Famous Kazakh economic observer Galym Kusainov is most confident that the government’s decision to go for another round of help to FlyArystan Air Company is a principal mistake.

In his telegram-channel, the expert argues why we need to develop other means of transportation, not just one individual air company.

Questionable Logic

“Government has plans to have FlyArystan farm-out from Air Astana and appoint someone from Ministry of Industry and Infrastructural Development to the new entity’s BoD, on the back of which measures, air tickets are supposed to become cheaper.

That is, frankly speaking, rather questionable. Competitive status of any air company these days rests of the size of such company. The bigger it is, the lower is the airfare.

Many factors contribute into the airfare generation process. That is one classical example of the economy of a large-scale company. Non-stop expenditures per one passenger, as well as cost of procurement in large volumes are the main drivers of the aviation industry’s cost reduction.

 Have many and big questions as to how and on basis of what our government wants to reduce FlyArystan’s primecosts. I remember, that 7 years ago, I expressed concerns about the creation of Qazaq Air, a losses generating company with unclear strategy.

Not By Air Alone

My opinion is that we must pursue not the airfare reduction, by means of administrative decisions, which decisions shall lead to industry risks and corruption, but the reduction of cost of transportation of a passenger from A to B. This is when we need to develop alternative transportation options. For example, we can build a speedway connecting Almaty and Astana. That will develop passenger traffic, the cost of which shall be way lower, compared to airfare. We relocated our capital city 25 years ago, but the speedway is still not out there.

Even if that speedway is commercial, it will much cheaper, than air transportation. Same is to be said about railroad. The Talgo project was commenced 15 years ago, but nothing has been done ever since. Our inter-city bus service is not being developed. That is why, I think that KTZ and Kazavtozhol must be Air Astana’s competitors, not a new aviation company, artificially created through farm-out.”