Interview: Air Astana CEO on growth opportunities, challenges

Air Astana president and CEO Peter Foster has been at the helm of the Kazakhstan-based airline since 2005 and is currently overseeing a period of ambitious growth. With an eye on international expansion, the carrier bolstered its nearly 40-strong fleet with the arrival of its first Airbus A321neoLR in September. In May Air Astana launched subsidiary FlyArystan—Kazakhstan’s first LCC—and recently announced its intent to acquire 30 Boeing 737 MAX 8s for the new airline.

Air Astana will receive a total of seven A321neoLRs. What does this mean for the carrier? The LR combines narrowbody economics with comfort levels never previously offered on narrowbody aircraft. Its configuration of 16 lie-flat Thompson Vantage and 150 economy seats with full amenities is an improvement over the 757, which it will replace, and will give us a competitive advantage on routes to Western Europe, Moscow, Beijing, Dubai and Istanbul. It will also fly the Bangkok, Hong Kong and Kuala Lumpur routes. The first aircraft is here and the remaining six, also Pratt & Whitney-powered, we expect to arrive within the next 15 months.

Air Astana took delivery of its first Airbus A320neo in November 2016. What is your experience so far with the neo and would the A321XLR be a future possibility? Air Astana operates three A320neos and four A321neos. We’ve had significant reliability issues with the engines and expect P&W to resolve these as soon as possible. We may consider the XLR, depending on the LR’s performance and the evolution of the network. 

How challenging is the aviation environment in Central Asia? Regional economies remain weak, with fragile currencies, which doesn’t help consumer demand. That said, sixth-freedom demand remains strong and inbound is increasing as Kazakhstan continues to liberalize the visa regime. The same applies to an even greater extent to Uzbekistan, which has the attraction of the big Silk Road cities of Samarkand, Bukhara and Khiva, and which is a major opportunity through our Tashkent flights, all of which connect to Europe and Asia. We have made internal adjustments and savings since early 2018, and in May launched our LCC FlyArystan, which is proving hugely popular. So the net result of all of these developments are much-improved results. 2018 was only marginally profitable, and we expect 2019 to be a more successful year. 

You’ve mentioned that some international routes could receive Public Service Obligation support. Wouldn’t that be unusual? No, this has been in place for many years. For smaller domestic routes, subsidized routes can be put to tender for government support if they are deemed in the public interest. This is a model which exists in quite a few countries. In principal it could also apply to international routes and subsidies have already been granted to another airline to operate charter flights to Tokyo. Air Astana is not and never has been a subsidized airline in any way, as we believe that subsidies distort the way an airline operates, both internally and externally. However, if the government believes that routes such as Tokyo or even New York should be operated in the national interest regardless of route economics, Air Astana would participate in the tenders. We are actively considering flying from Kazakhstan to New York via St Petersburg, if we are able to obtain fifth-freedom rights.

How well-known is the Air Astana brand internationally? We are still niche, I would say, because Central Asia is still relatively unknown, but that is changing fast. We have a great regional network and long-haul product, and serial Skytrax and other awards all help to get our name out there.

You still have no interest in joining an alliance? Isn’t it costly for a small carrier to operate from two hubs? We have codeshares with Lufthansa, Cathay Pacific, Turkish Airlines, Air France-KLM, Asiana, Ukraine International and S7. They are all very important to us. Russia is our largest foreign market, so the codeshare with S7 and shift to Domodedovo Airport is fundamental, and a very positive development. Given our location and markets, we need to work with airlines from different alliances, so the restriction of belonging to one single alliance wouldn’t really work. We wonder whether the alliance model in general is too restrictive in today´s world. As far as hubs are concerned, ideally an airline of our size should have a single hub, however the equal size and importance of both Almaty and Nur-Sultan mean that we need to operate twin hubs. We do this by minimizing duplicate costs as far as such a situation allows. 

FlyArystan launched operations this year on domestic routes. What are the international plans? I mentioned FlyArystan, our LCC, started flying on May 1, in response to the changing local and regional airline environment and what we estimated was the massive potential from road and rail travelers in this very large country. In any event, it is exceeding all expectations, with 95% load factors at an average fare of around $40. FlyArystan is indeed creating new demand by switching travel from other transport modes, but to a far greater extent than anticipated. The first international route will be from Nur-Sultan to Moscow Zhukovsky starting this December.