Kazakhstan’s aviation is set to triple—what’s behind the surge?
Positioned between Europe and East Asia, Kazakhstan is fast emerging as a ‘midway hub.’ With its aviation sector set to triple over the next decade, what’s fuelling the take-off?
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00:00With 20 million people spread across vast land, a growing middle class and a prime spot between Europe and East Asia, Kazakhstan is well positioned for aviation growth.
00:20But is air travel really taking off and what might fuel Kazakhstan's rise as a midway hub?
00:26Welcome to East-West Connect. We're highlighting business and economic developments in Kazakhstan and the wider Central Asia region, connecting with Europe and beyond.
00:37It's been six years since Kazakhstan adopted its Open Skies policy, opening the door to greater global connectivity.
00:44The fifth freedom of the air now allows foreign airlines to stop in Kazakhstan en route to a third country.
00:49As of last year, the policy covers 15 airports nationwide.
00:53Recently, the EU removed Kazakhstan from its aviation blacklist.
00:57The country's compliance with global safety standards now stands at 82% above the world average.
01:03It is on par with EU members like Denmark and Poland, placing it first in the Commonwealth of Independent States region.
01:10One thing Kazakhstan was missing but is setting up now is a specialized air incident investigation center.
01:16It is one of the key safety indicators tracked by the International Civil Aviation Organization, or ICAO.
01:22It became especially relevant after the crash of an Azerbaijani Azzal Airlines aircraft near Akhtau in December last year.
01:29Kazakhstan and ICAO are drafting a civil aviation master plan through 2050, covering everything from airport development and air navigation to safety and airline expansion.
01:40Within five years, the Ministry of Transport expects passenger traffic to hit 26 million with 200 international routes and a fleet of over 220 aircraft.
01:49Last year, Kazakhstan's air companies opened 12 new international routes, including Mumbai, Prague and Jeddah, with 16 more expected this year, including Rome, Shanghai and Belgrade.
02:00Kazakhstan's aviation sector comprises of the national carrier Air Astana, its low-cost arm, Flyaristan, Private Scott Airlines and Kazakh Air.
02:09Kazakhstan is the only country in Central Asia to list its national airline, Air Astana.
02:15Now the region's leader by market share and awards is headed by CEO Peter Foster, who shared his insights on the industry's growth.
02:25Mr. Foster, welcome.
02:27How do you assess investor sentiment following Air Astana's IPO and what strategy do you plan to implement to maintain shareholder value?
02:33We have recently announced a very substantial dividend, in fact, the largest dividend that we've ever paid and one of the largest dividends in the airline industry today.
02:43And that's a reflection of the strong performance, of the strong balance sheet, of the strong cash balance.
02:48The key really is to keep focused on cost and keeping cost competitive, to maximize service levels, to ensure top class safety standards.
02:56You've outlined major strategic opportunities for growth in the Gulf, Western Europe, China, Korea and Japan and India.
03:05What would these partnerships entail?
03:07So we're presently in discussions with China Southern in China.
03:11We're having discussions with carriers in India.
03:14We've recently signed a co-chair with Japan Airlines for the Japanese market, other areas in which we can cooperate.
03:21In maintenance, for example, here we're having this interview in our hangar, which has a full MRO maintenance capability for Airbus Fleet.
03:31We've just established a new company, Air Astana Terminal Services, which will provide a range of airport services at airlines in Kazakhstan and perhaps beyond Kazakhstan as well.
03:42Mr. Foster, thank you so much for your time today.
03:44Not at all. Thank you.
03:45The government is opening its skies to foreign low-cost airlines such as India's SpiceJet, South Korea's E-Star Jet and T-Way Air and Thailand's AirAsiaX.
03:57Kazakhstan's sovereign wealth fund Samru Kazana oversees major deals involving the country's airlines.
04:02Let's take a closer look.
04:06Air Astana's value has surged 50-fold since 2001 to over 700 million euros.
04:11It became the first Kazakh company to list shares on three exchanges, London, Astana and Kazakhstan, through an IPO led by Samru Kazana.
04:18The airline has topped Skytrax rankings in the region for 14 straight years.
04:22In comparison to other grand majors, we are doing quite well. Our EBITDA margin is 26%, which is one of the highest in the sector.
04:31Our revenue growth in comparison to 2023 amounted to almost 13%. EBITDA went up 16.1%.
04:40These numbers are testimony to the professionalism of our team and the testimony of value which we are creating for Air Astana.
04:48Air Astana has helped open Kazakhstan to global tourism. Since COVID-19, flights to India have jumped nearly 60%, with Almaty now a top destination.
04:57Indian citizens now rank among the top three foreign flyers, alongside Russians and Chinese.
05:02We have a network of routes which exceeds 70 destinations. We view Air Astana as a catalyst for economic growth in the region because not only we employ more than 6,000 people, we also create value by bringing in tourists in Kazakhstan, developing hospitality sector, and developing business connections between our country and the rest of the world.
05:27Samruk Kazanai and Air Astana are proud to lead this shift, driving connectivity and positioning Kazakhstan as a key transit hub between east and west.
05:38Kazakhstan plans to nearly triple processed cargo volumes to 500,000 tons within five years.
05:44Six airports, including Astana, Almaty, Aktau, Aktau, Karaganda, Shemkent, are set to become key hubs to boost air traffic and cargo capacity.
05:53Astana Airport will undergo a nearly 1 billion euro upgrade by a UAE aviation services provider, adding a second runway, a third passenger terminal, a cargo terminal, and a large airport city with logistics zones, hotels, retail, and freight facilities.
06:09To discuss the developments in Kazakhstan's aviation sector, we are joined by the Vice Minister of Transport, Talgat Lastaev.
06:16Mr. Lastaev, welcome.
06:20How advanced are the plans to develop an intermodal hub in Kazakhstan, and how would that strengthen the country's transit potential and its role as a regional logistics hub?
06:28Our aviation industry, last five years, shows a absolutely incredible growth, annually 10 and 15 percent growth.
06:38If we're talking about Almaty, so one of the biggest airports in Central Asia, Tav Group preparing to invest 362 million dollars for further development.
06:48It will be a multi-modal transportation, track to air, another big opportunity, Aktau Airport, Turkish company UID, planning to invest more 1 billion dollars to create a multi-modal hub.
07:01What will Kazakhstan's aviation sector look like 10 to 15 years down the line?
07:05Kazakhstan's aviation industry will grow at least triple times, and it will be very modern, digital, providing an excellent level of the services.
07:18It will be hubs for whole region for cargo and passenger flights.
07:23Kazakhstan, with our nature condition, with our territory, it will be the best place to realize the projects for the drones.
07:31In the upcoming five, I think, years, we will see air taxi services.
07:36Kazakhstan will be one of the best places for the aviation services and industry, not only in our region, but for the whole world.
07:45Looking forward to that. Mr. Al-Stayef, thank you so much for your time today.
07:49Thank you so much.
07:52Kazakhstan's skies are opening wider. Bye for now, and join us next time on East-West Connect.
