Published: 8/21/1998

21st August 1998 - Issue 61 The local market has experienced the arrival of the world's largest airlines providing mostly European connections. It is interesting to note thatthere is no regular Asian connections (except through Europe). Lufthansa has been the pioneer airline in the local market and currently flies five times a week to Frankfurt. The Germans are closely followed by KLM Royal Dutch Airlines (thrice weekly to Amsterdam) and Austrian Airlines, (two regular flights a week to Vienna). These airlines are also competing with Turkish Airlines which has twice-a-week regular flights to Istanbul. In late-1997, British Airways launched regular services to Almaty, flying twice a week from Heathrow. These flights have had a serious impact on other international airlines which lost or gradually reduced their market shares, as BA traditionally offers the lowest tariffs and most comfortable London connections. Lufthansa is believed to have the most well established market positions having five regular flights a week. Lufthansa has regular flights to Tashkent (Uzbekistan), Ashgabad (Turkmenistan) and plans further expansion of its Central Asia destinations. KLM also has a good share of the market, employing the most flexible tariff policies, special discounts for local residents and tourist agencies. KLM also controls the neighbouring Kyrgyzstan airline market through its authorised agents and many Kyrgyz residents travel to Europe and worldwide, via KLM through Almaty. Austrian Airlines successfully competes in the local market due to its combination of travel and tourist services. It offers tours around Central Asia and China, as well as connections to China. Austrian Airlines has committed large resources to the tourist sector, bringing hundreds of European visitors to local attractions. Turkish Airlines also competes for the market share but its Istanbul flights are mainly popular with local travellers rather than the international community. Turkish Airlines' business is undermined by multiple local charter flights for the shopping tourist, as Turkey is a major shopping hub for many CIS merchants. The British Airways operation launch was a real shock for competing airlines in late-1997, as BA applied a totally different flight schedule (morning departures) and gained a huge market stake in almost no time. BA won the business of many British and US/Canada passengers, who comprise the majority of the local international business and investment community. BA also has serious plans to penetrate the local market and is about launch regular flights to some other destinations. The average price for an Almaty-Europe economy ticket (London, Amsterdam, Frankfurt, Vienna) is about US$900. while a first class return ticket can be US$5000 and more. Many locally operating airlines have special low-priced tariffs for local residents. Most of the aforementioned airlines have a well-established agent network in Central Asia and particularly in Kazakhstan. The agent commission is no more than 3%. Almaty only has around 20 travel agents selling tickets for several airlines at a time. Most of them have SITA connections and deal directly with the airlines. Although Almaty is no longer the capital of Kazakhstan (Astana took over as capitail from 10 December, 1997), it remains the major airline hub in Central Asia and still homes the majority of businesses. Only Austrian Airlines plans to launch flights from Vienna to Astana, but with the remaining Almaty connection. Almaty has advantages in terms of climate, particularly in the winter, while Astana is influenced by cold Siberian cyclones imposing long-term breaks in air operations. Air Kazakhstan, the national carrier also relies on international flights, but until recently all of its six destinations in Europe and Asia have limited onward connections. Only a few months ago it allied with Austrian Airlines for further connections. The company's current international destinations include Budapest, Vienna, Tel Aviv, Hanover, Istanbul and Urumqi. However, currently Air Kazakhstan is undergoing major internal restructuring and has announced the sale of part of its aircraft fleet The company regularly encounters fuel supply and problems of poor airport service and high prices. The company also competes with many charter airlines which offer cheaper services. Iran Air, Pakistan International Airlines (PIA), China Airlines and Uzbek Airlines, which specialise in the shopping tourism services, control very little of the market and also compete with local charter airlines. Kazakhstan still lacks consumer products and these airlines providing connections with such shopping centres as Mashed, Karachi, Urumqi and Delhi are likely to keep their presence in the local market. Kazakhstan's International Airline market remains very attractive in terms of air cargo operations as there is a permanent freight exchange between the US, Europe and Central Asia. The local airlines find it hard to compete in this market due to the factthey use USSR or Russia-made aircraft, whichhave little cargo capacity. The major problem facing Kazakhstan's international airline market is the lack of direct Asian flights: to travel, for instance, to Japan you have to go west to Europe and then east to Tokyo. (AL898.1)

Article ID: 249