FIGHT & FLIGHT

Kazakhstan 2018 | TRANSPORT | INTERVIEW

TBY talks to Blair Pollock, CEO of Qazaq Air, on achievements over the last year, privatization plans, and the evolution of the aviation sector in Kazakhstan.

Blair Pollock
BIOGRAPHY
Blair Pollock has 23 years of experience in investment banking first at Merrill Lynch and Citigroup London and later at Troika Dialog Kazakhstan/Sberbank CIB. In April 2013, in coordination with Alpha Project and the Sovereign Wealth Fund of Samruk Kazyna, he decided to start a new domestic airline in Kazakhstan. He became head of the Qazaq Air project in February 2015 and is its founding CEO. He has an MBA from INSEAD and an engineering degree from the University of Edinburgh. He is a former Royal Air Force cadet and private pilot.

What have been the major achievements at Qazaq Air over the past 12 months?

From an operational perspective, we increased the number of routes to 15, with six of those either not served by other airlines or underserved. Proving that these routes are economically viable has been great, as we have also successfully increased our passenger numbers by 54%. Our revenues increased by a similar amount, which has exceeded the expectations of the management and our shareholders. We are pleased with the performance, though pricing power remains weak as ticket prices did not increase in 2017. This is great news for passengers, though as a low-cost carrier it makes it harder for us to differentiate ourselves from the other airlines that have relatively low ticket prices. Ticket prices remained flat in 2017, and our tickets were in fact 3% less expensive than in 2016. The economy is recovering and we have seen increased load factors on our aircraft to about 70%, which is great for an overall season. We have also changed our networks and stopped serving some of the longer routes. We have six flights that originate from Astana and have managed to develop strong hubs in the capital, as well as Almaty and Atyrau.

What have been some of the key operational developments at the airline?

We are taking advantage of new technologies in matters of distribution. Currently, 100% of all sales go through an online platform, though more than half are direct online ticket sales on our website. This is likely the highest of any business in Kazakhstan. We have also added additional revenue generators, such as reserving seats or purchasing a meal. We seek to follow many aspects of a typical low-cost model. This allows us to profit by delivering services that passengers want to pay for. In terms of our fleet, we have just three aircraft managing our entire route, and this is the significance of operating new aircraft as they are extremely reliable. We do need more aircraft and have ordered two new aircraft that will be delivered in March and April 2019. This will enable us to increase the frequency of our existing routes and also offer some new routes. Another major development is making progress on our plans to get our IATA Operational Safety Audit (IOSA). We have done the audit and will receive our certificate in 1Q2018, allowing us to fly internationally. We launched our first international flight in 2017, where we had a regular summer charter flight to Kyrgyzstan.

How are privatization plans progressing at Qazaq Air?

We are on the list for privatization and, if there are interested investors, they are welcome to talk to our shareholders about that at any time. Part of being a proper commercial business is being profitable and an attractive business to future investors in the company. This is an ongoing process and we expect to be a profitable business by 2020. In 2017, we had over 50% revenue growth, which indicates a strong performance trend that will make us an attractive proposition. We are taking steps to prepare for profitability, which includes having proper audited accounts and the best corporate governance of any company in Kazakhstan. We have a board of independent directors and all of the tools for excellent corporate governance and risk management compliance that one would expect to see in a much bigger airline.

How do you see the aviation sector evolving in Kazakhstan?

There are four domestically active airlines in Kazakhstan, which is a fairly large number. This competitive sector is to the benefit of the Kazakhstani travelling public. Travelers receive great value in terms of ticket prices with us; they are served by a young fleet of two and a half years that will be further boosted by our new aircraft. There is no other player in the domestic aviation market with more than a 50% market share. The picture three year ago was extremely different. Overall, traffic in Kazakhstan picked up by 28% in 2017 and we plan to put on new routes and frequencies to benefit people from the regions.

What are your expectations for 2018?

We will not be able to deliver the same growth that we delivered in 2017. 2016 was our real first start-up year and 2017 was when we showed what it is like to run an efficient company. In 2018 we will not have new aircraft arriving and will thus not benefit from increased capacity. We are increasing our load factor and the efficiency of our route network planning, and sales ancillary revenues are anticipated to increase as we have only just started serving food and additional services on the aircraft. Overall, we are optimistic about 2018 and look forward to the years ahead.