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Room to Grow

Peter Foster, President of Air Astana

President of Air Astana, Peter Foster, believes Kazakhstan and Central Asia are markets with significant potential

Air Astana has been consistently profitable. Can the trend continue?

Last year went pretty well for us. Revenues grew 16% to $870 million and we are expecting a similar performance in 2013. Capacity will increase 15% this year, which demonstrates the growth potential of Kazakhstan and of the region. We have opened 21 new regional routes in the past 18 months alone. Revenues are up 9.5% in 2013 and, for us, the first half of the year is never as strong as the second.

What was the inspiration behind putting in place a very Western airline in Kazakhstan?

The airline’s vision has been clear since it was set up by President Nursultan Nazarbayev, with the cooperation and participation of BAE Systems under its then Chairman, Sir Richard Evans. It was agreed from the outset that the airline would be run according to best commercial and operational principles and we haven’t deviated from that.

In the last three to four years, I think our international profile has become much more apparent to the market. The region had not had a carrier of our type in earlier times. We operate to high service standards and so far have won Skytrax awards in both 2012 and 2013. And the airline is on the IATA Operational Safety Audit (IOSA) registry.

Does the Kazakhstan government understand the benefits of aviation?

The government understands the importance of aviation and is implementing a clear strategy for change and development. There is still a need to implement global regulatory standards and improve infrastructure to fully realize the industry’s benefits.

Turning to infrastructure first, is it developing fast enough to handle Air Astana’s rapid growth?

Almaty Airport is still our main base at present but we are congested in the terminal. If you  look at the growth of the carrier over the past few years and consider that Almaty Airport hasn’t really developed since 2003, clearly there is an issue. There are plans to develop a new terminal, however. Almaty is a private monopoly and charges are relatively high, as pointed out late last year by IATA.

Astana International Airport is a government-run facility and is in a much better position to capture future growth. Astana completed a new passenger building in 2007 and there is no doubt that we will shift toward greater use of the airport in the future, even as we retain a twin-hub strategy. Astana has been placed into a newly-formed National Airports Holding Company, and there are plans to expand terminal facilities, not least because of expected demand for the World Expo in 2017.

More generally, national infrastructure needs to improve. The Ministry of Transport and Communications has a plan to increase the number of ICAO-compliant airports from 10 to 15 by 2020. IATA has pledged to help with that effort.

Does the regulatory environment also need to improve, especially in regards to safety?

The government needs to implement global standards. The Civil Aviation Authority in Kazakhstan falls below these in several respects, according to the ICAO Universal Safety Oversight Audit Program. As a result, Kazakhstan is on the European Union (EU) list of countries with significant safety concerns.

Air Astana is exempted from the ban but we had to freeze frequencies to Europe at the existing levels when it came into effect in 2009. In 2012, the EU allowed us to deploy our new aircraft to Europe in addition to those permitted under the terms of the exemption, so now we have no restrictions for any of the fleet. This was a sensible move and one in which IATA was instrumental on our behalf.

As an airline, there is only so much we can do to help with regulatory reform. We are on the IOSA registry, which is now considered best global practice. In effect we self-regulate to a large degree, though our maintenance is audited by the UK Civil Aviation Authority in accordance with our European Aviation Safety Agency 145 license and our Certificates of Airworthiness are audited by the Aruba DCA. However, this counts only so much with the EU and other authorities. Foreign authorities will never unequivocally accept self-regulation no matter how good that is, because the principle of ICAO is that there must be a clear check and balance at the national level. 

What are the prospects for the Central Asian market and Air Astana?

Looking ahead, our primary focus will continue  to be on the Central Asian and Caucasus regions. Kazakhstan is at a crossroads and can connect business opportunities in Russia, Asia, Central Asia, the Middle East, and Europe.

There are 16 million people in Kazakhstan. But if you look at the growth of the carrier over the past few years and consider that Almaty Airport hasn’t really developed since 2003, clearly there is an issue. There are plans to develop a new terminal, however. Almaty is a private monopoly and charges are relatively high, as pointed out late last year by IATA.

Astana International Airport is a government-run facility and is in a much better position to capture future growth. Astana completed a new passenger building in 2007 and there is no doubt that we will shift toward greater use of the airport in the future, even as we retain a twin-hub strategy. Astana has been placed into a newly-formed National Airports Holding Company, and there are plans to expand terminal facilities, not least because of expected demand for the World Expo in 2017.

More generally, national infrastructure needs to improve. The Ministry of Transport and Communications has a plan to increase the number of ICAO-compliant airports from 10 to 15 by 2020. IATA has pledged to help with that effort.

You have a mixed fleet type to serve the market. What are the reasons behind this given that many carriers prefer a single type or single manufacturer?

We have Embraer, Boeing, and Airbus aircraft and more from each manufacturer on order. Within 12 months, we will take delivery of five A320s, three 767s and two E190s, all of them brand new. In 2017, we will take delivery of the first of three 787s. We need all of these types of aircraft because our markets are so diverse in terms of size and distance. One needs to remember that in terms of geographic size Kazakhstan is the ninth largest country in the world and we serve short dense routes as well as long thinner routes. While it is complex operationally to utilize so many aircraft types it works commercially. It would not work to have a single aircraft type. We have the right aircraft for the routes we serve.

Do you have any issues with getting enough skilled staff to handle the growth?

Getting staff has become easier now that we have proven ourselves to be consistently successful. We can attract foreign specialists where necessary and train local staff from scratch.

Fortunately, we have a good number of talented young people in the country from which to choose. Young Kazakhstanis are well educated and because we have a reputation as a very good employer we do get our pick of the brightest. So it has become self-fulfilling, a virtuous circle.

How would you describe your style of management?

That is a short question demanding a long answer!

Every airline for which I have worked has been a learning experience, including Air Astana. One always needs to be open to new ideas, however long in the industry, as aviation is constantly changing and developing. We try to involve our people at all levels in ideas and decisions. We are still a young airline and even though we are larger now, we retain that family feel. I believe in management stability, and much of the team has been here for most, in some cases all, of the airline’s life. This is a core strength.

For more information, please visit: www.airastana.com.

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