A319 and E-190 fleet. Docking systems and spares are being acquired for this development.
The engineering division is currently only able to perform A-checks for the carrier’s 767s and the existing hangar at Almaty cannot fully accommodate the widebody aircraft. The new, two-bay hangar will have one bay dedicated to performing C-checks while the other bay is kept available for line maintenance.
Air Astana is providing an 18-month engineering training programme in conjunction with a local training academy. This involves on-the-job training and eventually produces high-calibre engineers. The carrier also sends engineers to Bristol, UK, for further training.
[Subhead:] Facing challenges
Due to the monopoly that exists in other areas of airport management and operations, Air Astana faces challenges in areas such as ground handling and terminal facilities at its hub.
The terminal building at Almaty is severely limited in its scale and facilities. Its four aerobridges are far from adequate in coping with Air Astana’s expanding operations, especially in winter, and the airline does not have its own lounge facilities for passengers travelling in premium classes.
Wainwright says: “We suffer from this inadequacy in facilities, as passengers do not make a distinction between the airline and airport.” Baggage handling is another area that sorely needs improvement. “In Astana it is better, but here in Almaty, we suffer. It can be frustrating sometimes, but we are hopeful that things can improve,” Wainwright adds.
When the Soviet Union broke up 20 years ago, Kazakhstan’s economy was the second weakest among the republics. Today, it has grown to become the second strongest, continuing to attract more airlines – including Middle Eastern operators, such as Qatar Airways and Etihad, and Chinese carriers such as Hainan Airlines and China Southern Airlines.
“We expect more competition, but it is not something we worry about,” Foster says. Through the development of a hub-and-spoke network that feeds its growing international services, Foster sees Air Astana growing in stature and developing into the Central Asian equivalent of a Cathay Pacific Airways or Singapore Airlines.
Foster notes that Air Astana has developed a good working relationship with Germany’s Lufthansa and South Korea’s Asiana Airlines, both of which are members of the Star Alliance global airline grouping. “[Joining] Star Alliance seems a possibility … but we are in such a strong position in this region that we may not need an alliance – and membership in any alliance may shut out co-operation with some other airlines,” Foster says.
[Subhead:] Passenger profile
Passengers flying on Air Astana today are mostly business travellers and Kazakh citizens travelling on vacation.
Of late, tourism is increasingly perceived as an important growth industry. Kazakhstan has a diverse landscape, ranging from extensive grasslands to spectacular sand dunes in the deserts and mountains rising above 4000m. Its historic Islamic centres boast beautiful architecture and inbound tourism could indeed eventually provide the second wind to power the further growth of this already successful airline.
This augurs well for Air Astana’s plan for an Initial Public Offering (IPO) in 2012, as part of the Kazakh government’s initiative for locals to acquire stakes in national companies. Air Astana’s strong reputation and good corporate governance has earned it a place in the first wave of the ‘People’s IPO’ and the airline also eventually hopes to gain listings in London or Hong Kong.
In spite of the turbulence affecting the global economy in recent years, Air Astana has remained profitable – even at a time when the largest airlines bled red ink. The carrier’s measured growth has produced substantial results and the company, which has hitherto remained under the radar of the world’s most aggressively-expanding carriers, is coming into its own as it approaches its tenth birthday.
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[Table:]
[Headline:] Air Astana Profits / Passengers Carried
Year Net Income (in US$) Passengers Carried
2006 32 mln 1.47 mln
2007 35.3 mln 2.13 mln
2008 17 mln 2.30 mln
2009 48 mln 2.2 mln
2010 77 mln 2.6 mln
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