The era of sky-high prices for air travel might be coming to a close in Kazakhstan.
The authorities are showing increasing discomfort with the dominance of the quasi-monopolist, state-controlled Air Astana. That said, while there is increasing competition, it is not yet doing much to add a price-busting edge to the market.
Earlier this month, a court in Almaty fined Air Astana the equivalent of nearly $15 million for abusing its grip over the market. After checks conducted by the antimonopoly service and the transportation prosecutor’s office, the carrier was found culpable of keeping its prices unjustifiably high.
The sting has been some time in coming. Customers have been grumbling about the problem for years. At the end of May, Prime Minister Alikhan Smailov joined the chorus at a government meeting.
“An hour-and-a-half flight with this so-called low-cost airline from [the capital] Astana to Almaty can cost twice as much as a similar route in Europe, the United States or China,” said Smailov, referring to Air Astana’s budget airline subsidiary, FlyArystan.
He did not hold back.
Smailov went on to accuse the airline of being more interested in its bottom line than the needs of its customers. It is this that has led to a spate of last-minute flight cancellations and chronic delays, he said. The problem is worsened by the fact that Air Astana fails to keep its passengers informed in good order.
“Unfortunately, representatives of the airline avoid direct dialogue with passengers, do not comment on the reasons for the delays, and they do not offer adequate service,” the prime minister complained.
Air Astana chief executive Peter Foster, a British national, was present at the government meeting. He defended his company by attributing the high fares to “dynamic pricing,” whereby the prices go up in line with demand. This practice allows the airline to make up for losses on days where demand is low, he said, noting that the same was done by all major world carriers.
Foster has some persuading to do, as many frequent fliers are unconvinced.
On the day of the government meeting, Denis Krivosheev, an economist, posted screenshots comparing the price of a FlyArystan flight from Almaty to Astana – $107 – to a roughly similar duration flight between the two main cities of Russia, Moscow and St. Petersburg, which he said was five times cheaper.
“Foster lies to everyone! We have no low-cost airline!” Krivosheev wrote.
Krivosheev ventriloquized the sentiments of many a Kazakh frequent flier when he complained that he saw the problem as one of a monopolist run by a British manager who had "captured the sky" with the connivance of the government.
Air Astana is majority owned by the government, but a 49 percent stake is controlled by British defense company BAE Systems Limited. FlyArystan was set up in 2018 in response to years of complaints about the limited options for affordable air travel within the country.
The geography underlying the demand is clear to see. Kazakhstan is the ninth largest country in the world by area, but the population is small and flung across distant cities. Taking the train from Almaty to Astana takes an entire day. In summer, when the weather grows stifling, riding one of the cheaper trains is a feat of endurance.
It was no surprise that the arrival of FlyArystan sparked such optimism.
"This is great! A real opportunity to fly for those who were previously unable to do so because of the high cost. Now even a student can buy an air ticket,” YouTuber Sagadat Utegenov said in a 2019 video that conveyed the upbeat mood of the time.
In the first quarter of 2019, more than 280,000 tickets were pre-sold. The airline’s only two planes performed 14 flights daily, with an average passenger load of 94 percent.
The affordability wrought a cultural change. For many Astana residents, it became a custom to spend the odd weekend down in Almaty, which is typically considered a more livable city for its pedestrian-friendly center and its proximity to the mountains.
The airline’s success enabled it to expand its fleet to 12 planes and to extend its reach to destinations in Azerbaijan, Georgia, Kyrgyzstan, and Turkey, as well as Egypt and the United Arab Emirates.
At some point, however, the prices began creeping up.
Ulzhan Sarsenbayeva, director of the Almaty travel agency Traveloperator.kz, notes that domestic flights in Kazakhstan are now much more expensive than comparable routes in other countries. That means she is constantly having to fend off the complaints of customers, she said. What is more, it feels to many that the rise in prices has been accompanied by a drop in the quality of service.
“Passengers pay quite a lot of money and wonder why many hours of flight delays have become the norm, while airline representatives do not even try to keep them informed about what is happening and when flights are scheduled,” Sarsenbayeva told Eurasianet.
Another unpopular practice that FlyArystan borrowed from international peers is double-booking, wherein more seats are sold than are available. In well-developed aviation markets, this is done with the assumption that replacement routes can be provided, and passengers are often in a good position to bargain hard for compensation. No such frills are available to Kazakh flyers.
“Despite all this, people are flying ever-more often, and those who do not have enough money are paying for flights or tours in installments,” Sarsenbayeva said.
Air Astana has its defenders in the government. In April, Deputy Industry and Infrastructure Development Minister Almaz Ydyrysov explained the airline’s prices as the result of rising costs of jet fuel, leasing aircraft and tribulations on the currency market.
Krivosheev does not buy that either. He argues that the carrier’s outgoings are incurred to a great degree by generously remunerated “non-flying staff”: managers on large salaries and erstwhile management and their friends taking advantage of special reduced rates for non-work-related trips.
“Air Astana is a cash cow used by everyone who is close [to management],” said Krivosheev.
It is not fair to say there is no competition, though. There are seven domestic airlines in Kazakhstan at present with a collective fleet of 75 aircraft. The Industry and Infrastructure Development Ministry has said it wants to see Kazakhstan’s civilian air fleet increased by 51 units by 2025.
For critics of the status quo, even this may not go far enough. The ultimate solution is to make Kazakh carriers really sing for their supper, they say.
“We won't see competitive prices until the government stops being the [state-controlled] airline's shareholders and opens the sky to foreign players and creating a real market,” Krivosheev said.
Almaz Kumenov is an Almaty-based journalist.