Kazakhstan's aviation sector experiencing significant resurgence post-pandemic - ADB

The introduction and expansion of LCCs have not only boosted passenger traffic but have also made air travel more accessible and affordable for a broader segment of the population.

Overview of the aviation market in countries of Central Asia Regional Economic Cooperation Program (CAREC)

The overall CAREC air transport market, excluding Afghanistan and the PRC, consists of more than 50 million passengers per annum. The 50-million passenger milestone was reached prior to the pandemic, resulting in CAREC (excluding Afghanistan and the PRC) accounting for about 1.2% of the 4.5 billion scheduled passengers that were transported globally in 2019. CAREC (excluding Afghanistan and the PRC) again reached 50 million passengers in 2022 as the overall CAREC aviation market essentially fully recovered from the pandemic.

Pakistan is by far the largest market, accounting for 34% of the total scheduled airline seat capacity in CAREC in both 2019 and 2022. Kazakhstan is second largest, accounting for 21% in 2019 and 22% in 2022. The third largest market, Uzbekistan, accounted for 11% and 12%, respectively.

Kazakhstan and Pakistan are the only CAREC countries with significant domestic markets in CAREC. In 2022, Kazakhstan and Pakistan accounted for about 55% and 23% of total scheduled domestic seat capacity in CAREC, respectively.

Azerbaijan, the Kyrgyz Republic, Turkmenistan, and Uzbekistan all have small domestic markets, with each accounting for 5% or 6% of total domestic seat capacity in CAREC.

Georgia and Tajikistan have very limited domestic services, while the scheduled domestic passenger traffic volumes in Mongolia are also relatively insignificant.

Overview of the aviation market in Kazakhstan

The aviation market in Kazakhstan has shown remarkable resilience and growth in the aftermath of the COVID-19 pandemic. As of the third quarter of 2023, Kazakhstan's international seat capacity has reached 109% of pre-pandemic levels, showcasing a robust recovery.

A significant driver of the recovery has been the emergence and rapid growth of low-cost carriers. FlyArystan, Kazakhstan’s first low-cost airline, has been at the forefront of this transformation. Launched as a subsidiary of Air Astana in 2019, FlyArystan has quickly established itself as a major player in the domestic and regional aviation markets.

“The evolution and rapid growth of Kazakhstan’s air transport market since the launch of FlyArystan is the best example in CAREC of how a local LCC can transform a market,” says the report of ADB.

Kazakhstan’s domestic market has nearly doubled in size since FlyArystan’s launch with low fares stimulating demand and persuading millions of travelers who previously relied on trains or buses. Major airports like Almaty have seen significant increases in domestic seat capacity, bolstered by the operations of low-cost carriers.

“Kazakhstan has had one of the world’s fastest-growing domestic air transport markets during this period. This would not have been possible without the launch of an LCC and policy adjustments that were implemented by the Kazakhstan government to facilitate LCCs,” according to the research.

For example, Kazakhstan previously required that all airlines provide free baggage, a regulation that needed to be removed given that charging for checked luggage and other items such as food is a fundamental component of the LCC model. Kazakhstan sensibly agreed to change this regulation, enabling LCCs to enter the local market.

Kazakhstan’s airports are inefficient

Despite the complete recovery from the pandemic and the growth of the aviation market, there are still problems that hinder further development. According to the report, most of Kazakhstan’s airports are inefficient and outdated.

“For many years there was no development, leading to quality and efficiency issues. Airport infrastructure is now improving; a new airport opened in Turkistan in late 2020 and a long-overdue terminal expansion project is now underway in Almaty. Passenger terminals are also being rehabilitated at several smaller airports, including Kostanay and Uralsk, while a new terminal is being constructed at Kyzylorda. However, more major airport infrastructure upgrades are needed, and it is critical that Kazakhstan makes the necessary investments without further increasing airport costs as this would further erode its competitiveness in attracting airlines,” says the research of ADB.

The report also states that as these airports are refurbished and modernized, it is important not to suddenly increase taxes and fees as this would impact demand. Domestic air travel in Kazakhstan, particularly outside the main cities, is highly price sensitive. As Kazakhstan’s airports consider new strategies, it is sensible to focus more on LCCs.

Airports should try to stimulate traffic by keeping fees and charges low. Kazakhstan’s airports should consider terminals that are designed specifically for LCCs. As LCCs can use simple facilities that require minimum investment, LCC terminals would facilitate faster growth in the near term.

Thus, FlyArystan aims to open Kazakhstan’s first LCC terminal at Astana Airport, which would be used only for FlyArystan domestic flights.

Another recommendations for Kazakhstan

To enhance Kazakhstan's aviation sector, a series of interconnected recommendations have been proposed. Firstly, there's a call to shift focus towards the international market, supported by more liberal policies to foster the growth of LCCs. Aligning with this, adjustments to the open skies policy are advised, expanding its scope to include additional country pairs and fifth freedom rights to bolster connectivity.

Moreover, revisiting aviation and tourism strategies is crucial, ensuring alignment and fostering coordination among stakeholders through joint programs aimed at developing international services. To attract more visitors, further liberalization of the visa policy and intensified promotion of international tourism are recommended.

Lastly, collaborating with other CAREC countries to enhance intra-regional connectivity and introduce supportive policies for LCC growth would further solidify Kazakhstan's aviation landscape.

Future outlook

The future of Kazakhstan's aviation market looks promising, with continued investments in airport infrastructure and a focus on supporting the growth of low-cost carriers. The ongoing liberalization of air transport policies in the CAREC region is expected to further enhance market dynamics, making Kazakhstan a pivotal hub for regional air travel.

In terms of the future of CAREC countries as a whole, according to the report, improving connectivity within CAREC is critical to boosting economic ties and tourism among CAREC countries. However, CAREC countries continue to do very little to promote intra-CAREC air travel. There are virtually no incentive programs to support new intra-CAREC routes, and marketing assistance for airlines launching new intra-CAREC routes is limited.