Joint venture with BAe Systems creates new Kazakhstan airline, which could prove significant rival to Air Kazakhstan (574 words)

Published: 9/19/2001

Announcing the creation on 29th August of Kazakhstan's airline JV with BAe Systems, Karim Masimov, Minister of Transport and Communications marked the official launch of Air Astana. The agreement follows a Memorandum of Understanding signed in November 2000 between the two parties during a visit by the Kazak President Nazarbayev to the United Kingdom. According to press reports, after extensive discussions, the two parties agreed on the airline's name and the operating standards for the new carrier, which will be held equally between the two parties. Masimov confirmed that all the principle elements of the agreement between the two sides have been decided and the government has signed the decree authorizing its formation, although additional work is apparently still being carried out on the shareholders' agreement. Peter McDonald of BAe Systems was very optimistic at the announcement of the new airline and assured journalists locally that the signing of the final documentation was imminent and that registration would follow shortly afterwards, although there has been no official confirmation of this from either side. According to its business plan, the airline is to be capitalized at $17m. The plan makes clear that the airline's business will be concerned with air transportation within Kazakhstan. Masimov said that, initially, it would fly Boeing 737-200s, with 737-300s added within a year to replace the -200s, scheduled to operate on the route between Almaty - the country's largest city - and the new capital at Astana. Discussions on the balance of the fleet are reported to be continuing: McDonald indicated that turboprops would probably be the aircraft for the regional routes, but was not specific about which turboprops will be operated by the carrier, which is due to begin operation this autumn. Commenting on the potential competition between Air Astana and the former state-controlled carrier, Air Kazakhstan, Masimov acknowledged that the new carrier could become a serious competitor and McDonald has reportedly hinted that the airline could grow to “the level of a national domestic carrier”. It is clear - initially at least - that the two carriers will not be in aggressive competition, as Masimov confirmed that the state intended to keep its holding in the much restructured Air Kazakhstan Group and that the launch of the new airline did not mark the beginning of a price war within the country. BAe has so far made commented only generally on its commitment to Kazakhstan, but it seems that this investment is seen as an entry into "longer term" relations with the country, across a broad range of areas: some well removed from operating a domestic airline. Masimov added to this interpretation by commenting that the government was considering the creation of a maintenance centre for Air Astana simultaneously with the building of the new airport for Astana. The centre is currently being discussed with both Boeing and BAe, so as to allow local maintenance of the airline's fleet. The minister also mentioned further involvement between BAe and Kazakhstan, but did not discuss the detail. It is unclear at this point if Air Astana has superceded the new carrier built on Astana-based Tselina Air Company and headed by former Minster of Energy, Mukhter Ablyazov, but this seems likely, given that Masimov was a sponsor for the airline announced in the early part of this year.

Article ID: 2768