Air Astana Joint Stock Company (AIRA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to Air Astana's 3Q and 9 Months 2024 Results Conference Call on the 5th of November 2024. [Operator instructions] I would now like to pass the line to Ms. Irina Martinez, the Head of Investor Relations at the Air Astana.

Thank you, operator. Good morning or good afternoon, ladies and gentlemen, and welcome to Air Astana Group Q3 and 9 Months 2024 Results Presentation. Thank you for joining us today. I'm joined today by our CEO, Peter Forster; and CFO, Ibrahim Canliel. They will take us through the company's performance during the first 9 months of the year. And after the presentation, there will be a Q&A session, as operator mentioned. Thank you very much. And with that, I will hand over to Peter.

Thank you, Irina, and a very good morning, good afternoon, good evening to all of you, wherever you are. It's a great pleasure for myself and for Ibrahim and Irina to have the opportunity to discuss and talk to you this afternoon about the Q3 results and indeed the first 9 months results. And I'm very pleased to say that we're able to report some positive results for Q3 and therefore, positive results for the first 9 months of the year, and we'll talk a little bit in this presentation as well about the outlook for Q4, the remainder of the year and the year as a whole. So I mean, if we can go to the next slide, if you mind. Thank you so much. So in Q3, the airline was able to deliver growth -- revenue growth of 10.4% on last year, excluding nonrecurring items. Now I think you're all aware that Q3 is the strongest year for the airline. It's the summer peak and therefore, of course, these results are always coming off across the back of a strong Q3 of the previous year. But notwithstanding that, we have been able to deliver 10.5% revenue growth with an EBITDA growth of 12.6%. And what that has meant is that the EBITDA margin has -- we achieved an EBITDA margin of 31.4%, that is 0.6% better than Q3 of 2023. And I think without very much doubt, that will put the EBITDA margin amongst the absolute best in class of airlines around the world at this time. Just to put this in context, of course, the industry, the aviation, airline industry in general has been struggling with 2 headwinds this year. The first of those headwinds has been pressure -- upward pressure on costs driven by high inflation that has affected the entire industry and indeed many, many industries. But the second, of course, headwind that the industry has been faced -- with has been flagging demand in the face of cost-of-living pressures in many parts of the world and of course, something of a hangover from what was labeled the post-COVID boom that many airlines experienced in 2023. In our case, we're not, of course, immune to those pressures, but our management of those pressures, I think, has been at the upper end of the industry. For the quarter, we've actually been able to achieve an increase in revenue per RASK, that's unit revenues of 1.8%. Cost has increased by 2.8%, which means that the difference between revenue increase and cost increase is 1%, which is marginal and is a great deal less than the differential that has been reported, I think, pretty much by all other airlines who've announced their results for the same quarter. So we think that's a very positive result. And as I say, that has resulted in a 12.6% increase in EBITDA for the quarter. And I repeat, a margin of 31.4% or an increase of 0.6% over last year. So that is good. If we go through 1 or 2 other measurements, the load factor for the quarter was 87%, which is an increase over last year of 1.1%, again, a very positive development. If we go to the next slide, we're on the -- if we go to the 9 months results. This continues the trend that we've been able to demonstrate for all the 9 months. As I said, revenue is up by 11.9%, EBITDA up for the year of -- by 11.1% and an EBITDA margin slightly lower than for the quarter of the question. But notwithstanding that, the EBITDA margin for the first 9 months, just shy -- just short of 27%, which again puts us at the very top of the league table in terms of EBITDA margin in our industry. RASK of 1.3%. Again, I repeat that's accelerated to 1.8% in the quarter of the question and CASK of 2.7%. That has left us with an extremely strong balance sheet, a cash to sales ratio of 37.3% and a leverage ratio of 1.3x net debt to -- the ratio of net debt to EBITDA of 1.3x in contrast with the guidance of 3x. So all of those metrics are looking very positive. If we go forward to the fleet development plan, we're effectively on target for that. As of now, we have 57 aircraft in the fleet. Although that we hope will, in fact, decrease to 56 aircraft by the end of the year. And this, of course -- and we hope that the final Embraer E2s in the fleet will leave -- one of those aircraft will leave very shortly, which will take the aircraft at the end of the year down to 56. Of course, the departure of the Embraer is all part of the fleet simplification program which is very much efficiency-led, efficiency driven. And that is on track to -- or in fact, slightly ahead of schedule in terms of the redelivery of those aircraft. Of course, an enormous issue that we and the industry have faced this year has been the problem of the Pratt & Whitney 1100 engines on the Airbus Neo fleet. This is something, I think, of which everybody on this call is well aware. You're all very familiar with it. But I'd like, again, just to restate the fact that we think, a somewhat unique approach to this in that we have been able to agree with Pratt & Whitney to a compensation program that covers not only aircraft that are obligatorily grounded once they have reached the limit of their shortened life because of this powder metal problem. But we also have been able to come to an agreement with Pratt & Whitney, whereby we are compensated when we are voluntarily resting these engines and aircraft. And the reason we do this voluntary resting is so that we can have less aircraft flying during the low season now is a case in point, of course, November, so that we can bring those aircraft back into service. When we come to the peak seasons, and of course, the peak seasons are Q3, which has just been completed. We have a peak season upcoming from Saturday, the 14th of December until roughly the end of the first week of January, that's the Christmas New Year peak. And of course, the other peak of which I think everybody is aware, is the spring peak, which runs from middle of March to middle of April. So as of now, we have 16 aircraft on the ground resting. That was planned. It's planned by our engineering team, and it's fully agreed with our commercial team so that we have a coordinated plan to have engines resting when our commercial team need them less so that they are back into service, as I have said, when our commercial team need them to be flying to maximize traffic and carriage during the peak seasons. So this plan, whilst it continues, of course, to be disruptive to the industry in general, is something that I think we have learned to manage effectively and coherently, and it continues in accordance with the plan. And that plan now goes out right out until the beginning of early 2026, but the plan has been defined for the whole of 2025. So with that, I will hand over to Ibrahim to go into perhaps a little more granular detail on some of the financial results. Ibrahim, over to you.

Thanks, Peter. Good morning, good afternoon and good evening to all. As Peter has stated, '24 has been a challenging year for the wider industry with inflationary pressures, unit revenue reductions and manufacturing challenges that limited the industry's capability to expand capacity during the summer peak when it actually makes the most significant part of its EBITDA during the third quarter. Against this backdrop, I'm pleased to report that the third quarter results for the Air Astana Group are robust. We discussed earlier this year how we were managing the fleet. Peter has just expanded on the Pratt & Whitney program and how we targeted to maximize opportunities during the summer peak, and this plan has been executed successfully. Our unique geographical location with almost equal distance to the East, Southeast or West has enabled us to reallocate capacity from lower growth or margin regions to higher-margin routes successfully. And that is an area that Peter will be expanding upon in the following slides. During the 9 months of the year, our ASK has grown by 10.4% with equal growth of RPKs resulting in a stable load factor of 84%. During the third quarter, with ASK growth of 8.4%, the traffic has grown by 9.8% or 1.4 points higher as a result of which the load factor improved from an already high 85.9% in the third quarter of '23 by another 1.1 points to 87%. For the first half, the revenue per ASK, excluding NRI, sustained and grew by 1% contrary to the industry-wide declines. And this has further accelerated in the third quarter to 1.8%, resulting in a 1.3% growth for the 9 months of the year. As a result, we have seen the revenues grown in the third quarter by 10.4%, 2 percentage points ahead of the capacity growth of 8.4%. Another item I want to touch upon on the financials is that we've previously been discussing the impact of the extraordinary market event following the sudden influx of traffic from Russia starting from September 2022, which was a significant event in the fourth quarter of '23 and the first half of '24. That impact, which we report as an adjusted item is now coming to an end. During the first half, the impact of that was $8.9 million, and this has reduced to $1 million during the third quarter despite the peak, and we expect it to fade going forward. Despite slowing yet still persistent global and industry inflationary pressures, our cost base remains highly competitive with a modest growth of 2.8% in the third quarter or 2.7% for the 9 months. We will go further into the details of the cost per ASK drivers in a few slides, and I'd like to draw your attention to what Peter stated on the narrowing gap between the revenue per ASK and cost per ASK, which combined has become the key driver to the accelerating bottom line and the margin. For the first 6 months, the EBITDA growth was at 10% and the margin was broadly aligned with a 0.7% gap below 2023. The performance during the third quarter has been robust with EBITDA growing 12.6% on the back of 8.4% capacity growth. The margin reversed from a contraction to an improvement in Q3, exceeding the 30.8% high margin of 2023 by another 0.6 points and reaching 31.4%, bringing the year-to-date margin almost to the same level as 2023. And as Peter mentioned, this is comfortably one of the highest margins amongst our peer group. Turning to the breakdown by brand. During the third quarter, Air Astana grew its capacity by 5.7%, and that growth was almost entirely driven by the international network growth of 9.1%, particularly on the high-growth and higher-margin Asian routes. As a result of the reallocation efforts by the commercial teams, despite the growth, the load factor also increased by 1.4 points from 83.7% to about 85%. And the RASK, excluding the NRI and intragroup revenue was up by a further 2.2%, resulting in a revenue growth of 8%, an area where we again differentiate from the industry-wide pressures on the unit revenues. The cost per ASK for the Air Astana brand was almost on the same level as 2023, bringing the year-to-date CASK increase down to 1.6% from 2.3% in the first half. What is more striking is the improvement of the RASK and CASK gap that was reversed from a negative in Q1 to positive 0.5 points in the second quarter and then improved further to 1.9 percentage points during the most important third quarter of the year. As a result of that, the EBITDA growth was at 10.7% and resulting in the EBITDA margin growing from 29.6% to 30.4% by 0.8 percentage points for the Air Astana brand. As a result, the Air Astana brand has managed to grow both capacity and margin at the same time. Moving on to FlyArystan. FlyArystan continued its growth performance in the underserved domestic and extended home market. And during the summer peak, FlyArystan increased its capacity by 14.2% with 14.5% growth of traffic ahead of the capacity growth, the load factor grew from an already high 90.7% in the third quarter of '23 to 90.9% in the third quarter of '24. That is on a flow basis, while on a solid basis, the number would have been at 94% for Q3 of '24. As you may recall, the load factor in the first quarter was 4.8 points behind for FlyArystan behind the 2023 numbers. This narrowed to 3.3 points in the second quarter and now has turned to the positive during the important summer peak of Q3 2024. Along with the load factor improvement, the revenue per RPK also improved by another 2.1% to deliver a total RASK growth of 2.3% on the peak of 2023. In the third quarter, both of our brands differentiated themselves from the industry negative unit revenue trend and on the back of 14.2% capacity growth, FlyArystan also grew its revenues by 16.9%. Also for FlyArystan, I would like to highlight the improving trend of the RASK and CASK difference. During the first half of the year, that difference was up to 5.1% and has significantly narrowed to 0.8 percentage points in Q3 of 2024. Again, on the back of 14.2% capacity growth, the EBITDA is up by 17.2% in Q3 at a high margin of 34%, matching the same period of last year. And this is again an important achievement of the FlyArystan team, reverting back to its historical high EBITDA margin during the summer peak.  We have been talking about the proactive management of the Pratt & Whitney issue, and Peter has just provided details in the earlier slides. All brands since last year have been geared towards the peak season of Q3, which proven by the results has been a successful execution of the strategy by the management team. The fleet growth from 49 at the end of 2023 to 56 over the 9 months is already at the year-end target and the fleet optimization is well on track ahead of the schedule.  On the back of 10.4% ASK growth, our RPK growth for the 9 months has been aligned. And during the third quarter, we mentioned that the differential between the 2 was up to 1.4 points, resulting in the 1.1% load factor growth in the third quarter, growing on top of the 85.9% already high benchmark in Q3 '23 and to as high as 87% in the third quarter of '24. While FlyArystan continued to stimulate the market with 27.8% growth domestic capacity for the 9 months, Air Astana's growth has been over 2x higher on international than it was on the domestic during the first 9 months, and in the third quarter, almost all of Air Astana's growth was on the higher-margin international routes and particularly on the high-growth routes in Asia, the Gulf and Saudi Arabia. That equals to 9.1% growth on the international network during the third quarter. On the next slide, as with the engine challenges, we have proactively managed the capacity to support the margins throughout the year. The group's flexible dual brand model has enabled us to generate internal competition for capacity between brands as well as between the routes purely based on margin. That remains to be the case. And in Q3, the winner of that were the international routes largely on Air Astana. Our unique geographical location with similar distances to Europe in the West, North and Southeast Asia in the East as well as Saudi Arabia and the Gulf with China with even shorter distances to South Asia and the Gulf, we are very well placed to reallocate capacity dynamically. And Peter will be going more into the detail on this in the network slides. As a result of successful execution by the commercial team management, we have once again positively differentiated ourselves from the wider industry. We have not only sustained the unit revenues, but have continued to grow, accelerating from 1 percentage point in H1 to 1.8% in Q3. That positive trend continued for both of our brands, where Air Astana and FlyArystan revenue -- unit revenues grew by 2.2% and 2.3%, respectively, during the third quarter. As we look back to the 9 months of the same period of 2019, our compounded annual growth of RASK for the group has been at 3.3% or on a cumulative basis, running 18% ahead of the same period of 2019.  Our unit cost remains a key competitive advantage. And we are focused --unit cost Slide 14, please. Our unit cost remains a key competitive advantage for the group, and we are focused on retaining this leadership position. That is the case for the group as well as for the FlyArystan and Air Astana brands. Despite inflationary pressures continuing with manufacturer escalations ranging between 10% and 20%, the CASK growth has been modest with 2.7% only for the 9-month period of 2024. Looking through the key costs for the 9 months that you can follow on the bridge on the right bottom corner. Depreciation, which is largely aircraft was up by 9.1% per ASK, and this cost item is impacted by the number of the resting aircraft that Peter referred to and is largely offset by the reduction of the engineering and maintenance costs. When the 2 combined, the CASK increase of these 2 items is at 5.3% despite the much higher escalations in double digits that we mentioned a minute ago, offset by the increased efficiencies of the Air Astana Group. The next cost increase is on the in-flight and airport charges. One driver to that is the fact that the majority of expansion of Air Astana is on international routes for 9 months or entirely solid for the third quarter. And naturally, international flights have a higher charge at airports and navigation. However, as we mentioned earlier, this comes along with higher revenues and higher margins at the same time. Another differentiating factor from the wider industry is that we continue to invest into excellence for a better customer experience. And that is an investment of which we see the returns coming from both the customer experience ratings and the improving revenues on the premium travel. Fuel cost, which is roughly 1/3 of our costs, rose by 1.7% during the 9 months and were down by 0.5% during the third quarter. I'd also like to take this opportunity to state that we are fully hedged for our international uplift for 2024 as we are for the first quarter of '25 and for 50% of the second quarter at positions between $75 and $85. Our employee costs for the 9 months are down by 1% and that has been achieved with a 2.7% increase of the staff numbers on the back of 8.4% growth of the capacity or 10.4% growth of the traffic during the same period. As a result, we remain one of the most cost-efficient airlines in the industry. The point that we have been making about the narrowing gap of the RASK minus the CASK is illustrated in the graphs on the left bottom side. We had guided that the CASK would exceed the RASK growth in 2024. In Q1, that gap was at 1.9% which we reduced to 1.1% in the second quarter and further reduced to 1 percentage point in the third quarter of the year. This was the key driver of the improvement of the EBITDA margin that Peter reported at the start of this presentation. If we can move on to the next slide, please. In terms of our balance sheet, I'm pleased to report that the balance sheet remains robust in the third quarter we are reporting. Our cash level at the end of the 9 months was at $473.9 million compared to $314.4 million a year ago. That is an increase of close to $160 million or almost 13%. Of course, this includes the IPO proceeds of $120 million. However, if we were to remove that amount, the cash would still have been growing by an additional $40 million or 13% on top of the 30th of September 2023 number. Our current cash-to-sales ratio is at a healthy 37% prior to facilities of another 13% that we have not included into this number. That is in a very comfortable zone compared to the target of 25% that we stated in the guidance. And this metric too places us in a high liquidity ranking amongst our peers. In terms of the debt, as a result of the growth of 11 aircraft since September of 2023, the total debt has grown by $166.9 million to $864 million, entirely consisting of capitalized leases with the absence of any other debt in that particular item. You will also have noted that in our release, we have stated that in view of our very strong cash position, we have voluntarily brought forward the balance of finance lease payments on 2 A320 family aircraft during the third quarter. We will be doing the same with 2 more aircraft in the fourth quarter and with another aircraft maturing as per schedule by the end of 2024, we will have paid the entire finance leases of the Airbus fleet by the end of this year. With a very strong cash position and EBITDA, once again accelerating at double-digit growth, our leverage now is as low as 1.3x, as Peter earlier referred to in the start of the presentation. This again places us amongst the lowest-leverage airlines globally despite being one of the fastest growing in the world. And with that, I'll hand back to Peter.

Thank you, Ibrahim. Thank you very much for that. So we'll conclude the presentation, therefore, fairly shortly with just a few more points. And then, of course, we can see the many questions that you all have. So we want to accommodate as many of those as we possibly can. So there's been some positive developments this year in terms of the development of the airlines products. One of those, of course, has been the construction by TAV, the airport owners of Almaty Airport, the new terminal, which opened in June, which has increased the capacity of the airport from 8 million to 14 million passengers a year. It's a very welcome development. It's the first new development that there has been at Almaty Airport since Air Astana started flying back in 2002. So that's very welcome. And we're also very pleased to announce that later this month, we will be opening our own dedicated premium lounge for business class passengers and for frequent flyer elite members. And it really is an extremely good facility indeed, and we are sure that it will add a significant competitive advantage to our business class, which, of course, is an award-winning business class for in-flight service, but the lack of a dedicated lounge at Almaty Airport was perceived, I think, quite rightly as a weakness. And that now has been addressed and the lounge, as I say, will open very shortly. And the lounge that we already have in Astana has been renovated to a very high standard, and this is all part of the commitment that we have as far as the Air Astana brand is concerned, in maintaining and enhancing the premium nature of our product, which has for the 13th time at the Skytrax Award that were held at in the U.K. in July, being awarded Best Airline Central Asia and CIS and Best Class Service also in Central Asia and CIS for the 13th time. And FlyArystan won exactly the same awards for its low-cost category for the second year running. We go to the next slide. We continue -- I mean, this is -- we've talked about this slide a great deal, the geographical position of the airline. I think in the past, we talked about the fact that we were further enhancing the geographical position of the airline by adding to the range of the Airbus 321 long-range fleet by adding a third auxiliary center tank for fuel in that aircraft. That has now been done for the first 3 of the 6 aircraft initially. That has increased the range of the aircraft by approximately 300 nautical miles, which means that we can now fly nonstop to London without a fuel stop on the Caspian Sea, regardless of the fact that Russian airspace remains close to us for the time being. It also means that in just over a year's time, we'll be able to operate nonstop with the same aircraft to Tokyo, something that we already announced and is in the public domain, a joint venture codeshare that will be with Japan Airlines. So the geographical location of the airline continues to be an enormous strategic advantage to us. And I think the bridge at the bottom left of that slide there demonstrates that.  So whilst there have been some voluntary because of powder metal and because of the aircraft being rested, there has been because of the voluntary grounding program, we have had to reallocate capacity to ensure that spare capacity in a capacity-constrained situation is allocated to the highest-yielding routes. And the highest yielding routes have been the longer-haul international routes for Air Astana.  And that's why we see that of the 10% growth in passenger carried that we have registered in the first 9 months, whilst some of that is domestic, primarily through FlyArystan, in fact, almost exclusively through FlyArystan, there has been growth to the Middle East when we talk about the Middle East, we actually talk about Gulf and Saudi Arabia. Just to draw the distinction between the sort of troubled region of the traditional Middle East and Gulf and Saudi Arabia, which, of course, is an untroubled and very profitable and high-growth region for us. So more flights to Dubai. We've recently started flying to Abu Dhabi, more flights to Jeddah, and we have recently started flying to Medina. So very much a growth area for the company, Gulf and Saudi Arabia.  Secondly, Thailand. More flights to Puket, more flights to Bangkok, flights also between Astana and Phuket, again, a high-growth area. India, 51% growth, but really, we're only touching the surface of the potential growth in India. India, again, a very high-growth market. And of course, we have been able to benefit from that. China finally is beginning to come back. So China also, albeit from a low base, also growing at 30% year-to-date, and Korea continues to be a strong market for us. It is quite interesting. You'll note that the negative growth that we have there on Central Asian caucus is not a reflection of the fact that the local markets are in any sort of trouble. It's just the fact that they are lower-yielding markets. And again, because of the powder metal issue, as I just mentioned, we have been obviously very keen to ensure that the capacity available to us is allocated on the higher-yielding routes, which is exactly what we've done. But I think it's an important point to note here that if we take the traffic figures that are coming out of various different parts of the world, the traffic the total air traffic figures for Europe this year are showing a growth of between sort of 6% and 6.5% whereas the latest figures for Asia Pacific, that's the Association of Asia Pacific Airlines, of which we are an Executive Committee member, the latest figures for September have shown a growth of 18.5%.  I mean, a huge imbalance really between the growth profiles of Europe and the growth profiles of Southeast Asia, which are mirrored, of course, obviously, in China, Northeast Asia and India. And as I mentioned, the Gulf of Saudi Arabia. So by virtue of our geographical location and of course, the extended range of the A321 fleet now enhanced further with the addition of the third auxiliary center tank, we can take full advantage of these differing growth patterns by ensuring that growth is allocated to the higher growth regions.  And indeed, we have recently started flying to Phu Quoc in Vietnam to Sanya in China, more flights into India. FlyArystan are flying charters to Goa in India. We have charter flights to Sri Lanka. We have more flights to Maldives. We, as I mentioned, have started to fly to Abu Dhabi, increased flights to Jeddah and have started flying to Medina. So this is all reflective, if you like, of the fact that we are in a position to very quickly deploy capacity to those regions showing the highest growth, which is a huge advantage to us. Now if we go forward a bit, we continue, of course, obviously, to invest in all of these things. We're in the process of installing the second simulator, the second full motion flight simulator at the training center that we have at Astana Airport. We continue to do all possible to maximize utilization, both of crews and aircraft available to us, notwithstanding powder metal. And as far as the technical center is concerned, we have continued to expand the capability of our technical center, primarily in Astana from the light and medium C checks to the heavy C checks.  In fact, we just completed our first 12 C check, which those of you who are familiar with the industry will know was until recently referred to as a D check, and that is really the heaviest check that one can perform on any aircraft. And this we can all do in-house now which saves, of course, time, money and keeps that business keeps -- that expense within the company and of course, within the country. So I think we've talked about most of the things on this on the slide here. So I don't propose to go through all of those points other than to say that there has been talk about shortage of resources. I mean certainly, there are supply chain problems as far as OEMs are concerned. We all know about that. We talk about Pratt & Whitney of course, there are also problems in Boeing, those are very well documented. But there are also other problems of other OEMs as well. So that's a sort of general problem in the industry. But as I mentioned, the one that affects us most significantly is of Pratt & Whitney, which we think we're managing fairly effectively. But in terms of internal resources, we're fine. I mean we haven't suffered from an exodus of pilots. We are not -- we don't have a lack of ability to attract pilots to the company, whether they be foreign pilots or locals through the Avenir program. Those programs proceed at a pace. And in terms of resources, we do not have an issue.  So if we go to the next slide there. Again, this really sort of summarizes what myself and Ibrahim have been talking about. So I don't intend to go through that again. I think we've got more important things to do in terms of answering your questions. But I would just like to say this. We have a very strong cash position. Ibrahim has referred to this. We have a very strong cash position as of 30th of September 2024. I can also say that as far as Q4 is concerned, whilst I can't talk in specific detail about Q4 as it unfolds and we're halfway through it. What I can say is that the booking curve at the end of September, i.e., the end of the reporting period that we're talking about for Q4 was extraordinarily positive. Bearing in mind, of course, that Q4 traditionally is a lower season for us. And so whilst generally speaking, in low seasons to quote Ryanair, one's management is characterized by being load active, yield passive, we are able to be load active yield active in Q4 as well. And so because of that, and as I mentioned and because as Ibrahim has gone in some detail, because we have been able to maintain the strong cash position.  I think we can say that if we are able to maintain this through the year-end, which, as I mentioned, we are confident of so doing. And if, of course, we have a strong start to 2025, then I am confident that we could consider to start paying dividends much sooner than our current medium-term guidance and that our present position will be supportive of a payment of dividend to shareholders in 2025. And of course, I qualify that by saying that this, of course, is subject to the market conditions and the developments to which I referred as well, of course, as the legal process and Board and shareholder approvals. So that concludes our presentation, and we are now open and available for questions.

Thank you very much, Peter and Ibrahim. Now we are ready to take the questions from the audience.

[Operator Instructions] So our first question comes from Mr. Sivakumar from Citigroup.

I got 3 questions here. Maybe to start off with the Almaty, where you sound excited about the new terminal, new capacity coming through, and there was a line that said that it actually removes a lot of capacity bottleneck. So what does it actually translate into in terms of asset utilization and unit cost benefit? So that's my first question. I'm going to go one by one or list all 3 together.

You mean specific to the new airport?

Yes.

It doesn't really have a sort of unit cost impact. I mean, after all the airport cost of the airport costs. And the new airport I think resulted in a reduction of cost. But of course, obviously, what it has done is it has given us the ability to expand much more rapidly and robustly. I mean, I think really, the real point about this is that had this new terminal not being built. And of course, obviously, the plan and the construction has been underway now for the best part of 2 years. But had this airport not happened, we would have found ourselves in a situation really, I think, by the end of this year, beginning of next year, where any form of growth would be virtually impossible. I mean the old terminal, which, as I mentioned, has not been added to or expanded. In the entire period that Air Astana has been in existence since May 2002. I mean, bearing in mind that we started with 2 aircraft in 2002. And today, we're 57 aircraft. I mean when your main airport hasn't expanded at all, clearly, there's going to come a point when it is not possible to expand. So it's not so much the effect on unit cost that it has had. And the new terminal has assured our future, and that's not understating it in any way.

Okay. And maybe my second question is around the, say, the capacity growth expansion. Obviously, versus, say, last year, the capacity growth has kind of moderated down, and that's driven by, say, GTF-related groundings and so on. So how does we think about pilot productivity here? And because of, say, the sudden drop in capacity growth? And have you seen your staff productivity, both at Cabin crew and pilot being impacted? And what is the levers you have as we ramp up capacity back again?

Yes. No, it's a good question, Sathish, and thanks for that. I mean, actually, we've been watching some of the announcements that have come up in the last few days. And of course, I think there's 1 or 2 airlines who have planned in terms of staffing, in terms of pilots and cabin crew in particular, had planned for a much greater growth than they've been able to put into the market. And of course, I think that was very much driven by the lack of aircraft deliveries, I think, from Boeing. So yes, some airlines have indeed been caught in a resource, in an over-resource situation because aircraft haven't come. I mean we knew. We've known about powder metal for over a year now.  So we have planned accordingly. And so we have not found ourselves in an overcapacity situation with regard to crews. And so our crews, our core crews are roughly speaking, I mean, when we benchmark our corporate crews, they're roughly speaking about 20%, 25% more productive than their European counterparts. So most of our crews are operating close to or near or at the regulated upper level. So our problem is not one of underutilized crew. We're fine in that regard.  Satish, Ibrahim wants to add a few points.

Just a very quick note on an additional statistic, Satish. The growth of our staff members compared to 30th September 2023 is 2.7%. That is on the back of 8.4% growth of ASK and 9.8% growth of RPK. So that again gives an idea of the improvement of the efficiency of this year.

Okay. Got it. That's quite helpful. And so that also factors in the Q4 where you continue to grow like around 16 aircraft. So we should see same productivity gap or productivity or efficiency continue into Q4?

In general, I would say that we will be aiming, as we always do, to maintain a very competitive cost per ASK. There are a number of measures that have been taken already over the years, including to what Peter referred to in terms of facilities, training, et cetera. And the planning has been for an improvement of the staff productivity, which we expect to continue going forward.

Okay. And my third question, the final one is actually on, say, Slide 22, where you talk about the growth on 80 aircraft by 2028. Maybe is it a good time now? Can you help us like understand the phasing of those 80 aircraft from where we are today in the next 4 years?

On the fleet growing from 49 to 80 aircraft, where we are in terms of the number?

How do you like -- what is the like ramp-up would be?

Yes. What's the question, Satish?

So basically, we got 80 aircraft today -- sorry, 80 aircraft by 2028 and around 49 today. And what is like next 4 years, should we expect like a linear growth? And does it factor in the grounded aircraft today? Or is it incremental?

Yes. Sorry, I think if I understand the question correctly. I mean, the growth for 2025, obviously, is going to be affected by powder metal. So the capacity growth for 2025 is going to be mid-teens. As we go forward into '26, of course, those aircraft are going to come back. So capacity will increase. I mean the number of aircraft isn't because it's going to increase that much, but of course capacity will because more aircraft will fly. I mean they won't all come back in a rush from Pratt & Whitney, but they will come back. So there will be more available capacity to us. So yes, I mean, we can expect that capacity will accelerate from mid-teens in 2025 from -- up to a high level from '26, '27, '28 as those aircraft come back into service. Satish, I'm not entirely sure whether I've answered that question exactly as you want to, but that's what's going to happen anyways.

I'm just trying to understand like the trajectory of growth for the next few years.

Yes, that's right. I mean we -- as I said, just to make it clear to everybody else, which is a very good question. Powder metal, that problem is going to persist right through until mid-'26. So yes, capacity growth this year is what it is. Capacity growth next year, we expect again to be mid-teens. But notwithstanding the fact that there's a fairly -- what's the word, unchanging upward trend in terms of numbers of aircraft. Of course, capacity is going to be -- will accelerate from late '26 onwards because, of course, there will not be -- what we hope to generate, there will not be the same number of aircraft that we are obliged to restore ground because of the aircraft that we are obliged to [indiscernible]. Let's hope it.

Next question comes from Mr. Jakub Caithaml from Wood & Co.

Two from my side, and both of them are sort of following on Satish's question. I wanted to ask about the split of growth for next year between domestic and international, if I understood correctly, this year, so far, we have seen more than half of the growth delivered in the domestic Kazakhstan network, which has been, I understand, almost fully driven by FlyArystan. I appreciate that this is a bit distant, but sort of in broader terms, how do you think about this? And if you see room eventually for FlyArystan to also start growing internationally or if you would be sort of taking the capacity of Air Astana in Kazakhstan and rather deploying Kazakhstan internationally, that would be helpful. And my second question, I was just wondering if it's possible to share by the end of '25, what is the size of the fleet that you are looking at now based on the order book and the discussion with the investors?

Sure, Jacob. Look, there's a pretty quick pretty simple answer to both those questions. Yes, I mean, there's been -- FlyArystan has had a degree of growth this year on domestic. Air Astana has not grown on domestic at all. As we go forward to next year, almost all the growth will be on international. So -- and FlyArystan, yes, of course, FlyArystan has much more of its network at on domestic. But we are very much encouraging FlyArystan to fly more international. I mean, obviously, FlyArystan is a low-cost airline. We don't believe in the long-haul, low-cost model. FlyArystan only has A320s whether they're neos or ceos. So FlyArystan's range is really limited by those choices to -- I mean, internally, we're really seeing nothing more than 3, 3.5 hours. And so that's the -- those are the opportunities. We won't have FlyArystan flying any longer than that. But yes, we're looking at international growth for the most part for both brands for next year. And as far as your question on fleet is concerned, we expect to be at 62 aircraft by the end of 2025.

If I can just follow up on the first part of the question. Can you share what were the reasons that so far in '24, we have seen almost all of the growth of FlyArystan on the domestic market and what will be different next year?

Well, I think FlyArystan need to do some realignment. FlyArystan had a bit of a realignment in April, May of this year. There was one or two internal changes. And they have resulted in a significant improvement in the way that we manage domestic yields. And therefore, we want to take full advantage of that opportunity, and that's why we have put capacity back into domestic with the new management team who have been able to maximize yield, and that's been a positive development. I mean for FlyArystan to Fly International, the brand is very well known in Kazakhstan, and it's relatively straightforward to sell FlyArystan. It's a well-known brand. It's -- the Kazakhstan market is roughly 20 million people. So it's relatively straightforward to be able to reach that market fairly quickly in terms of communication. Obviously, when you take a new brand outside the country to foreign countries, there's a lot of work involved in setting up the right sales networks, in setting up the right distribution networks. And for example, FlyArystan has tremendous opportunities in, for example, in Northern India, in other points in China, in certain points in the Gulf. But in order to do that, it needs to have the right sales, distribution and agency network in all of those places. We can't simply rely on Air Astana's network to do that because Air Astana's different product, a different market profile. That's again something that FlyArystan, the management team of FlyArystan have identified is an area for development. It needs to be worked on. It needs to be developed. That's something they're doing actively now. And as that goes forward, that will be followed. Once those building blocks, those foundations are in place, that will be followed by international expansion by then.

Jacob, just a quick point that I wanted to add to put things into perspective to what Peter has mentioned in terms of the capacity allocation, reallocation. As a result of actions taken, both brands have grown their EBITDA and their margin. And FlyArystan in the third quarter grew its EBITDA by a further 17.2%. And it, again, caught up with its historical high margin of 34% during the third quarter, while it was 2 points behind during the first half. So all actions indicate that the decisions that were taken have helped both of the brands to grow EBITDA and improve the margin.

Next question comes from Mr. Igor from Hark Finance.

I also have 3 questions to ask. The first one is regarding the devaluation of Tenge to U.S. dollar. As you can see, there has been a devaluation since summer and since both Air Astana and FlyArystan okay, pay most of the cash in Tenge. I wonder if there is going to be any negative impact on margins of the company, both for Air Astana and FlyArystan.

Thank you very much, Igor. If you don't mind, I'll take that question. The Tenge actually revalued during the first half, and then it kind of came back to the level by the devaluation that happened in -- most of it in June, and it kind of reached equilibrium in early July. The Q3 results that we are presenting today actually fully already reflect the impact of if there were any concern. In terms of the revenues and expenses of the group, you will probably be aware that we have a natural hedge in place, whereby about 30% of our revenues and costs are in Tenge. So we have a natural hedge there in place, which doesn't have a negative impact directly on the financials.

The one thing that we are, of course, cautious of is that if there were to be a very significant and sudden devaluation that there could be an impact on the demand as well. So in a way, we are relieved with the movement that has taken place. It doesn't have an overall negative impact when we take into account the Tenge costs and the Tenge revenues. And as I mentioned at the beginning, Q3 already has a full reflection of that because by early July, those rates were already established.

Well, another question is regarding the fuel costs. I could see that your fuel costs, the growth of them have been decelerating. Well, it's kind of 8% year-to-year, if I believe I remember correctly. Can you elaborate what has been driving this deceleration in this growth? And also, whether you are expecting that trend to continue?

Okay. Igor, to be very quick, it's indeed correct in the third quarter, the growth of the fuel cost is lower than the capacity growth. So the 8% you're referring to is driven by the growth of the capacity by 8.4%. And as a result of that, the fuel cost per unit production is actually down by 0.5%, and that is helped by the actual fuel prices we have today. So I just wanted to clarify that it is not a unit cost growth, but an absolute growth, whereby the unit cost is actually down during the third quarter.

We're running out of quick time actually for questions. Does anybody else have any other questions?

Let us take one question from the Russian line, written questions, please, Michael.

Michael?

Yes, just one second. We'll be coming back to the Russian line questions. We have a number of questions there. We'll just pick one. Regarding the liquidity of the shares being low, do you have any plans of delisting from the LSE? Or do you consider other actions to increase liquidity?

Yes, that's a very good question. I mean indeed, the performance of the share price is what it is. Everybody can see that. I mean we take the view, and I'm sure everybody takes the view really who understands and knows the company that the share price is completely odds with and not at all consistent with the extremely good performance of the company. And there's absolutely no intention whatsoever to delist. But we do very strongly take the view that the share price really has to, hopefully, sooner rather than later, follow the performance of the airline. And therefore, once it improves in accordance with the performance of the airline, liquidity will improve.

Perhaps we can just take 1 last question, Michael.

Okay. We do have a couple of questions on dividends. So maybe I'll just summarize them. Can you please provide more clarity on dividends, when you will pay? Any more additional color of that? That would be very helpful. Addresses a couple of questions.

Sure. I mean obviously, you'll appreciate, Michael, I'm not sure you asked a question, but whoever asked a question, I'm sure it's a question that all of you have got. You'll appreciate that I'm not in a position, of course, to offer any -- I'm subject to the legal process as well, of course, obviously, is subject to the approval of the Board of Directors and the approval, of course, of the shareholders. And of course, the year has not finished yet. We are still in the middle of the final quarter. And of course, when the dividend is paid, it will be paid not only on the base of the performance of 2024, but also with a mind to how things are going in 2025 because the cash position of the company and the stability of the cash position of the company, of course, obviously, is our top priority.  But having said all of that, with all of those caveats, and please note all of those caveats, please don't misquote me on any of those caveats. The fact is that if things continue as they are and if the fourth quarter reflects the strong indications that we had at the end of the third quarter for the fourth quarter. And if the first quarter continues that trend, then I can absolutely say that we will be recommending that the strong cash position will absolutely justify a dividend on the basis of 2024. And we will, of course, be looking at the industry for guidance as to what that dividend should be. And we'll be looking at the industry right from the top to bottom of the industry to be able to have an idea as to what we should be recommending to the Board and to the shareholders. So I hope that's as clear as I can make it.  I think -- ladies and gentlemen, we're aware there's many, many more questions, and we'd be happy to have those responded to in writing. But I'm afraid we are out of time. We do have a media event for which we're already 10 minutes late, in fact. So we'd like to thank you again. Michael, thank you for organizing and for moderating. And we'd like to thank all of you for attending. We hope it was helpful. And again, we'd like just to reiterate that we're happy to have been able to come to you this afternoon, this evening with a positive message and hope that, that continues to be the case as we move towards the year-end. So thank you very much and have a good day.

Thank you.

Thank you very much. This concludes today's conference call. We'll now be closing all the lines. Thank you, and goodbye.