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Annual Report 2017 HIGH VALUE Our ability to deliver full service with a low cost base makes us very competitive, and we are committed to remain so. CONTENTS 1 2 About This Report Company profile Strategic report This report was prepared by Air Astana JSC (the “Company”) and covers the period from 1 January 2017 to 31 December 2017. Business model ......................................................... 4 2.1. Chairman’s statement ......................................18 The report uses internally audited data from operational reports. Peter Foster Development of the route network ...................... 6 2.2. President and CEO’s statement .....................20 In Deсember 2017 the Company changed its functional currency President, Air Astana JSC from Tenge to US Dollar, as the latter currency better represents the Our Aircraft Fleet....................................................... 8 2.3. Market overview .............................................22 underlying economic environment. Customer service .....................................................10 2.4. Strategy review ...............................................26 The consolidated financial data presented in the report are as per the Company’s audited IFRS financial statements. Key events ................................................................12 Azamat Ospanov Vice President Finance Accounts, Air Astana JSC About Air Astana 3 4 Air Astana JSC was established in 2001 by Resolution of the Government of the Republic Management report Corporate governance of Kazakhstan No. 1118 of 29 August 2001. The Company’s shareholders are JSC National Welfare Fund Samruk-Kazyna (on behalf of the Government of the Republic of Kazakhstan) 3.1. Operating results .............................................. 34 4.1. Corporate governance system ....................... 76 and BAE Systems (Kazakhstan) Limited, which own 51% and 49% of the Company’s shares, respectively. The Company’s head office is located in Almaty, Kazakhstan. 3.2. Customer Service ............................................ 36 4.2. General Meeting of Shareholders ................ 79 The Company’s main airports of operations are Almaty International Airport and Nursultan Nazarbayev International Airport in Astana. 3.3. IT and E-Business .............................................46 4.3. Board of Directors ...........................................80 The Company’s principal activity is the provision of domestic and international 3.4. Engineering and maintenance ......................48 4.4. Сontrol ...............................................................92 passenger air services. Other business activities include freight and mail transportation. Technical centre provides services for aircraft maintenance 3.5. Safety ................................................................ 50 4.5. Management team ....................................... 100 both for Air Astana and for other airlines in Kazakhstan. 3.6. Additional commercial activities ................... 52 4.6. Dividends ........................................................ 106 The Company operates a fleet of 32 turbojet aircraft, including 3 aircraft of Boeing family, 9 aircraft of Embraers and 20 aircraft of 3.7. Supply chain ...................................................... 54 4.7. Stakeholder awareness and disclosure ...... 107 Airbus family. 3.8. Environmental policy ...................................... 55 3.9. Human Resources ............................................ 58 3.10. Charity ..............................................................66 3.11. Financial performance ................................... 70 Legal Disclaimer In addition to factual data, this Annual Report also contains opinions, assumptions and forecasts by the Company’s management based on currently available information. Changes in external factors such as This Annual Report is also fluctuating demand for air transportation, adoption available online as an interactive of new technologies, regulatory changes, foreign document at exchange rate fluctuations etc. may cause the Company’s actual performance and results in http://ar2017.airastana.com/en/ future periods to differ from those projected 5 in this Annual Report. Financial statements ... 108 Contacts ..................................................................151 COMPANY PROFILE Pocket Travel Assistant Our corporate website is one of the major lines of communication with our customers, making us Kazakhstan’s largest single e-commerce platform. It offers a wide range of services, including online bookings and check-in, information about flight arrivals and departures, verification of reservation details and much more. Our mobile application is virtually a pocket travel assistant with many rich features. From the Heart of Eurasia Company Strategic Management Corporate Financial Annual Report 2017 profile report report governance statements 4 5 BUSINESS MODEL High quality of service Passenger Aircraft Air routes Employees turnover in year Average age fleet fleet 5.9% 12% “The best airline “The best airline Staff Mobile and online International certification 66 5.1 thousand 4.2 million 8.2 years 32 in Central Asia Service in Central Asia registration and sales IOSA/EASA and India” Skytrax and India” Skytrax Focus on Kazakhstan as a transit corridor 69% 66% International Load factor Load factor See more at page 516,866 million USD 70-7 3 +24% Domestic See more at page 24% 70-7 3 Cargo, mail and excess 201,312 million USD baggage carried +17% 20% thousand tons 767, 537 KAZAKHSTAN 20.0 million USD Other revenue, including Gain from sale and leaseback transaction Total revenue and 29,693 million USD See more at page TRANSIT DOMESTIC INTERNATIONAL other income +93% 70-7 3 (Sixth freedom passengers)* 58% 3% 23% Cargo and Mail See more at page 19.666 million USD 70-7 3 0.5 million 2.2 million passenger 2.0 million passenger +26% passenger turnover turnover in year turnover in year in year (24% share in the international) 2.6 billion RPKs 6.4 billion RPKs The healthy net profit of USD Gain from sale and leaseback transaction 198.6% 51% 49% Domestic market share international market share * is the right of airline to carry passengers million USD or cargo from a second country to a third 8.478 country by stopping in one’s own country 39.32 Company Strategic Management Corporate Financial Annual Report 2017 profile report report governance statements 6 7 DEVELOPMENT OF THE ROUTE Over the last ten years, the size of air traffic market in Kazakhstan has doubled and in 2017 NETWORK Saint Petersburg stands at 7.4 million passengers (2007: 2.7 million passengers). In respect to the total transportation Yekaterinburg market within Kazakhstan, air transportation now contributes a larger proportion of passenger Moscow Kazan Omsk Novosibirsk movements than 5 years ago Amsterdam Kostanay Pavlodar Hannover Aktobe London Uralsk Astana The International Air Transport Kiev Karaganda Oskemen Frankfurt Association (‘IATA’) forecasts a Paris Atyrau twofold increase in the global Urumqi demand for passenger services over the next twenty years Aktau Kyzylorda Almaty Tbilisi Shymkent Bishkek Baku Istanbul Tashkent Beijing Dushanbe Antalya Tehran Seoul PERSPECTIVE MARKETS Delhi Dubai (population million people 2017) Hong Kong India Russia China Bangkok 146 1,300 1,378 Ho Chi Minh City Perspective Domestic Kuala Lumpur COUNTRIES ROUTES International 16 66 Seasonal Company Strategic Management Corporate Financial Annual Report 2017 profile report report governance statements 8 9 OUR AIRCRAFT FLEET WE ARE ALWAYS STRIVING TO GET BETTER Embraer E190-E2s A320 NEO Family² Number of aircraft Number of routes Number of passengers carried The E2 will be a logical replacement for the E190, which we The delivery of the new generation of A320 NEO Family aircraft have been operating since 2011. The E190 enabled us to open will allow for an overall increase in capacity by up to 40 per 32 66 4,192,590 up smaller markets in southern Russia, the Caucasus and Central cent over the next three years. The A320 NEO and A321 NEO Asia and smaller domestic routes. As domestic and regional will operate on domestic and medium-haul destinations, while 2017 2017 2017 competition grows, we estimate that the E2 will deliver up to the A321 NEO LR has the ability to operate long-haul services 31 65 3,748,682 15% seat cost savings, which will enable us to increase capacity from Almaty and Astana to destinations in Asia and Europe. In 2016 2016 2016 and market share on these routes and maintain our position as addition to increasing frequencies on existing routes, the aircraft the region’s leading airline. will also be deployed on new services to CIS countries and South Asia. Boeing 767-300ER Boeing 757-200 Airbus A321 Airbus A320 Embraer 190 Airbus 320/321 NEO Wide-body, extended-range Narrow-body, medium-haul Narrow-body, stretched fuselage, Narrow-body, short- to medium-haul Narrow-body, medium-haul Narrow-body, short- to medium-haul short- to medium-haul Payload, kg ............................................ 37,500 kg Payload, kg ............................................23,000 kg Payload, kg ............................................23,000 kg Payload, kg ............................................16,400 kg Payload, kg .............................................11,500 kg Payload, kg ...................................18,400/20,500 Passenger cabin: Passenger cabin: Passenger cabin: Passenger cabin: Passenger cabin: Passenger cabin: