Air Astana: How Central Asia’s largest airline is looking abroad for growth

Kazakhstan barely figured on the global aviation map back in 2006 when Sir Richard Evans, then Chairman of British aerospace and defense group BAE Systems, offered Peter Foster the top job at the newly established Air Astana. 

Foster, who had previously held senior executive roles at Cathay Pacific, Philippine Airlines and Royal Brunei Airlines, accepted the challenge to take the new fledgling national carrier and turn it into the largest airline in Central Asia.  

BAE’s involvement in the Air Astana project, in which it took a 49% equity stake, was almost a byproduct of conversations with Kazakh authorities about selling them a military radar system.  

And while the radar deal never materialized, Air Astana proved wildly successful. The airline went on to become the undisputed regional leader, holding simultaneous share listings on the London Stock Exchange and the Kazakhstan Stock Exchange in February 2024. 

Under Foster’s leadership, Air Astana has also been instrumental in opening up this huge country, roughly the size of Western Europe, for tourism and business. 

Far from declaring that the mission has been accomplished, though, Foster still sees huge potential for further growth in the Kazakh air travel market. The country’s emerging middle class is increasing its propensity to fly and tourists from around the world are starting to discover Kazakhstan as a unique and relatively untouched travel destination. 

AeroTime traveled to Almaty, Kazakhstan’s largest city and Air Astana’s main hub, for an extended conversation with Foster and to learn more about Air Astana’s current and future projects. 

“We have had a pretty solid first six months of the year [2024 – ed. note], with, give or take, a 12% increase in revenue and performance and capacity and the booking curve for the third quarter was very positive,” he explained after AeroTime mentioned how our Air Astana flight from Europe was full to capacity. 

However, Foster was careful not to provide specific figures, since Air Astana is currently a listed company with all that entails in terms of information disclosure.   

Air Astana’s successful IPO is an achievement that Foster is understandably proud of and one which has also been transformational for the company’s capital structure.  

“We had just two shareholders for 22 years [51% of the airline was owned by the sovereign wealth fund of Kazakhstan, the other 49%, by BAE – ed. note], now we have some 60,000 shareholders. That process went well,” said Foster while noting that, while both foundational partners remain major shareholders in more or less similar proportions, their ownership share has been diluted to the point that Air Astana can no longer be considered a government-owned company. “This changes everything,” he added. 

The IPO could be seen as a sort of recognition of a long-running growth trajectory. Even the pandemic only managed to make a small dent in this trend.  

“We came out of COVID much earlier than everybody else because the Kazakh government allowed people to start flying reasonably early, so we came out of the pandemic much faster,” he explained. “We had good growth, but it was spread over a wider period of time, therefore it was less precipitous than for other carriers. We didn’t have a boom and bust and continued on a fairly even trajectory, which is how we like it.” 

Getting Kazakstan to fly 

“This region is a massive growth market. We are only really seeing the beginning of its potential,” he continued, highlighting that the Kazakh market still has quite some scope to grow if it is to catch up with other markets with similar demographic and economic parameters.  

“In 2019, the average Kazakh traveled by air only 0.2 times per year and that’s for a country that’s the ninth biggest in the world by area where it takes 3.5 hours to fly from one end of the country to the other,” Foster explained. “Imagine a country the size of Australia, with vast distances. So, clearly people have to travel by air, and yet, the propensity to travel is very low.” 

“There is a comprehensive rail network, but it’s an old Soviet one, and it’s slow,” he continued. “Even today, after we launched FlyArystan [Air Astana’s low-cost carrier – ed. note] propensity to travel is still at about 0.45 trips per year, well beneath countries like Malaysia, with a similar GDP per capita, but a much smaller country,” Foster said, reiterating is long-term optimism about Kazakhstan’s untapped growth potential. 

While it operates a substantial domestic network, Air Astana’s attention is focused on the international market. The Kazakh carrier has been a pioneer in narrowbody aircraft use on long routes, with some of its Airbus A321LRs racking up segments over eight or nine hours long on westward flights to Europe. In fact, Air Astana has not waited for Airbus to launch the long-awaited A321XLR and has started to fit its current A321LR fleet with extra fuel tanks to extend their range.  

This modification brings the regular A321LR aircraft close to the range of the XLR version and, since September 2024, it has allowed the airline to operate the route between Almaty (ALA) and London-Heathrow (LHR) nonstop. Previously this route required a technical stop in Western Kazakhstan.  

“A lot of people were asking us, why aren’t we getting the XLR instead. Well, the answer is that the LR, with the ACT [Auxiliary Centre Tank – ed. note], will do what we want it to do,” Foster said. “When we took the decision to modify the A321LRs, the (A321)XLR wasn’t even certified. It is now, but it has not flown yet. So, would you rather take something we know works or take a chance? So that’s your answer. On paper the XLR might have just an extra 200-300 nautical miles on top of our modified LR.”  

While the European manufacturer collaborated with Air Astana on the range extension project, the actual modification was performed in-house at the airline’s own Maintenance, Repair, and Overhaul (MRO) center in Astana.  

“We have a very good base maintenance capability,” Foster said.  

Air Astana plans to add this extra fuel capacity to all its A321LR fleet and is already considering deploying them to destinations other than London, likely in Asia. 

“When we got our first A320s in 2006, you couldn’t conceive of flying them between Kazakhstan and London or Japan or Seoul. So, it just goes to show how technology has enabled us to do stuff that we couldn’t even imagine we would ever be able to do,” Foster said. “We were trundling around with B757s until 2020 so, we’re getting 40-50% of fuel savings with the same aircraft configuration we were operating years ago.”  

He continued: “We hope to get all of them done by the end of next year or beginning of 2026. We made an order for seven extra A321LR aircraft, and we won’t get them modified at the time of manufacture, but they’ll come here and get it done, because there is no point in having non-modified aircraft.”  

Awaiting the Dreamliners 

In addition to this extensive use of the A321LRs capabilities, Air Astana is currently preparing for the arrival of three Boeing 787 Dreamliners, which will considerably expand the carrier’s long-haul network options. 

Foster declined to comment on speculations that Air Astana may try to launch nonstop flights to the United States and did not provide a timeframe for entry into service. 

“Last time we were told it would be by the end of 2025 but obviously with what’s going on, we can’t be sure,” he said. “What we’re seeing with Boeing is almost like a slowly unfolding Greek tragedy. It just gets worse and worse and worse.” 

However, Foster did confirm that the three Dreamliners will not be replacing the three Boeing 767s Air Astana currently has in its fleet. 

“We’re going to keep the 767 until the end of 2028. They are doing a good job for us,” he said. “We use them in the summer on European routes and in winter on the Southeast Asian ones. The B767 is, for us, what I would call a high season aircraft. If you’ve got a high season aircraft, you don’t need vast numbers of them.” 

Foster explained that Air Astana’s network expansion is not driven by the number of aircraft available, but by a rather conservative approach to market expansion. 

“We have relatively thin markets in Central Asia,” he said. “It is a big growth market, but the aggregate market size is still pretty small.” 

Air Astana also used to operate Embraer E-Jets, including one painted in a special eye-catching livery depicting a snow leopard. These relatively small jets, however, are now on their way out. 

“They’ve been a good partner all these years. If we wanted to have a regional jet, Embraer would be perfect, but we just don’t need regional jets now,” Foster said. “We want volume and high quality and, unfortunately, Embraer can’t provide volume and can’t provide high quality. All the pilots have been converted to Airbus, so we’re just waiting for these jets to go.” 

Connecting Kazakhstan to the rest of the world 

Air Astana targets a rather eclectic mix of passengers, with around 15% connecting traffic. This is a figure Foster expects to go up, particularly after the opening of a brand-new international terminal at Almaty International Airport in June 2024 and the upcoming inauguration of Air Astana’s flagship business lounge at that airport. 

“At the moment, roughly speaking, our traffic is 75% Kazakh and 25% foreign. Now that’s maybe too much if you take a sort of an academic view of what a market mix should look like,” he explained. “Most people would tell you that relying on 75% on your home market is too much, particularly since our home country only has 20 million people. But, as I say, it’s 20 million people who are increasingly traveling more.” 

When it comes to international traffic, Foster highlighted the growth of the Indian market [Air Astana flies daily to Delhi (DEL) – ed. note], which is mostly driven by the increasing interest of Indian tourists in Central Asian destinations. 

“Without saying more than I’m allowed to say at this point, we are very conscious of the huge potential of the Indian market, extremely conscious,” Foster said, before moving on to talk about other markets the airline serves.  

“We don’t do as well as we should do in some other outbound markets, such as Korea. We hope to do much better from there. We look forward to doing well from Japan, which, notwithstanding the weak Yen, is also having a good period in terms of outbound travel,” he said. “We do pretty well from Europe, as well. In Germany, for example, a lot of our business is the German diaspora, ethnic Germans who used to live in Kazakhstan and went back to Germany, but still travel back and forth. We ought to do better in all these markets, particularly now that Central Asia is becoming more of a destination, for business and for leisure.” 

Air Astana was also forced to readjust its network after Russia’s full-scale invasion of Ukraine in February 2022. The airline ceased all flights to neighboring Russia on March 11, 2022, without prospects to resume anytime soon and has avoided overflying Russia, adding flying time to its European routes. 

Foster explained that the airline has managed to mitigate the impact of these measures.  

“The Russian market hadn’t fully come back after COVID,” he said. “Russia was very slow to reopen after the pandemic, so it was still a very small market for us. Also, as a result of what’s happened, a lot of business has gravitated to Kazakhstan and other countries in this region.”  

Air Astana splits its international operations between Almaty and Astana (NQZ), the country’s newly developed capital. It also operates some services from other Kazakh cities, such as Aktau (SCO) to Amsterdam (AMS), which mostly serves the oil and gas business or the recently launched routes between Western Kazakhstan and the Gulf. 

However, Foster highlighted that Almaty, Kazakhstan’s largest city, remains the principal hub of the airline.  

“We have a secondary hub in Astana, but when we look at the international services out of Astana, they’re all operating for a specific reason. The Astana to Beijing route, for example, is because of the relations between the two governments, and there’s a lot of investment from China and a lot of Chinese investment,” he explained. “Most Chinese investment tends to be state-owned Chinese companies. And so, state-owned Chinese companies tend to invest in, you know, oil and gas and minerals, and tend to have their headquarters in Astana. The same goes for Seoul, Abu Dhabi, and Dubai.”  

He added: “There is good business from Astana, but it is not a hub in the sense that Almaty is.” 

Air Astana expects to end 2024 with a fleet of 59 aircraft, which, Foster said, is slightly ahead of target.  

“That’s because we’ve got two more CEOs than we had planned for in order to address the issues with the GTF engines, which everybody is talking about,” Foster said, confirming the carrier has also been affected by the global supply chain issues across the industry. 

At this point, Foster sounds quite critical of the OEMs not being able to get their act together. 

“The OEMs keep blaming global supply chains for everything that goes wrong. Actually, we all have supply chains in life. Don’t we? We need our groceries and transportation and everything else,” he said. “Hiding behind supply chains is becoming increasingly irritating. We expect OEMs to get a handle on their supply chain. It’s just like the rest of humanity has to do.”  

Air Astana has been forced to ground 16 aircraft due to the GTF engine issues and has kept some of these grounded during low demand seasons to guarantee they will be ready to fly during peak demand periods. In Kazakhstan these are basically June to September and mid-December to mid-January. 

The launch of FlyArystan 

In 2016 Air Astana launched its own low-cost airline, FlyArystan, which has been instrumental in growing the Kazakh air travel market by getting more segments of the population to fly. While still wholly owned by Air Astana, FlyArystan has become increasingly independent from an operational and marketing perspective. 

“FlyArystan is now formally separate. It’s got its own AOC and it’s already marketing its flights under the FS code,” Foster explained. “Richard Ledger [FlyArystan’s CEO – ed. note] runs it as a separate organization. That said, of course, there were tons of synergies. We share pilots and engineers and a lot of other shared services.” 

Foster referred to similar cases in which a full-service airline and its low-cost subsidiary operated coordinately while keeping a degree of operational independence. 

He said: “I think you could probably put Scoot and Singapore Airlines into the same basket or Qantas and Jetstar. There has to be some arbiter who decides who gets what route and says, ‘you’ll have this, and you’ll have that’, so we do have ultimate control of who gets what capacity, and we try and manage that process as best as we possibly can.”  

Foster explained how the two airlines cater to different publics and have different passenger profiles.  

“There is some overlap but it’s very little. Sometimes we have to do brand substitutions and if we replace an Air Astana aircraft with a FlyArystan one, it usually does not go well, despite FlyArystan providing a perfectly good service for what it sets out to do.  

“They’re not rude in any way,” he added. “In fact, they’re very good. But it is a very different market profile.”  

Foster picked Cebu Pacific, the Philippine low-cost airline, as an example of the sort of dynamic FlyArystan has unleashed in the Kazakh domestic market. 

“When they started, they completely changed the profile of travel in the Philippines,” he said. “All those people who were traveling by boat between the islands started traveling by air. It completely changed the market. So, we’re seeing the same here. Kazakhstan is, of course, not split by the sea, but it is split by these huge distances. So, you’ve got the choice between a three-hour flight or a 24-hour rail trip. Which one are you going to take?”  

Partners and competitors 

Foster does not see Air Astana joining any of the major alliances for the foreseeable future. 

“We codeshare with Lufthansa to Frankfurt (FRA), with Turkish Airlines to Istanbul (IST), with Asiana to Seoul (ICN), and we very much hope we will codeshare with Korean Air to Seoul as well,” he said. “We used to codeshare with S7 to Moscow (DME), although that’s no more, and with Cathay Pacific to Hong Kong (HKG), but we don’t fly to Hong Kong anymore.” 

“We will start code sharing with Japan Airlines to Tokyo soon, though,” he continued. “It’s not in our interest to join any one particular alliance because we can codeshare with all the three major alliances.”  

The maze of restrictions and regulations put in place during the COVID-19 pandemic led Air Astana to experiment with some new routes that have since consolidated as regular leisure markets. 

Foster said: “During COVID we started flying to the Maldives and Montenegro because these countries said, ‘you can come here with just a PCR test, and it’s fine’. So, we said, ‘fine!’ and everybody loved those routes. Then we started Phuket for the same reason. We had always done Antalya (AYT), but now we are also doing Bodrum (BJV) and Heraklion (HER). We’ve announced Phu Quoc in Vietnam, Sanya in Hainan, China, Colombo in Sri Lanka, and we’re looking at others as well.” 

“The Kazakh market is a very sophisticated and well-traveled market these days,” he continued. “There’s a big leisure demand and the middle to upper class travelers [have] got money and high spending. People like to travel and stay at nice hotels. So, there’s a big leisure demand from this region. Dubai, for example, is primarily a leisure destination for us.”  

Foster also acknowledged that the Air Astana brand is not as well-known as he would like in most foreign markets. 

“We need to do better on this. If I think back to my Cathay Pacific experience, going back into the late 80s and early 90s, that was the time when all the Asian airlines started flying to Europe and, at that time, those airlines were completely unknown,” he said. “Ditto Emirates. They were completely unknown. Nobody knew who these carriers were, but they immediately established a reputation for excellence.”   

For this reason, Air Astana relies heavily on travel agents and other intermediaries to sell tickets overseas.  

“In Kazakhstan, everybody knows us,” Foster said. “We could sell every ticket directly if we wanted to. But in foreign markets where we are small, we have to rely on the distributors and tour operators. That’s where we need to do better.”  

Foster also outlined a number of countries that he sees as strategic for Air Astana’s continued overseas growth. 

“Japan, Korea, China, Western Europe, the Gulf, Saudi Arabia, and India. These are the big opportunities,” he said. “We do get quite a lot of business from China and it’s a big opportunity, but it’s slow.”  

Embracing competition 

Foreign low-cost carriers have also flocked to the Kazakh market. Airlines such as Air Arabia, IndiGo, Jazeera, and Wizz Air Abu Dhabi have all launched routes into Kazakhstan recently, adding capacity and competitive pressure on some markets. 

“There’s a lot more competition now,” Foster said. “If you look at our market share, in terms of capacity, the biggest drop we’ve had is to and from the Gulf. But this is actually one of our biggest growth markets too. And domestically, our main competitor is SCAT, which was, perhaps, not a brilliant airline a few years ago, but they’ve got B737 MAXs now and they have also taken over all the Russian flying from us. They’re a different airline now, not really the type of airline we are, but they’ve got about 34% of the domestic market share. So, they’re a substantial domestic operator.”  

While Air Astana is undoubtedly a full-service carrier, Foster outlined how the carrier’s efficient cost structure allows it to compete when it comes to both product and price.  

“First, we’re an efficient airline. We’ve got high utilization of the aircraft. Obviously, the more you fly an asset, the less the unit cost of owning the asset is,” he said. “Second, our staff costs are relatively low compared to European carriers and similar to those of Asian carriers, even if our pilot costs would be on a par with European ones, maybe slightly lower.” 

“Then we’ve got an advantage when it comes to the fuel we buy here,” he continued. “We buy it directly from the refineries and it’s probably about 15-20% cheaper than what we pay at foreign airports. So that’s a big advantage.”  

“So, we do have a cost advantage,” he added. “At the IPO, for example, we were able to demonstrate to investors that compared with a basket of about 20 airlines, our unit cost is about the third or fourth lowest. We all know that this ultimately a unit cost game. That’s why we can undercut the competition and still put a good product in the market.”  

Cost efficiency hasn’t prevented Foster from thinking about ways to enhance the product Air Astana offers, particularly when it comes to its long-haul services. 

“We’ve got FlyArystan, which is a volume carrier,” he said. “We’ve got Air Astana, which is ahigh-quality carrier with a good reputation.”  

While Foster expressed his broad satisfaction with the current in-flight product, he did not rule out the introduction of some new services using the new B787s, particularly concerning in-flight entertainment. Some of this would be in the form of an expanded content selection, including the addition of more Japanese, Korean and Indian content, but also the potential installation of in-flight internet, which the current fleet lacks. 

Foster did not appear overly enthusiastic about the economics of in-flight internet, although he conceded that new lower-cost systems like Starlink, which is starting to be offered by some airlines, could change his position on this. 

“For sure, we’ll have internet on the 787s, although in-flight connectivity is terribly expensive, and the market is not really screaming for it,” he said. “Starlink is an interesting option because we think the technology is going to get much cheaper because it is modularized, and you don’t need to have those big stations all over the place. It doesn’t have universal coverage yet but sooner or later it will.”  

“We’re watching it carefully,” he added. “It will change things.” 

As we came to the end of our conversation, Foster reiterated Air Astana’s clear international vocation. 

“There’s no question that the Kazakh market is destined to grow and that’s great,” he said. “But our big marketing sales opportunity is overseas, specifically India, Gulf, Japan, Korea, China. We’ve got open skies with the US, with the Gulf, with a lot of places with the European system. We’ve got traffic rights from everywhere and there’s nobody using them apart from us.” 

“There’s no question that the Kazakh market is growing fantastically well and we’re happy with that,” he continued. “We’ve got a strong team here and we’re extremely well-positioned.”  The post Air Astana: How Central Asia’s largest airline is looking abroad for growth appeared first on AeroTime.

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