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Kazakhstan 2017 | TRANSPORT | VIP INTERVIEW

TBY talks to Peter Foster, CEO & President of Air Astana, on building a brand, stopover tourism, and plans for 2017.

What have been the main highlights of Air Astana's recent successes?

We began as a start-up company. When I arrived 11 years ago, a lot of great of work had been done to get the airline going and it was operating effectively. Over the past four years, however, we have really broken through in terms of service levels, operational reliability, and, of course, our international image. To do so, an airline needs to have a certain number of aircraft, routes, and people who understand what it seeks to achieve internally in terms of corporate and organizational behavior. It is only able to achieve this when it has reached a certain critical mass; that is when it can really develop its internal culture and external image, which is what we have achieved in the last four years.

To what extent is the country's size a challenge in Kazakhstan's aviation sector?

When measured by industry metrics, we are in fact a low-cost airline; however, we have a huge advantage. We are not only low-cost and highly efficient but we are full-frills: we offer everything at excellent standard on board. Our business class is highly rated, and we have flat or nearly flat seats, top quality in-flight entertainment, food and beverage, lounges, and so on. We are therefore a low-cost airline with a high level of service. The most efficient way to fly is to have one single fleet type. However, we cannot do so because some of our routes are short and require an Embraer, while other routes are long and in high demand, like Bangkok in the winter, for which we have the Boeing 767. Therefore, it is not just the size of the country but the nature of the different markets in which we operate that dictates our need for a multi-aircraft fleet. That obviously means that we cannot operate like Ryanair, for example, which only has 737s, or EasyJet, which only has A320s. Notwithstanding our different market profile, we can still be efficient. This is more complicated but we just have to manage around it. However, Kazakhstan's geographical position is a great advantage for us. People think of Kazakhstan as being in the middle of largely uncharted territory, but it is in fact right at the center of the main east/west trade routes. With the new Airbus 321 NEOs we can fly to any city in China, India, Europe, Russia, the CIS region, Southeast Asia, or Japan. That is a great advantage for us. Our location is absolutely our greatest asset.

Can you tell us about Air Astana's expansion plans?

We have recently opened a Tehran route, which is only two-and-a-half hours from here. Tokyo is on the list for 2019, as are Singapore, Shanghai, and Chongqing. New York is a distant plan. This year we plan to fly between Astana and Ulan Bator, Kiev, and Delhi, and increase the number of flights on many existing routes, such as London and Beijing. Our fleet will also expand. Since the tenge devalued, foreign travel is obviously more expensive now and thus the number of local travelers has fallen, but this will stabilize. Currently we fly many people from China to London, from Russia to India, and from Ukraine to Thailand. These are just three examples of what we call network business, an increasingly crucial element of our traffic mix. This is the future for us; we cannot rely on traffic to and from Kazakhstan alone as it is both a small and a structurally challenging market, given its huge size and widely-dispersed population centers.

Has Air Astana benefited from low oil prices?

Oil prices are a double-edged sword; on the one hand, our costs have fallen. However, the market has been very badly affected as the country is dependent on oil for much of its GDP and tax revenues. The overall effect has been that we have lost more than we have gained, though we are still profitable. The years following the 2008 recession were great for us. However, since 2014 when oil prices collapsed and the tenge devalued, it has been challenging. We reached the bottom in 2016. The oil price has partially recovered, but we need to remember that Kazakhstan does not only have oil, it also has huge mineral resources, and as there could well be an infrastructure boom in the US this could a great opportunity. I believe we will come out of the recession of the last two years and get to a good place.

Could you tell us more about the one-dollar stopover initiative launched by Air Astana and the potential of Kazakhstan's tourism sector?

The initiative has been a great success and we are seeing a huge amount of stopover traffic. Our business to and from Kazakhstan is down by 18%. However, this year our transit business is up 92%. Any tourist who comes to Kazakhstan can stay for a dollar a day. There is revenue for hotels, shopping malls, restaurants, nightclubs, and so on. The average Chinese tourist spends around USD150 a day, not including airfare. Last year, we carried approximately 200,000 Chinese tourists, which is a great deal of money entering the economy. The potential for tourism here is transit business. That is how Southeast Asia—Singapore and Hong Kong in particular—built up their tourism industries, through stopovers. Of course there is potential for traditional tourism—there are people who are interested in winter sports holidays in Kazakhstan, and already flying here with us for this reason—but that is not mass tourism. The greatest potential is in stopovers. When people stop over, they take a short tour, get to know the place, and quickly realize that the country has in fact much to offer.

Air Astana is the official carrier of the Expo 2017. How will this affect the company in the medium term?

In the medium term the government's plan is to convert the Expo site into a financial center, and if this proceeds as envisioned, we will see a large amount of business traffic. It is a long-term sustainable project. The challenge is to make sure the financial center does in fact come to pass. In the short-term of course we look forward to carrying many visitors to the Expo. It will showcase the best of Kazakhstan and could not come at a better time.

What are your expectations for 2017?

We are cautiously optimistic. We expect an 11% increase in business this year. We have two more Airbuses A320 NEOs on order for delivery mid-year. The government has made significant investments in infrastructure to jumpstart the economy and provide employment. In our case that affords some tremendous benefits. A brand new terminal will open at Astana Airport in mid-May, coincidentally our 15th anniversary. 2017 will be a watershed year and we expect that over the course of the next 15 years, Air Astana will become a widely-known and much respected global brand.