Brief Overview of Civil Aviation in Kazakhstan

Economic development, population, geographical location and the extent of the territory make Kazakhstan one of the most important players in the civil aviation market of Central Asia. Also, many transcontinental routes between Europe and Asia now pass through the territory of Kazakhstan, which previously passed along the Trans-Siberian routes through Russia.

1. The system of public ad­min­is­tra­tion of civil aviation in Kazakhstan is somewhat unique in the post-Soviet space

Main functions of state regulation are performed by the State Institution — Civil Aviation Committee of the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan — an agency of the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan, which performs regulatory, implementation and control functions, as well as participates in implementation of the strategic functions of the Ministry in the field of civil aviation.

At the same time, in 2019, the Aviation Administration of Kazakhstan began its activities with 100% state participation, whose main function is technical control and supervision in the field of flight safety and aviation security.

The created model is similar to the model of the British State Civil Aviation Agency (UK CAA), which is also a state corporation. The Administration is funded by international air navigation fees, which is also used in foreign practice.

This approach has been introduced for the first time in Kazakhstan and among the CIS coun-tries. A similar management model is common in all the states of the European Aviation Safe-ty Agency (EASA), is used in developed countries (Singapore, UAE, France, etc.) and is recog-nized by the International Civil Aviation Organization (ICAO).

According to the comments from sources, the Aviation Administration of Kazakhstan is charac-terized by flexible and advanced approaches, whereas the Civil Aviation Committee is more characterized by a bureaucratic approach.

By the end of 2023, Kazakhstan airlines, according to the Ministry of Transport of the Republic of Kazakhstan, transported 13.3 million passengers, which is 15% more than in 2022. This result became another historical record for passenger air transportation. The previous record was set in 2022, when 11.5 million people used air transport in Kazakhstan. In pre-pandemic 2019, the volume of passenger air traffic amounted to 8.6 million people. At the same time, in 2023, Kazakhstan’s airports served a total of more than 26 million passengers (an increase of 22%), that is, foreign air carriers occupy almost 50% of the air transportation market in Kazakhstan.

Cargo transportation in January-December 2023 amounted to 23.8 thousand tons, which was by 2.9% less than a year earlier. Out of these, 14.2 thousand tons were accounted for in Almaty, 6.4 thousand tons — in Shymkent, 3.2 thousand tons — in Astana.

In the conditions of the virtually closed airspace of the Russian Federation, Kazakhstan is be-coming increasingly attractive for transit flights. In 2023, the air navigation system of Kazakh-stan handled about 415 thousand flights, of which transit amounted to about 263 thousand flights, i.e. more than 63%.

According to the Ministry of Transport, the volume of domestic air traffic has fully recovered and amounted to 640 flights per week on 50 routes as of the end of 2023. In order to ensure transport accessibility to socially significant destinations and the development of domestic tourism, 23 domestic air routes in seven regions are subsidized.

International air traffic is operated to 28 countries, in 2023 new flights to 13 countries were resumed and opened on 23 routes with a frequency of 57 flights per week. According to the Ministry, the route network with the countries of the Persian Gulf, Asia and Europe is expand-ing rapidly. In total, international flights are operated on 86 routes with a frequency of 484 flights per week, and 48 of these routes are operated by the country’s largest carrier, the Air Astana group, which also includes the low-cost airline FlyArystan.

In January-December 2023, investments in fixed assets in the field of air transport in Kazakh-stan reached 57.7 billion tenge, which is 2.3 times more than a year earlier. The largest volume of investments fell on Shymkent: 34.4 billion versus 4.4 billion tenge a year earlier. Another 17.8 billion tenge was directed to Almaty, 5.4 billion tenge — to Astana, 27.4 million tenge — to the Almaty region.

The revenues of air transport enterprises from transportation amounted to 745.1 billion tenge, including 731.9 billion tenge from passenger transportation, and 13.2 billion tenge from cargo and baggage transportation.

In 2023, Kazakhstan airlines received 10 long-haul aircraft: the flagship Air Astana received one Airbus A321LR, the low-cost airline FlyArystan received five A320s, the private airline SCAT re-ceived four Boeing 737s, as a result of which the total carrying capacity increased by 26% - from 12 to 15 thousand seats. By the end of 2025, in accordance with the current signed agreements, the air fleet will be replenished with another 25 aircraft. Thus, the number of air-craft will increase to 124, and the carrying capacity will increase by another 32%.

In December 2023, Kazakh Minister of Transport Marat Karabayev said that in the next six years, the number of air passengers in Kazakhstan will at least double, and cargo transporta-tion will increase eightfold by 2030. According to the Minister, in order to develop the cargo transportation segment, three new air cargo carriers are at the creation stage, but he did not disclose the details.

In order to overcome the shortage of personnel in civil aviation, according to Marat Karabaev, "the issue of training specialists according to the standards of the European Aviation Safety Agency (EASA) is being worked out with the involvement of a strategic partner — the National School of Civil Aviation of France" (ENAC, Ecole Nationale de l’Aviation Civile).

At the end of January 2024, Minister of Transport Marat Karabayev announced that Kazakhstan was ready to transfer its airports under the management of European investors. The largest airports of the republic — Astana and Almaty — are already under the management of foreign holdings. "We are ready to transfer the remaining 22 airports in Kazakhstan to the private sec-tor under the management of European investors. There is great potential for becoming a transit hub between Asia and Europe," Karabayev said.

2. Short List of Kazakhstan Airlines

Scheduled Carrier: Air Astana and Fly Arystan, Qazaq Air, SCAT Airlines and Hi Sky
Passenger Charter: Avia Jaynar, Fly Jet KZ, Jet Airlines, Kaz Air Jet, Kazairtrans, Sayat Air, Zhetysu
Cargo Carrier: Air Trust, East Wing, Irma Air Service, Jupiter Jet
Scheduled Carrier: Air Astana and Fly Arystan, Qazaq Air,  Airlines and Hi Sky
Passenger Charter: Avia Jaynar, Fly Jet KZ, Jet Airlines, Kaz Air Jet, Kazairtrans, Sayat Air, Zhetysu
Cargo Carrier: Air Trust, East Wing, Jupiter Jet, Irma Air Service

3. From the above table, you can select a super-short list of the most important carriers

Air Astana is the flagship airline of Kazakhstan. Together with its subsidiary airline, FlyAristan, it occupies about 70% of the market. Air Astana is a strong airline with clear traditions of the British management, and the Air Astana Group President Peter Foster was at the forefront of its creation some 20 years ago. The airline is focused on international markets; contacts with Russia have been discontinued.

Air Astana Fleet Is Presented in the Following Table (February 2024):
As you can see, Air Astana has medium- and long-haul fleet, and in the segment of medium-haul aircraft, the emphasis is on the Airbus A320 family with an almost complete transition to NEO. It should be noted that compared to the situation six months ago, Air Astana has already withdrawn 10 A320−200s from its fleet (some of them were transferred to its subsidiary FlyArystan) and six A320−200NS, but the fleet has been replenished with two A321−200NX (LR). The airline is considering the possibility of increasing the range of its Airbus A321 NX (LR) by adding an additional fuel tank to the aircraft in the center section, which will allow to perform flights from Almaty to Tokyo and Paris.

In the long-haul aircraft segment, it is planned to replace the outdated Boeing 767 with the latest Boeing 787. Initially, the Boeing 787 will be used on existing 767 routes. By the end of 2025, Air Astana expects to begin flights to New York, although non-stop flights may be suspended if the Russian airspace remains closed to the carrier, which stopped all flights to, from and over Russia in March 2022. In this case, the airline may make an intermediate stop in Aktau on the east coast of the Caspian Sea in Kazakhstan to service oil transportation to and from this region, as is currently done for flights to and from London. In addition, airports in Kazakhstan will require the U.S. Category A certification.

In addition, since 2024, the airline has begun the gradual decommissioning of its fleet of regional Embraer E190-E2, the number of aircraft of this type has been reduced from 5 to 4. As previously reported by Air Astana President and CEO Peter Foster in an interview with Kurt Hoffman, "FlyArystan", a subsidiary of Air Astana, no longer needs regional aircraft".

By 2027, the airline expects to expand its fleet to 64 aircraft.

In 2022, the Air Astana Group transported about 7.3 million passengers, having completed approximately 52 thousand flights to 16 countries. The cumulative average annual revenue growth rate was 60.6% for the three-year period which ended on December 31, 2022. In 2023, the Group’s traffic volume exceeded 8 million passengers, with revenue of $ 1.186 billion.

The Air Astana Group has become the first in the Central Asia and the Caspian Sea region to increase the operating fleet to 50 long-haul aircraft (including the subsidiary FlyArystan). The expansion of fleet is in line with the Air Astana strategy to increase the fleet to 80 aircraft by the end of 2028.

Air Astana aims to become a full-service hub airline that will connect Central Asia and the Caucasus region with major markets: China, India, the Middle East and Europe. According to Air Astana, using mainly narrow-body aircraft for this purpose will allow it to gain an advantage over competitors which operate wide-body aircraft to these destinations. In addition, the company will continue to develop a network of tourist routes and premium business transportation to neighboring international markets.

In early February 2024, Air Astana conducted an IPO — the initial public offering of its securities, which was attended by the London Stock Exchange (LSE), Astana International Exchange (AIX) and the Kazakhstan Stock Exchange (KASE). The starting offer price was KZT 1073.83 ($ 2.4) per common share and $ 9.5 per global depositary receipt (GDR), which corresponds to four shares (GDR is a secondary security backed by the company’s shares). Based on these prices, the estimated market capitalization of Air Astana was approximately $ 847 million (for comparison, the market capitalization of the largest airline in the Russian Federation, Aeroflot, currently stands at about $ 1.7 billion, or about 155 billion rubles).

The conducted IPO, subject to the exercise of all options, brought $ 370 million to the Air Astana group. The number of applications from Kazakhstani investors to participate in the IPO exceeded the offer. As a result, 58% of the securities were placed on the local market, while international investors received 42%.

The existing shareholders, the National Welfare Fund "Samruk-Kazyna" and the British BAE Systems, sold part of their shares, reducing their share from 51% to 41.0% and from 49% to 15.3%, respectively.

As part of the IPO, the Group raised $ 120 million to accelerate the next stage of its development. It plans to increase the aircraft fleet from 50 to 80 by 2028, to increase the frequency of flights on existing routes and to open flights to new regions.

The European Bank for Reconstruction and Development (EBRD) acquired a 5% stake, investing $ 41.99 million. The EBRD called the IPO of Air Astana an important stage of privatization for the economy of Kazakhstan, which is mainly controlled by the state. According to the bank, the reduction of the state’s share in the largest airline to less than 50% due to the IPO creates an important precedent for the country and Central Asia as a whole. At the same time, the very fact of the EBRD, an AAA-rated investor, participation in the IPO, gives additional confidence to institutional and private investors, which are considering investment opportunities in Kazakhstan and Central Asia.

"We are confident that the initial public offering of shares will contribute to the next stage of growth of the Air Astana Group," said Peter Foster, President of the Group.
FlyArystan is a low-cost airline, the Air Astana’s subsidiary, which currently operates as a division of the parent airline, but expects to receive its own operator’s certificate in 2024. FlyArystan plans to develop by entering underserved routes or routes of a single operator within a three-hour radius in Western and Central China, India, the Persian Gulf, Pakistan and Eastern Europe.

FlyAristan Fleet as of the Beginning of 2024
The airline, which is led by Managing Director Adrian Hamilton-Manns, is actively developing as a classic low-cost airline. Domestic flights account for about 85% of FlyAristan operations. "The market has tripled, — Hamilton-Manns told Kurt Hoffman in a recent interview. — From 2.5 million per year to the current 8 million. We expect to transport 4.5 million passengers this year, versus 4.2 million in 2022". By 2027, the airline expects to expand its fleet to 30 aircraft.

The airline operates the Airbus A320neo in a layout with 188 seats, with eight more seats compared to the standard one. The load factor is 95%, so the airline focuses on the Airbus A321neo with a capacity of 240 passengers, but their deliveries will begin only in two years.

FlyArystan’s expansion plans to other countries in the region are very interesting (following for example of Hungarian Wizz Air or Irish Ryanair). Two options are being considered — either direct basing of aircraft at foreign airports, which requires obtaining appropriate commercial rights for air transportation, or the creation of joint ventures with local airlines, which is much more difficult organizationally, but makes it possible to sell air transportation from other countries. As a first step, we consider basing one aircraft in Kutaisi (Georgia), where FlyArystan already flies, and obtaining commercial rights to operate flights to third countries.

In a conversation with Kurt Hoffman, Adrian Hamilton-Manns notes the active development of aviation in Uzbekistan ("Uzbekistan has suddenly become the largest startup of low-cost airlines in the world; nine carriers are planning to be launched, four are already operating"), and also notes the opportunities in Turkmenistan and Tajikistan, which have limited air traffic.

Thus, the topics of low-cost transportation development and air traffic liberalization, which can be considered interconnectedly, are interesting.
SCAT Airlines is a private airline based in Shymkent and operated by the Russian-speaking management; unlike Air Astana, which stopped flights to Russia, SCAT took advantage of this opportunity and increased the number of flights. It occupies approximately 24% of the market.

SCAT Airlines Fleet as of February 2024
In terms of the number of aircraft and carrying capacity, SCAT Airline ranks second in Kazakhstan after Air Astana. It should be noted that the fleet is very diverse, although it is based on medium-haul Boeing 737s of both the classic generation (-300 and -500) and the new generation NG (-700 and -800) and the latest MAX (-8 and -9). In addition, the fleet includes long-haul narrow-body Boeing 757 and wide-body 767, as well as regional CRJ. In general, the park is quite old. Obviously, SCAT is one of Boeing’s promising customers in Central Asia.

In November 2023, SCAT Airlines announced an order for seven Boeing 737 MAX8 aircraft at the Dubai International Airshow. Doubling the fleet of modern MAX will allow the private carrier from Shymkent to expand its route network, primarily by opening flights to Europe.

"Today SCAT is the most dynamically developing airline in Kazakhstan… Replenishing the fleet with seven more new 737MAX-8s will increase the airline’s carrying capacity, will positively affect the timeliness of the schedule and air ticket offers, and will also allow the company to expand its own route networks and offer passengers even more travel destinations," said Vladimir Denisov, President of the airline.

This contract, which has been in the official Boeing Orders & Deliveries book for some time (in the "unnamed customers" section), is extremely important for the American aircraft manufacturer: the main narrow-body aircraft in Central Asia are the Airbus A320 family aircraft from Europe.

"This new order is a testament to SCAT’s confidence in the value and performance of the 737MAX family," said Brad McMullen, Senior Vice President for Global Sales and Marketing at Boeing Commercial Airplanes. "We look forward to supporting their expansion plans and continuing to play an important role in their further success."

In March 2018, SCAT was the first recipient of re-engined 737 MAX8 in Central Asia and in the post- Soviet space. Currently, the airline operates three MAX-8s and five more spacious MAX-9s.

According to the Aviation Administration of Kazakhstan, the incident with the Boeing 737MAX-9 aircraft of the American Alaska Airlines, when during the flight the deactivated emergency hatch of the passenger compartment, measuring 0.66×1.3, came off, and the subsequent flight bans and airworthiness directives did not affect the Boeing 737 aircraft operated in Kazakhstan.
Qazaq Air was established in 2015 to develop regional transportation in Kazakhstan. The airline fleet includes five DHC-8-Q400 turboprop aircraft with the average age of 7.2 years, and the total capacity is 390 seats. The airline accounts for about 6% of the Kazakhstan market.

Qazaq Air Fleet as of February 2024
In April 2023, the Kazakhstan Welfare Fund "Samruk-Kazyna" allocated more than $ 77 million to Qazaq Air for the purchase of five aircraft. The type of aircraft is not reported in the news. Earlier, there were talks about the possibility of acquiring 20 Boeing 737 MAX aircraft at the expense of the Fund, but, obviously, the allocated amount is not enough for this.

Financing of Qazaq Air is being discussed in the context of the need to increase competition in the air transportation market in Kazakhstan, where, in fact, only four companies listed above are represented so far. The rest are either niche players like business aviation, or startups whose prospects remain vague. So, the topic of developing competition following the example of Uzbekistan also looks very interesting.

Air transportation in Kazakhstan is growing at a record pace, and Qazaq Air is working at an operating profit and had revenue of $ 44.3 million in 2022.

Qazaq Air served 588,000 passengers in 2023, which is the highest figure since its inception in 2015. This was announced by Chairman of the Airline’s Management Board Jerking Nauryzbayev at a meeting with Senate Deputies of the Kazakhstan Parliament representing the Zhetysu region.

The aircraft load factor was 84%; the flight on-time performance indicator was 77%. In the winter season of 2023−2024, the airline operates 10 domestic flights, and also flies from Kazakhstan to the Russian cities of Yekaterinburg, Novosibirsk and Omsk.

Since the beginning of 2024, Qazaq Air has added three destinations to its route network: international flights from Astana to Novosibirsk (Russia) have been resumed, domestic subsidized flights from Zhezkazgan to Ust-Kamenogorsk have been launched and flights from Kostanay to Turkestan, also subsidized, have been restored. All flights are operated with a frequency of 2 times a week.

The Head of the Airline confirmed that Qazaq Air plans to increase its fleet: "in the medium term due to the same type of aircraft" (now it has five turboprop De Havilland Dash 8−400), and "in the long term, the possibility of attracting a jet fleet to expand the geography of flights is being considered."

The funds necessary for development are planned to be raised through privatization.

In January 2024, the Kazakhstan National Welfare Fund "Samruk-Kazyna" announced a repeat tender for the privatization of the regional airline Qazaq Air. The previous attempt ended in November 2023, when within three months there were no buyers willing to purchase from 49 to 100% of the airline’s shares.

The terms of the second attempt at privatization have not changed, although it would seem that the first failure could have contributed to lower prices. Investors were again offered to buy the same block of shares at a minimum price for the entire company of 10.2 billion tenge ($ 22.4 million). However, the terms of the new competition included a 20-year delay in the airline’s payment of the debt of 38 billion tenge (83.5 million dollars) spent by the Samruk-Kazyna Fund on the aircraft purchase.

However, already at the first stage, the repeated two-stage tender for the sale of the company’s shares, announced on January 9, was declared invalid due to the lack of competitive bids that meet the terms of the competition, Samruk-Kazyna Fund, the sole owner of Qazaq Air, reported on January 30.

Samruk-Kazyna Fund, with the assistance of an independent consultant from KPMG Tax and Advisory LLP, will continue to take "further measures to work out the issue of transferring Qazaq Air to a competitive environment."