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The odd story of why BAE Systems will make a huge profit when Kazakhstan’s Air Astana floats

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Earlier this month it was reported that Kazakhstan national airline Air Astana may float on the London Stock Exchange in 2024.

Listing in London would give Air Astana access to a broader investor base than a local IPO, but there is another reason to choose London.

Weirdly BAE Systems, the UK defence contractor, owns 49% of the airline. Samruk-Kazyna, the Kazhak sovereign wealth fund, owns the rest.

Air Astana

Why does BAE Systems own 49% of a state airline?

Why, you ask, does BAE Systems own a large stake in a niche foreign airline? The company’s bread and butter is building warships, fighter jets and submarines – not commercial airlines. It’s an odd story and one suited for a news-free New Year’s Eve …..

In 2001, BAE Systems wanted to sell its radar systems to the Kazakh military. As a sweetener, they agreed to co-fund the launch of a new Kazakh Airline called Air Astana, which launched flights in 2001.

The investment – about £6.5 million, not much given the vast sums required to purchase aircraft – gave BAE Systems a 49% stake in the airline, which it has maintained to this day.

Ironically, those radar systems never got sold. The deal fell apart under pressure from Russia which presumably wanted to sell its own gear to the former Soviet country.

It was a good deal though ….

Nonetheless, it seems the investment was a sound one; it now sits on BAE System’s books at a valuation of £63 million. It is likely to make a much larger gain, however.

Over the first nine months of 2023, Air Astana reported an operating profit of $129 million and EBITDAR of $250 million on revenue up 20% to $900 million. Average load factor was 84%.

In fact, according to Bloomberg, some are hoping that the IPO will value Air Astana at around $1 billion, significantly raising the value of BAE’s stake.

The airline has doubled in size since before the pandemic and Peter Foster, its British CEO, thinks it can double again in the next four years.

What is the secret of Air Astana’s success?

Other airline startups can only dream of Air Astana’s sustainable (and profitable) growth. The airline operates a virtually all single-aisle fleet of 46 aircraft based around the A320 and A321s, with just three widebody Boeing 767 aircraft for longer routes.

That’s an advantage in some ways, because single aisle aircraft are much cheaper to operate. It has taken advantage of the A321LR (the LR stands for ‘Long Range’) which allows it to operate routes up to 4,000nm from Almaty, including all of Europe, Asia and North Africa, ie:

Air Astana shareholders

In an interview with Simple Flying, Foster also said the new A321LRs burn less than half of the fuel of the Boeing 757s the airline previously operated.

The longest routes Air Astana operates are to London and Frankfurt, approximately 3,500nm and below. The A321LRs have been kitted out with a ‘proper’ staggered business class seat alternating between 2-2 and 1-1 rows.

From the UK, Air Astana flies four times weekly to Almaty (five in the summer) on Tuesdays, Thursdays, Saturdays and Sundays. Flights depart Heathrow around 17:20 and arrive in Almaty at 09:10 the following day.

Since the war in Ukraine, flights now operate via a refuelling stop in Aktau. If you want to get off in Aktau you can – anyone heading to Almaty stays on the plane.


There’s your New Year’s Eve tale for 2023 …. the story of how a UK defence contractor ended up with a huge and now hugely valuable stake in a state airline.

If the float does go ahead in London as planned next year, you will get your own chance to buy a stake in Air Astana.

Comments (41)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • BJ says:

    More lije it @Rhys 🙂 I’ve been temotedvto try thus to BKK so we can have a sttopover in Almaty but put the refuelling stop is annoying.

    • The Savage Squirrel says:

      Judging by the typing here, you’ve also been to the pub 😀 😀

      • Gordon says:

        BJ’s typos have not gone unnoticed, over time, but I did not comment as it may be a form of dyslexia! However he does add an element of humour and insight into his posts, so I am sure this can be overlooked 😊.

        • The Savage Squirrel says:

          Hehe, yes it was not a criticism and hopefully came across as lighthearted as intended; more an observation that as New Year’s Eve lasts about 46 hours on HfP (as there will be readers scattered to every point of the globe) that some of us will start on the sauce earlier than others 😀 😀

      • BJ says:

        No, probably gets better if I have a drink.

        No, not that @Gordon, something else but I’ll try harder. I’d like to edit it but the comments box no longer allows me to scroll up and down within it.

  • Meike Hokkenbaals says:

    Borat’s favourite airline 🤣

  • Eoc says:

    So is the BAE share price currently reflecting this potential windfall?

    • BBbetter says:


    • Super Secret Stuff says:

      No, it’s the fact there’s a war in Ukraine and very hostile relations with china, along with a massive submarines deal with Australia

  • James says:

    I can see that Air Astana reports EBITDA, but not EBITDAR. Have you calculated this and then used this term because the company has unusual rent arrangements?

    • Rob says:

      The 9-month results press release has it.

      • James says:

        Ah! So it does. Reading their definition (“profit for the period before income tax (expense)/ benefit, finance income, finance costs, foreign exchange loss, net and depreciation and amortisation and lease costs (comprising aircraft variable lease charges, spare engine lease charges, lease of spare parts, property lease costs (office accommodation rent), rental of plant, machinery and ground equipment)”) brings to mind the Charlie Munger quote about EBITDA.

    • Chrisasaurus says:

      I would have assume it related to aircraft leases especially given a) the significant sum and b) the propensity of smaller airlines to lease aircraft

  • Andrew says:

    Time to buy some more BAe shares…

    • TGLoyalty says:

      Surely it’s already priced in

      • Andrew says:

        The possibility may be priced in, but that wouldn’t be 100% factored as it’s just a possibility, not definite.

        Much of the share price increase over the last year will have been due to Ukraine.

  • Greenpen says:

    I first went to Kazakhstan about fourteen years ago and subsequently lived there for a while. Air Astana then was like flying decades ago, they tried and while they did their best it was never quite right. Service was very Soviet. I usually flew TK.

    However, they have made incredible progress both with their aeroplanes as mentioned in the article and service. I now think they are a first class airline! They used to have a direct LHR service from Astana which was my route, but that seems to have gone. I don’t think it is solely down to the Russian invasion of Ukraine but to do with passenger numbers and profitability. The Aktau stop is more to do with the West Kazakhstan oil industry and the decline of the UK in international commerce compared to FRA traffic.

    Two points for those used to BA: women carrying babies or with small children go right to the front of the embarkation queue and the very important businessmen all give way and smile and, secondly, you can take a bunch of flowers in addition to the usual cabin baggage!

    They have developed a sound network and I think they will continue to prosper, good luck to them.

    • Qrfan says:

      Not sure what you’re banging on about really but a) men also carry kids b) BA pre board children on many flights. I’m glad they don’t allow flowers to take up space in the overhead lockers though…

      • Andrew says:

        Indeed. Preboarding of those with small children is common if not always the case on BA.

        • Bervious says:

          It is, but met with scowls and moaning on internet forums that their Group 1 / Group 0 status is being diminished by the practice.

          • Andrew says:

            Not seen that and I’m in Group 1 – but I’m on leisure flights more than business

            Hardly matters – they’ll be going to the rear of the plane and reduces overall boarding time.

        • Gordon says:

          Order is – F, Gold & Emerald members, People with disabilities, families with infants under two and young children in pushchairs,
          All of the above I do not have an issue with, however what I do have an issue with is the scrum once Group 2 is called, or pax starting to queue at the gate that are clearly not Group 2.

      • RussellH says:

        We brought flowers back from Maderia on BA at the beginning of the month.
        They were fully wrapped in white paper, and we were in CE, though…

        • Bagoly says:

          I was worried taking a bunch of amaryllis (big hollow stems in which things could be concealed) through Schiphol security, but the operators all smiled !

        • Barry cutters says:

          To import fresh cut flowers or any other plants into the UK, you have to gain clearance from DEFRA and UK Customs. This is done by registering for the DEFRA’s ‘PEACH’ computer system. You also require a phytosanitary certificate

        • AndyC says:

          Maderia – great hol destination…😎

  • Can says:

    I had to look up where Aktau is.

  • L Allen says:

    Interesting article, thank you! I like wider aviation / travel news in addition to the Amex adverts 😉

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