Air Astana goes for Airbus makeover | Analysis | Airfinance Journal

Air Astana goes for Airbus makeover

Modern-technology aircraft leases are driving profitability. Soon Airbus A320neo leases from Aviation Capital Group and CDB Aviation will join the fleet, Air Astana Group chief executive officer, Peter Foster, tells Dominic Lalk.

After returning a strong financial performance to shareholders in 2021, Kazakh flag carrier Air Astana Group and low-cost subsidiary Flyarystan are poised to continue growing as the pandemic recedes.

Group chief executive officer, Peter Foster, tells Airfinance Journal that four key factors are at play driving Air Astana’s success: huge domestic growth (Flyarystan grew at 553% in passenger numbers); strong regional yields (suppressed supply, returning demand); lifestyle route growth; and complete fleet renewal (total retirement of all Boeing 757 and Embraer E190 aircraft, additional Airbus A321neo long-range units).

Brisk business is expected ahead for Air Astana Group because its airlines are mounting new destinations as the new A320neo-family arrives.

New lease deals

Foster disclosed exclusively to Airfinance Journal that Air Astana has awarded A320neo operating lease mandates to California-based Aviation Capital Group (ACG) and Chinese bank-backed CDB Aviation, covering seven deliveries in 2022-23. The seven A320neos will be assigned to the Flyarystan subsidiary, says Foster. ACG and CDB Aviation are new lessors to Air Astana Group.

In addition, Foster notes, mainline Air Astana is due another three A321neo long-range aircraft from another California-based lessor, Air Lease (ALC), also in 2022-23.

For CDB Aviation, the new Flyarystan A320neo deal continues the lessor’s push into the CIS; for ACG, Air Astana will be the first lessee in the wider CIS region, excluding Russia, where it had moderate exposure before the invasion of Ukraine.

Daily utilisation rates for Air Astana Group’s Airbus narrowbody fleet are up to 11.5 hours, says Foster, and the airline’s three 767-300ERs are operating at “high utilisation rates”, too. One 767 that had been temporarily converted for cargo-only usage was repurposed in late 2021.

From 2025, Foster confirms three 787 aircraft are scheduled to arrive, subject to final discussion with Boeing. The aircraft will enable Air Astana to fly to the USA. Foster notes that the existing 767s will be sold or converted to full freighters when the 787s arrive.

As Airfinance Journal went to press, and before the 10 Airbus Neo aircraft were due, Air Astana had a fleet of 27 aircraft comprising 767, A320neo, A321/A321neo/A321LR and Embraer E190-E2 models. Flyarystan operated a fleet of 10 A320s, including a single A320neo.

Later in May, Flyarystan added a 2014-vintage A320 on operating lease, which forms part of the SAIL asset-backed securitisation serviced by BOC Aviation. The A320 was previously operated by India’s Vistara; its delivery marked Flyarystan's 11th aircraft. 

Airfinance Journal also recently broke the news that Air Astana’s E190-E2 fleet had changed ownership after Aercap sold the whole portfolio comprising five units with leases attached to the flag carrier to new leasing entrant Azorra Aviation. The disposal completed Aercap’s exposure to the E190-E2 series, although it remains involved in the larger E195-E2 programme.

Soaring revenues

Net profit of Air Astana for the 12 months ended 31 December 2021 was $36.2 million, compared with a loss of $93.9 million in 2020. The result was notably higher than the figure of $30 million in 2019, prior to the impact on travel of the Covid-19 pandemic.

During 2021, Air Astana increased total revenue by 90% to $761 million from $400 million in 2020, with the figure for 2019 being almost $900 million.

EDITDAR (Earnings before interest, taxes, depreciation, amortisation and restructuring) for 2021 was $217 million, compared with $33 million in 2020, with the figure for 2019 being $171 million.

The group carried 6.6 million passengers in 2021, up almost 80% on 2020, with Air Astana carrying 3.6 million passengers and Fly Arystan carrying three million passengers. Total overall capacity was up more than 60% over 2020.

“We had a very good year last year,” says Foster. “Far, far better than expected. Flyarystan grew at 553% in passenger numbers.”

The pandemic may have forever changed Air Astana’s business model, says Foster, noting that point-to-point flying is the way forward for the airline. In that vein, the group has inaugurated many new “lifestyle routes”: to the Maldives, Phuket, Sri Lanka, Egypt, Montenegro, Heraklion in Greece, in addition to existing ones to Antalya, Bodrum and Dubai.

“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,” explains Foster.

“Regional routes and, of course, our low-cost Flyarystan network are performing extremely well, too. There is very high demand and therefore high load factors and yields,” he says.

Russia challenge

Living in proximity with Russia means Air Astana is heavily impacted by President Putin’s war against Ukraine.

“Aside from the horrendous human cost of the war, the invasion (which I witnessed first-hand in Kyiv) has caused us to lose all flights to Ukraine and Russia, the latter because of withdrawal of insurance cover,” resulting in an approximate loss of 12% of the group’s international route network, says Foster.

The Kazakh flag carrier, however, says it is bridging that lost capacity with extra flights and new services to South Korea, Germany, Turkey, Greece, Montenegro, Georgia and Uzbekistan. Naturally, most of these new flights are still impacted by the war, however.

“All flights to Europe avoid Russian airspace and follow the southern route through the Caucasus, south of the Black Sea coast, Turkey and north from there. Greece, Montenegro and Turkey are hardly affected; however, Frankfurt and Amsterdam have an extra 90 minutes flying and London has to make a fuel stop on the Caspian,” says Foster, noting that he will “try to make up some of the extra cost with fuel surcharges”.

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