Aviation Week & Space Technology - January 15, 2015

58 AVIATION WEEK & SPACE TECHNOLOGY/JANUARY 15-FEBRUARY 1, 2015 AviationWeek.com/awst

Cathy Buyck Almaty, Kazakhstan

The Lone Ranger

A

ir Astana has carved out a

unique niche as Central Asia’s

leading airline, but the decel-

eration of Kazakhstan’s oil-fueled

economic boom, the devaluation of

the country’s currency and the lack of

modern airport infrastructure might

impede its future growth.

The airline had planned a 14% ca-

pacity hike measured in available seat

kilometers (ASK) for 2014, in line with

prior years, but the devaluation of the

Kazakhstani tenge prompted the car-

rier to review its plans. The tenge,

which is pegged to an amalgam of the

U.S. dollar, the euro and the Russian

ruble, was devalued by 19% last Febru-

ary. Up to 65% of Air Astana’s revenues

are in tenge; 65% of its expenses are in

U.S. dollars.

“About $48 million was wiped off

our balance sheet in less than an

hour,” sighs Air Astana President/

CEO Peter Foster. “We were worried

that the plunge in value of the tenge

would result in a drop in demand, so

we took immediate action.” By the end

of February, management had put a

cost-savings plan in place and had

started adjusting its network. Several

routes were suspended, frequencies

were reduced, some services were

downgraded to smaller aircraft and

plans to increase capacity on routes

to Russia were put on hold. Unit cost

was reduced by 8% over 2013’s.

The capacity decrease resulted

in a reduction of fl eet utilization. To

compensate, Air Astana initiated a

seasonal charter program to Rhodes

and Heraklion in Greece as well as to

Barcelona. “I’m not sure whether we

will do it again, but it of ered revenue

opportunities for unused metal,” says

Richard Ledger, vice president for

worldwide sales.

Air Astana was able to start opera-

tions to additional European destina-

tions after the European Union (EU)

eased restrictions to expand flights

into the EU in April 2014. The airline

is still banned from operating Embraer

E-190 jets to airports in the 28-nation

bloc, even though its E-jets are de-

ployed only on its regional network.

Air Astana operates a Western-built

fl eet with an average age of 5.8 years

and has repeatedly passed the Inter-

national Air Transport Association’s

International Safety Audit.

The fleet consists of 30 aircraft:

three factory-new Boeing 767-300ERs,

fi ve Boeing 757s, 13 Airbus A320-family

aircraft and nine Embraer 190s. In De-

cember, the carrier took delivery of its

fi rst two new 767-300ERs, which were

ordered together with three Boeing

787-8s in 2012. A third new 767-300ER

arrived last July. As part of its revised

business plan, Air Astana has post-

poned introducing its first two 787s

until 2019.

It will decide on a new narrowbody

order in 2015. The carrier will pur-

chase 11 A321neos or Boeing 737 MAX-

9s, in part to replace its fi ve 757-200s

and older A320s and also to support

growth. Like other 757 operators, Air

Astana faces some hard choices in

replacing its 757 fl eet. Boeing has no

concrete plan for an upgraded 757, and

the A321neo and 737 MAX-9 do not of-

fer the same unique payload/range

capabilities as the 757-200. However,

Airbus’s proposed A321neoLR with a

maximum takeof weight (MTOW) of

97 metric tons and extra fuel tanks

“is right up our alley,” Foster says. “If

we can get the aircraft, we can reach

all of Europe from our hub in Astana,

most of Southeast Asia from our Al-

maty hub and the whole of China from

both Astana and Almaty,” he says. Air-

bus notes that if the type is launched,

it would not enter service until 2019,

whereas leases for two of Air Astana’s

757s end in 2017. Leases for the other

three expire in 2019.

A potential solution would be to ex-

tend the leases of all 757s until 2019,

Foster indicates. The average age of

Air Astana’s 757 fl eet is 17.5 years; the

interiors recently have been refur-

bished, including 16 angle-flat seats

in the business-class cabin. Next year,

the carrier will take delivery of its 10th

E-190 jet and a new A320 that is re-

placing an older A320.

Air Astana operates its whole fl eet

in a two-class confi guration, and Fos-

ter vows the airline will not evolve to-

ward a hybrid model and “never ever”

implement a zero-service model, de-

spite the emergence on the Kazakh

market of low-cost carriers (LCC) such

as Air Arabia, which connects Sharjah

(UAE) International Airport with Ka-

zhakstan’s Almaty International, and

Flydubai, which serves Almaty and

Shymkent International in the south-

ern part of Kazhakstan from Dubai.

Full-fare business-class traf c is “very

substantial” and load factor is 75% in

business class compared to an average

overall load factor of 64%, Foster says.

“We have never been a load-factor-

driven airline.”

The fl ag carrier, which launched in

2002 as a joint venture between Ka-

zakhstan’s sovereign wealth fund Sam-

ruk-Kazyna (51%) and BAE Systems

AIR TRANSPORT

Air Astana intends to continue implementing

its extended home-market strategy, though

growth will slow

Air Astana’s deploys its Embraer

E-190s on regional routes in a

two-class confi guration; it has nine

business-class seats.

EMBRAER