Aviation Week & Space Technology - January 15, 2015

AviationWeek.com/awst AVIATION WEEK & SPACE TECHNOLOGY/JANUARY 15-FEBRUARY 1, 2015 59

(49%), has posted annual profi ts every
year since 2004; it expects the same
for 2014. “Our operating profi t will be
by far the best we ever returned. How-
ever, our net profi t will be down. With-
out the devaluation, reaching a $100
million net profi t for 2014 would have
been possible,” asserts Foster, who was
appointed CEO in 2005.
Although Foster notes that the risk
of further devaluation looms, he is
adamant that the airline will not ask
for state aid in case the tenge devalues
further. “We would rather die before
asking to get subsidized,” he avers.
Revenues for 2014 are expected to
be down 2% compared with 2013, while
passenger numbers should be up 8%
to 4 million on a 2% increase in ASKs.
Air Astana has posted a strong 13%
compound annual growth rate in re-
cent years, and passenger count rose
to 3.7 million in 2013 from 1.5 million
in 2006. Growth rate measured in seat
capacity, passengers and revenue is
slated to slow to 7% for the next fi ve
years. “We have expanded quite rap-
idly, so growth will slow a bit,” says
Foster, noting that growth will come
mainly from extra frequencies on
existing markets. The airline oper-
ates, on average, 770 legs a weeks on
a network spanning 59 routes and 38
destinations in 18 countries in Asia,
Central Asia/Commonwealth of Inde-
pendent States/Caucasus, Europe and
the Middle East in the current winter
schedule.
About 55% of its operations are out
of its historic base at Almaty Airport
and 45% are from Astana, compared to
a 75/25% ratio 10 years ago. A poten-
tial handicap for growing Almaty as a
hub is the lack of modern infrastruc-
ture; its “transfer facilities are wholly
inadequate,” Foster contends. Airport

expansion plans have been delayed for

years and there is no solution in sight.

In contrast, Astana International

is planning to expand its passenger

capacity and build an additional three

air bridges as well as a fully automated

baggage handling system for transfer

traf c.

To increase load factor and become

less dependent on local demand—

which could contract as the country’s

gross-domestic-product growth rate

slows further—Air Astana has been

increasing network traf c. Connect-

ing and sixth-freedom-rights traffic

now accounts for 13% of the airline’s

total business, says Ledger. Most of

the transfer traf c is on regional-to-re-

gional and regional-to-intercontinental

routes. “What we do not want to do is

to get in the big mega-transfer busi-

ness. Every single airline does that,

and yields are very low,” Foster notes.

The airline will continue to foster an

“extended home-market strategy” that

stretches to a 200-km (125-mi.) radius

around Kazakhstan, to include Uzbeki-

stan, Kyrgyzstan and Turkmenistan,

Tajikistan and parts of Russia and

China.

“A home market of 17 million people

becomes a market of 60 million,” ex-

plains Ledger. Its largest foreign mar-

ket is Russia, where it serves seven

destinations. Air Astana is looking to

increase capacity on these seven cit-

ies but might also add new routes to

cities with populations of 2-5 million.

Kazakhstan was the last of the Soviet

republics to declare independence fol-

lowing the dissolution of the Soviet

Union in 1991, but relations with Rus-

sia are good, says Foster.

Kazakhstan is on an economic liber-

alization trajectory, so companies that

are entirely or partially owned by the

state, such as Air Astana, must deliver

a profi t. “We have a clear mandate to

be profi table, and we regard this as an

unshakable mantra,” Foster says.

The carrier still hopes to launch

an initial public of ering (IPO), Foster

says. Initially, an IPO was pondered in

2012, but plans were deferred due to

market conditions and internal issues

at BAE Systems. Although BAE Sys-

tems no longer has a strategic interest

in the country or the aerospace indus-

try, the U.K. company is an ef ective

board member, Foster notes. He points

out that Air Astana is a “cash cow” for

BAE Systems.

“They paid £5 million [$7.8 million

at the current exchange rate] for their

stake, and we have been paying [them]

dividends since 2006, about $50 mil-

lion. I would say Air Astana is not a

bad investment,” Foster adds.

Tokyo is among the new destinations

being considered for 2016 via the car-

rier’s 767-300ERs. Talks are ongoing

with Japan’s two leading carriers, All

Nippon Airways and Japan Airlines. If

all proceeds well, service with Boeing

757-200s will roll out three times week-

ly to Paris’s Charles de Gaulle Airport

starting on March 29, although there is

an active dispute about the allocation

of terminals.

Despite its ambitions, Air Astana

views joining an alliance as too restric-

tive. The airline is more interested in

forming route-specifi c joint ventures

and is in talks with Etihad Airways on

a full cost- and revenue-sharing ar-

rangement covering the Astana-Abu

Dhabi route, Foster confi rms.

Air Astana is not a candidate to be-

come a partner in Etihad’s equity alli-

ance, however, because “the agendas

are extremely dif erent, and we do not

need their money,” Foster says. c

Kazakhstan’s fl ag carrier deploys a

Western-built fl eet across its entire

network. The average age of its

Boeing 767-300ERs is one year.

MICHAEL ING/AIRLINERSGALLERY.COM