Air Lease (ALC) has delivered its latest long-range Airbus A321neo (A321LR) to Air Astana, the Kazakh flag carrier’s chief executive officer, Peter Foster, confirms to Airfinance Journal (AFJ) in an interview.
The airline chief notes that another A321neo from ALC would follow next month, in September, with three additional A321neos, also from ALC’s orderbook, scheduled to join the fleet in 2022.
As of 24 August, Air Astana and its FlyArystan low-cost subsidiary operated a fleet of 37 aircraft, including 11 A321neos and six A320neos.
Foster tells AFJ: “The whole fleet is active. We are now operating 1,100 flights a week; this number is actually greater than in the summer of 2019. The domestic market is the fastest growing domestic market in the world right now. It is up 37%, compared to 2019 while globally, there’s been a decrease of 25%.
Particularly our low-cost carrier FlyArystan has had an extremely successful crisis, so to speak. The total cost of the airline is down more than 45% from 2019, with 37 aircraft, the same number we had at that time,” says Foster.
Air Astana underlined its resilience by swinging to a first half profit of $4.9 million, recovering from a loss of $66.2 million in the first half of 2020. EBITDA for the first half came in at $91 million.
The airline’s international network is 40% smaller than it was in 2019, its CEO confirms, although Air Astana has been able to fill that void with a renewed focus on regional and domestic flying, as well as mounting various new “lifestyle routes”.
The pandemic may have forever changed Air Astana’s business model, Foster says, noting that point to point flying is the way forward for the airline.
The airline chief notes that the Kazakhstan government has adopted “a more European or American-style approach to Covid” compared to zero-Covid policies across most of Asia.
“In Kazakhstan, the government has been keen to find a balance between economic activity and virus control. We’ve had a pretty aggressive vaccination campaign with the Sputnik vaccine, including myself. The economy remains reasonably open. Travel is restricted, but permitted, although frequencies are down as per government order,” Foster says.
“Our international network is 40% smaller than it was in 2019. However, we did inaugurate several what we call ‘lifestyle routes’: to the Maldives, Sri Lanka, Hurghada, Sharm el Sheikh, Montenegro, in addition to existing ones to Antalya, Bodrum and of course Dubai. We hope to launch Phuket as soon as the Thai government allows the Sputnik vaccine to qualify for the ‘Sandbox’.
We call them ‘lifestyle routes’ because they are leisure destinations no longer restricted to holiday periods. We are finding that many people are keen to travel for extended periods to agreeable places and run their businesses and in some cases educate their children, remotely from there,” the Air Astana chief explains.
“Regional routes are performing extremely well, too. With the reduced frequencies, there is very high demand and therefore high load factors and yields.”
For example, Air Astana has been deploying its 767 widebody capacity into Bishkek and Tashkent in neighbouring Kyrgyzstan and Uzbekistan over the summer, routes previously serviced by E190-E2s.
“We are out of the sixth freedom business. We are transforming into an exclusively point to point carrier. Covid has changed the way we operate, and I don’t expect a return to the status quo ante. For us, point to point will be the way forward as we have seen with the ‘lifestyle routes’.
Sixth freedom made up about 26% of our revenue in 2019 and now it is zero. I do not expect that to come back for a very long time. Point to point yields are higher and managing traffic flows is less complex. The market has pivoted and we’re fine with that,” Foster tells AFJ.
The former Cathay Pacific executive notes that the A321LR has become “the backbone” of Air Astana’s international fleet, with a high-spec business class cabin equipped with Thomson Vantage seats, including ‘throne seats’ very popular with customers.
“Covid has resulted in the fleet renewal programme being accelerated, put on steroids really. As we were able to effect early returns of the 757 and E190 fleets last year, the A321LR is proving to be a high-value, high-performance acquisition,” Foster tells AFJ.
"Our fleet financing strategy hasn’t changed. We will continue mainly to lease rather than own, although we do have three 787-8s on order and those will be purchased, most probably from 2025. It is too early to say what the long-term financing strategy for those aircraft will be," he says.
Foster confirms that early in the pandemic Air Astana undertook a combination of renegotiations and deferrals as it made it “very clear” from the very start of the pandemic that it must not tap either the government or its shareholders for a bailout.
“And we achieved that, we did not require any bailouts of any kind. We did, however, open and extend lines of credit with commercial lenders, although most remain untouched,” the airline CEO says.
“March to August of 2020 was an extremely tough period as there was very little flying. A significant reason why we were able to meet the financial challenge at that time was as a result of the successful discussions with the European Credit Agencies (ECAs), US EXIM bank and operating lessors.
Generally, the lessors were very helpful, as indeed were the export credit agencies and EXIM bank. With the exception of one lessor we were able to obtain deferral and/or lease reductions from all our lessors, vindicating the long standing relationships we’ve had with them, including with one which goes all the way back to 2002 when we launched the airline,” says Foster.