INSIGHT: Kazakhstan’s Bek Air demonstrates ambition

Photo by Maxim Golbreight

Bek Air, Kazakhstan’s third largest airline, has the ambition to become second, by outflanking the current No 2, SCAT. The largest Fokker 100 operator in CIS, is growing its market share by means of an aggressive price policy. Besides, Bek Air’s beneficiaries own a potentially lucrative Uralsk airport.

By Artyom Korenyako

According to Kazakhstan’s Civil Aviation Committee’s data, the country’s carriers served 5.5 mln passengers in 2014. Five airlines are approved for regular flights, four of which (with the exception of the industry leader Air Astana) are strongly associated with regional airports.

Airline No 2, SCAT, operates a 17-strong fleet of Boeing 737/757/767 and Bombardier CRJ200 aircraft, is based in Chimkent. Karaganda region has a privately-owned airport Jezkazgan and an homonymous carrier, Jezkazgan Air, which operates Yakovlev YaK-40s. Taldy-Kurgan airport in Almaty region is managed by Jetysu airline.

Bek Air, rated third, is based in Uralsk airport in Western-Kazakhstan region. It leaders have often been heard claiming they will not settle with the third place.

 

Winged Patriotism

At the beginning of this year Bek Air’s single-type fleet of Fokker 100s reached seven aircraft built between 1991 and 1994 and valued at ca. US $400,000 each. The airline wants to grow its fleet to 11-12 aircraft.

The turquoise color and ethnic patterns in the airline’s color schemes echo the Kazakhstan’s national flag. The airline’s main slogan is “We don’t need assistance. Just don’t interfere, and we’ll do the thing ourselves”, that’s the message their official web-site gets across to its visitors.

According to Forbes Kazakhstan, the airline belongs to dollar multimillionaire Sultan Narbol. His now late father Sarybai Kalmurzayev was a high-rank official in the country’s current leader, Nursultan Nazarbaev’s team.

Nurbol is one of the shareholders of Oral International Airport, the company, that manages Uralsk airport. His main asset is AsiaCredit Bank.

Bek Air’s “talking head” is the company’s chairman of the board (also chairman of supervisor board at Uralsk airport) Nurlan Zhumasultanov. It was he, who signed a contract with the Sukhoi Civil Aircraft at last year’s Farnborough, for seven SSJ 100s. The aircraft were supposed to be delivered in 2015-2016, but the deal has been suspended.

In July this year Zhumsultanov told the press, that 30% of Bek Air belong to a Dutch entity, whose support was vital in realizing the Fokker 100 financial leasing scheme.

“I used to work as aircraft technician, an engineer, then an officer for the Soviet KGB, later on in the presidential protective service and national security agency, in Civil Aviation Committee, in Astana and Almaty airports,” – Zhumasultanov says. “I have seen a lot, I understand, and I know the passengers’ likes and dislikes. My experience and my analytical skills are built into Bek Air’s business model. Its mission is to provide fast, safe, punctual and affordable travel.”

Founded in 2009, the airline launched regular flights in 2011. Today its network includes 13 (out of the total 20) of Kazakhstan’s airports. The airline’s charter segment’s share does not exceed 5%.

Bek Air is most often seen in Almaty Airport. With the share of 5% of total airport operations, it also ranks third in here, after Air Astana (50%) and SCAT (14%).

According to Nurlan  Zhumasultanov, in 2014 Bek Air’s traffic exceeded 345 thousand passengers, and it aims for 650-700 thousand this year, and wants to cross the 1 million benchmark by 2016. “We compete successfully even with the railroad, and e observe a massive outflow of passengers from there. Our rate for Almaty and Astana flights range from 10,000 to 18,000 tenge (US $50-100) one way. Same price from Almaty to Chimkent, Kzyl-Orda and so on. Western Kazakhstan is a bit more expensive, but its longer flights after all. I personally believe that a fair price for a ticket to anywhere in Kazakhstan should be in average of 100 dollars for a 1.5 hour flight.”

Bek Air follows the low-cost business model, the top-manager explains. It operates a single-class fleet, and owns a maintenance facility which can provide MRO for the Fokker 100s, up to C-Checks and D-Checks. It offers simplified catering, no press and alcohol on board. “As a result, we get fares that almost anyone will like.”

Notably, on August 20 Kazakhstan launched its new currency and credit policy, based on fluctuating rate of the national currency, after which tenge’s exchange rate to dollar took a 20% dive. “Contrary to our competitors we did not raise prices, So now because of tenge devaluation our plans for expanding flight network will have to wait,” top-manager explained.

 

Monopoly Is The Word

Bek Air’s characteristic management style may be observed at Uralsk airport. Oil and gas sector is developing in Western Kazakhstan, so the region’s main air gateway has a promising potential.

In 2014 the airport owners, not capable to undertake a 2400 m-long runway reconstruction, conceded the runway ownership to the state. The state declared it wants to make the runway 400 m longer.

“Now the airport managers keep sending us letters telling us they don’t need the extra 400 m,” Head Civil Aviation Committee, Beken Seidakhmetov complains. “But in this case only the Embraers and the Fokkers will be able to land there. There’s also an issue with taxiway and apron reconstruction. These belong to the airport owner, so they should do it at their expense. However the owner is holding back on this decision, and we don’t see any action. However, if these infrastructure is not renewed, the whole project cannot be completed, because larger aircraft will not be able to reach the apron. So the aim of making the schedule more intensive is jeopardized.”

According to the official, although Air aAstana resumed flights to Uralsk in 2015, the airport owners’ attitude is clearly aimed at keeping the competitors out of the airport. For instance, they refused to allocate slots for SCAT without explaining the reason.

“We are now hardly reaching the breakeven point, with just a token margin. We hope to start making money once we’re done with the leasing payments,” Nurlan Zhumasultanov says. “We’ll become second in Kazakhstan in the near term. And I believe that Kazakhs’ interest to us has long been justified by our slogan, Airline For The People.”

 

 

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