Long-serving Chief Executive Peter Foster is stepping down after two decades at the helm of Air Astana, during which the Kazakhstan airline group has continued to grow despite market and fleet disruption. Graham Dunn reports from Almaty
Over 20 years at the helm of Kazakhstan carrier Air Astana, Chief Executive Peter Foster has grown accustomed to the ups and downs of the airline industry.
Already faced with rebuilding out of an industry frozen by the Covid pandemic, Air Astana has had to deal with disruption from and the loss of the neighbouring Russian market. The carrier has also had its growth clipped by lack of availability of Airbus A320neo-family aircraft due to continuing Pratt & Whitney GTF powerplant issues.
But despite these challenges, the group has embarked on strong post-pandemic growth, in part fuelled by the timely launch of its low-cost unit FlyArystan. Indeed, it has enjoyed fortunes bright enough that the company last year successfully carried out a long-sought IPO and has just committed to a follow-on order for up to 15 Boeing 787s and signed an MoU for up to 50 more A320neo-family jets.
Foster, who in October announced he will step down next year to be succeeded by Air Astana’s Chief Financial Officer Ibrahim Canliel, leaves the airline profitable, a large way through a major fleet simplification and expansion, and increasingly looking towards network opportunities to the East.
Eastern promise
Air Astana this year launched new services from Almaty to Mumbai and Guangzhou, and both India and China are key markets for an airline seeking to tap opportunities beyond its home market.
As the ninth-biggest country in the world by area, Kazakhstan is tailor-made to develop domestic air travel – a burgeoning demand it has helped to stimulate through budget arm FlyArystan in particular. But at the same time, Kazakhstan does not even feature among the 50 biggest countries by population.
Speaking to ARGS during a media briefing in Almaty at the end of September, Foster acknowledged the strategic challenge for the carrier. “With a population of 20 million people, there’s a limit on the size of the [Kazakhstan] outbound market,” said Foster.
He noted, though, that big markets like China and India are within four hours flying distance of Kazakhstan.
Air Astana serves Delhi and Mumbai in India, while FlyArystan flies to Goa. “India has a great future. We’d love to fly to other places in India well,” he said, also noting that the new airports in Delhi and Mumbai means slots are going to be less of an issue.
China, one of five countries bordering Kazakhstan and where it also serves Beijing and Urumqi, offers an even bigger opportunity.
“China is a massive outbound market,” said Foster. “The reason why China is such a big game is because Kazakhs can go to China without a visa.”
Asia has also become a more attractive option because of the operational complications for Air Astana in serving Europe since it stopped flying to or over Russia following the invasion of Ukraine. While Kazakhstan has not imposed sanctions on Russia, and local carrier SCAT continues to serve the country, the government is being careful to avoid the risk of secondary sanctions. Air Astana itself stopped serving and overflying Russia in March 2022.
“We would have gone East in any case,” said Foster, “because the growth markets are in Korea, probably in Japan in future for us, and India and now China which has come back in quite a robust way. And of course the Gulf which is a huge growth area.”
The longer routing on its flights to western Europe, where it serves Amsterdam, Frankfurt and London Heathrow, also presented operational challenges. Air Astana was for a period required to add an intermediate fuel stop in the western Kazakh city of Aktou on the Heathrow route until it began a programme to outfit its Airbus A321LRs with an auxiliary central fuel tank.
“That has increased the range of the aircraft so we can now roughly speaking get to 4,200 nautical miles,” he said.
“By the same token, that has allowed us to focus on East Asia and it has knocked Aeroflot out as a competitor to Europe,” Foster noted. While Aeroflot still serves Kazakhstan from Moscow Sheremetyevo, it no longer has onward connections to most of Europe.
Air Astana also lost Russia as a source market, though Foster noted the impact on the carrier has been less pronounced than it would have been before the pandemic.
“So, its loss in March 2022 was a lot less dramatic than it might have been three years earlier,” said Foster. “And with all the Pratt & Whitney problems that we have had, we have been very limited by the number of aircraft we can deploy in any case. We would almost certainly have carried on flying to Russia, but our growth has been significantly constrained by the Pratt & Whitney problem.”
Fleeting challenge
As an operator of GTF-powered Airbus A320neos, Air Astana has been among the airlines impacted by the powder metal problems which have required additional engine inspections. Foster also pointed to additional disruption. “We had 16 unplanned engine removals over the summer. That’s on top of powdered metal,” Foster said, noting the impact of this is exacerbated by a shortage of engine shop space.
The unavailability of aircraft means Air Astana has had to keep hold of existing A320ceos – and bring in additional aircraft and spare engines.
“By this stage we would have expected to have an entirely Neo fleet [of A320s], but obviously the Pratt & Whitney problems have got in the way of that. So we still have a significant number of Ceos, some we’ve had to bring in quite recently, second-hand aircraft to supplement the loss of the Neo [capacity],” he explained.
Foster though talked up the performance of the A321LR – describing the company’s best decision as placing an order for 11 of them and joking its worst decision was to not order more.
“If we had double the number of LRs we would be very happy,” he said. “It’s a great aircraft. It is extremely passenger friendly, we can get a huge amount of yield out of the business cabin even though it has only 16 seats. We are talking about 15% savings against a 757, so that aircraft – notwithstanding the engine issues – is an extremely economical and passenger-friendly aircraft.”
It has since taken steps to add more A321LRs, in November announcing an MoU for up to 50 more A320neos for delivery from 2031. The majority of these with be A321LRs.
Fleet simplification
The aircraft is part of a major overhaul which has seen Air Astana shift from the four types it operated in 2019 – Embraer 190s, Boeing 757s and 767s alongside Airbus narrowbodies. After the 757s were replaced in 2019, the last of the Embraer jets were phased out earlier this year.
It has also grown the fleet, from 35 in 2019 to reach an expected 63 by the end of this year. That will comprise 39 A320s, 21 A321s and three 767s – which were the last three passenger-versions of the aircraft produced by Boeing.
The carrier will increase its fleet to 72 next year as it adds more Neos, as well as taking delivery of its first Boeing 787-9. Air Astana is taking three 787s over the next two years and in November supplemented its commitment with a firm order for five more of the type. It also took options and purchase rights covering a further 10 Dreamliners. The newly-ordered widebodies are set for delivery between 2032-35.
“The 787 will fly where the 767s fly today,” Foster said. “It will fly to Korea, it will almost certainly fly to Japan at some point in the future, it will go to Thailand and various routes to southeast Asia. It will fly to Frankfurt in the summer. There is huge demand for Dubai. So, there is plenty of work for it.”
The Dreamliner also opens up the potential to serve the USA, though for now at least, that route is off the table while it cannot overfly Russia. “If we were to do the US, the idea would have been to do the US non-stop from Almaty or Astana using the 787. But now with the Russian airspace closure, that is not an option for us,” he said.
Air Astana’s long-term plan will see the fleet reach 84 by 2029 with the addition largely of more A321neos. The backbone of the fleet will comprise 40 A320s and 38 A321s, alongside the 767s and 787s.
But while new aircraft join the fleet, Foster expects it be some time before the current fleet availability issues within the industry play out.
“It is going to be a very long, slow process,” he said, while also noting this means the extra lost capacity will also eventually be returning. “By late 2027, early 2028, aircraft are going to be coming back. And that is why we have been relatively modest in our growth plans for 2028 and 2029, because of that factor.”
Foster noted that FlyArystan, which has taken a relatively large share of the grounding pain, for example has a fleet of 23 aircraft but is only currently flying 14 of them. “So they are going to have natural growth, virtually doubling capacity just by having aircraft coming back into service,” he said.
Dual strategy
Air Astana launched FlyArystan in 2019 as part of its dual-brand strategy. The low-cost carrier operates an all A320 family fleet in a higher-density single-class configuration.
FlyArystan has been a strong driver of growth since the pandemic, particularly in the growing Kazakhstan domestic market. It carried 4.2 million passengers last year, alongside the 4.8 million flown by network carrier Air Astana.
Air Astana itself accounts for three-quarters of the group’s revenue and focuses its hub operations on Almaty, where it is benefitting from the opening last year of a new international terminal increasing passenger capacity at the airport to over 14 million.
“The hub and spoke network is primarily from Central Asia and the region onto the long-haul network, and primarily that is Almaty-focused and that is working pretty well because we have got the new terminal in Almaty,” said Foster.
The carrier though also operates out of the Kazakh capital Astana. “We add services to Astana when there is sufficient business that it will support itself. Beijing, Seoul, Dubai, Istanbul and Frankfurt routes are all good Astana routes. But there is no intention to develop a hub around Astana,” Foster explained.
The dual brand strategy also positions the two carriers for different market segments. This enables the group to tap the potential of the growing Central Asia and Caucasus market – a region with a population of 95 million but which Air Astana notes is one of most under-connected in the world. Air Astana already serves 11 routes in the region and FlyArystan nine, which the group says gives it almost 30% market share by seats.
That potential is reflected in continued growth. The 9 million passengers the group carried last year was up 11% on 2023 and is getting on for double the 5.2 million it carried in 2019. That growth has continued over the first half of this year, as group passenger numbers climbed 11% to 4.5 million over the first half of 2024.
“We have a lot more airlines coming into Kazakhstan and at the same time we’ve got a lot more people coming into the country, and the market has grown,” said Foster. “That is pretty much in line with the IATA forecast, which said Kazakhstan and Central Asia was going to be the next big growth story in aviation. And that has proved to be the case.”
