The revival of Kyrgyzstan’s domestic air transport business lies in the hands of private investors and market players because the state cannot afford to foot the bill, a report warns.
A depressed national economy, unaffordable ticket prices and dilapidated airfields are key factors that have contributed to the shambolic state of the sector, even though the Kyrgyz government launched a four-year national program in March this year to reinvigorate its air transport sector.
There remains a major stumbling block to the ambitious proposal getting off the ground: no state funding is to be allocated to this expansive project, a 17-page government document admits.
Instead, the Kyrgyzstan government expects the finance to come from private investors, commercial partnerships and the current Kyrgyz air operators.
The report also suggests that international organizations will be the probable sources of consultancy and various types of support, including technological enhancement.
The findings come as no surprise given Kyrgyz’s GDP amounted to just US$1,112 per capita in 2015, positioning the country in 153rd place worldwide. The only CIS country behind it is Tajikistan, at $992 per capita.
Economic instability points to why few people in the country’s regions can afford to fly domestically. Instead they prefer to use more affordable overland transportation modes.
Another factor hindering growth in the sector is that Kyrgyz airlines currently do not operate aircraft types capable of seating up to 70 passengers, which would be more suitable for profitable regional operations, notes the report.
“The restoration and development of the domestic air transport system requires measures aimed at increasing state support for the acquisition of new aircraft by carriers, as well as providing other incentives for the development of regional airports,” the reports states.
Karim Damin, general director and co-founder of Kyrgyzstan’s leading carrier Avia Traffic Company, and also a co-founder of regional Kyrgyz airline Tez Jet, contends that politicians do little about developing profitable domestic air services. “Unlike in Russia, the state does not subsidize domestic air services [here],” Damin observes.
“Nobody is even proposing this. Everyone believes that the Kyrgyz budget is way too convoluted, that the national economy is too weak, and that there are always more burning issues on the agenda.”
Damin believes Kyrgyz residents need domestic air services: “Prices are key,” he asserts. “If people were offered affordable fares at, for example, about 1,500 soms [US$17 at the current exchange rate] for one-way travel between domestic city pairs, then the number of travellers would reach Soviet levels again.”
Most Kyrgyz people simply cannot afford the current one-way rates at 3,000 soms. “We cannot offer to bring the prices down either. On the other hand, we still operate a number of routes at a profit [domestically] because they generate some passenger traffic.”
Although Tez Jet has managed to generate profits with a couple of BAe 146-200s on un-subsidized routes within the country, despite the nation’s economic plight, state-run Manas International Airport (IATA code: FRU), which operates the country’s entire airport network, reports that Russian airlines last year carried a fourth of all passengers served by the Kyrgyz airports.
Russian carriers alone transported 777,000 passengers between the two countries on scheduled flights in 2015 (up 12% on 2014), according to ATO Sourcebook
The Kyrgyz economy relies heavily on money brought or sent back in by migrant workers, including those employed in Russia. This situation is largely due to labour migration. Two-thirds of all passengers travelling via the Kyrgyz airports are flying abroad, the national airport operator’s first quarter figures for 2016 reveal.
The busiest domestic route is between the capital city Bishkek and the second largest populated city of Osh, a service which carried about 200,000 people in the first six months of this year – most of the entire domestic passenger traffic. The Bishkek and Osh airports together account for about 99% of all passengers and flights handled by Manas.
“Bishkek-Osh is a good route,” confirms Damin. “In the Soviet times it used to be one of the busiest regional passenger routes nationwide. It continues to be popular because of the Osh region’s difficult mountainous terrain.” Three-quarters of Kyrgyzstan is covered in mountains up to 7,400 meters tall. As of October this year, at least four daily scheduled passenger services were operated between Bishkek and Osh.
All of the country’s scheduled passenger carriers: Avia Traffic Company, Air Manas, Air Kyrgyzstan and Tez Jet operate between the two cities. Aircraft utilized include Boeing 737-300/400/500/800s, Airbus A320s and BAe 146-200s. Flight times vary between 35 and 50 minutes. There is no railroad line linking the cities, and travelling by car takes about 10 hours.
Unsurprisingly, Tez Jet is fast emerging as the most successful player in the Kyrgyz domestic air transport market. With Maxim Askarov, the son of Alik Askarov, co-founder of Avia Traffic Company, Damin founded the airline in 2013, according to data held by the Kyrgyz Ministry of Justice and the national civil aviation authority. Alik Askarov became the domestic carrier’s general director.
Shortly after its inception, Tez Jet obtained its air operator’s certificate (AOL).
Yan Yekimovsky, its executive director, reveals the ethos behind why the dedicated domestic air carrier was launched. “[Operating] regional services requires special attention; airlines do not always have the time and enthusiasm for this. They view regional operations as an ancillary business.”
Tez Jet’s fleet initially comprised a single 99-seat BAe 146-200 previously operated by Avia Traffic Company until mid-2016, when the new airline purchased another from Avia Traffic. Both airliners were built in 1990. Tez Jet’s technical personnel have been certified to provide line maintenance services and perform some limited maintenance and repair tasks on the aircraft, says Damin. “They [the staff] have learned the ropes over the past three years,” he reveals. “We have delegated the bulk of MRO [maintenance, repair and overhaul] workload to them – except for heavy duty work, such as engine replacements, which are still done by Avia Traffic.”
Tez Jet carried more than 86,000 passengers in 2015 – up 16 per cent on 2014. This year’s figures are expected to exceed 100,000. Its two wet-leased aircraft fly scheduled services from Bishkek to Batken, Jalal-Abad and Osh, and from Osh to Issyk-Kul, says the company website. There are no connections between its flights and those of Avia Traffic Company, but there is “a partnership of trust regarding either part’s interests,” Yekimovsky explains.
The carrier is constantly looking to develop new services. “Last summer we inaugurated an Osh-Tamchy route, helping residents of the country’s southern regions get to the Issyk-Kul resorts quicker,” he reveals. Work to promote the route continued this year.
“Flights between the north and the south of Kyrgyzstan are fairly popular. We will do our best to capitalize on this factor in further expanding our route network,” adds Yekimovsky.
“Overland transport is not always the most convenient in the mountains, and it takes too long,” he asserts. “During the winter periods, with their periodic avalanches, getting to your destination by car becomes impossible.”
Damin is quick to point out that Tez Jet’s flights generate profits. “For example, Batkent region is a huge area bordering Tajikistan and Uzbekistan. Given our aircraft’s large passenger capacity, we break even with airfares of about 2,500 to 3,000 soms one way. We do see [consistent] profitability, albeit on a small scale.”
Tez Jet believes that raising domestic passenger numbers to the levels of the Soviet era, when Yakovlev Yak-40s served all of the region’s airports, requires government assistance. “What shape this assistance might take is for the government to decide,” Yekimovsky remarks.
Meanwhile, Kyrgyzstan’s rundown airports are another major restriction to developing a thriving domestic air transport sector. Apart from Bishkek and Osh, only five other Kyrgyz airports were operational in the first half of 2016, and they processed less than one per cent of the overall Manas passenger traffic. In effect, the country’s airfield network has shrunk by half from 23 to 11 airports during the last two decades.
Some have fallen into disrepair due lack of demand and were phased out over the past 15 years, whilst the infrastructure of those still in operation, built between the 1970s and 1980s have, as a result of the current financial constraints, had little refurbishment – barring pothole repairs.
Most of the remaining airfields are located in remote borderline areas, and are used by local residents in emergencies and by official delegations only. Just three airports, namely Manas, Osh, and Issyk-Kul, have had substantive infrastructure updates.
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