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 Q4 Full Year 2024 Results Conference Call. I will now pass the line to Ms. Irina. Please go ahead.

Thank you, operator. Good morning or good afternoon, ladies and gentlemen. Welcome to Air Astana Group's Q4 and Full Year 2024 Results Presentation. Thank you for joining us today. I'm joined today by our CEO, Peter Foster; and our CFO, Ibrahim Canliel. They will take us through the company's performance during the year and the group performance of the year. After the presentation, we will conduct a question-and-answer session. We hope to get through as much as possible today. But if you have any follow-up questions or clarifications, please e-mail Investor Relations team. The presentation, earnings release and other materials along with IFRS financial reports are available on our IR website. With that, I will hand over to Peter. Peter, please go ahead.

Thank you, Irina. And it's very nice to have the opportunity to speak to you today, this morning or this afternoon depending on where you are. And I'm pleased, Ibrahim and myself who are here are delighted to be able to announce the first full year results following the successful IPO that was conducted across 3 exchanges in February 2024. So this is our first annual result announcement since that event and I am of course pleased to be able to announce some very solid and strong results. Total revenues for the group up by 12.4%. Adjusted EBITDAR up by 16.1% to $338.6 million and adjusted EBITDAR margin of 25.9%. An increase of almost 1 million passengers to 9 million passengers carried at an improved load factor of 87.1%. 57 aircraft at the end of that year, that's now increased to 60 as of last week. Last year in 2024, we signed an MoU with Japan Airlines for flights to Tokyo in 2026. Now we have a more immediate event about which to inform you. That is the signature of an MoU, a memorandum of understanding, with China Southern Airlines which we hope to turn into a formal wide-ranging codeshare agreement covering both China and Kazakhstan and Central Asia very soon. And China Southern Airlines, if I might just remind you, is a powerhouse airline in China that presently operates a fleet of 910 aircraft. So one of the largest airlines in one of the largest markets in the world. So this is all good news and we are obviously very pleased to be able to announce not only this strong result, but we're also able to announce a dividend payment of both an ordinary and a special dividend which combined together equates to a dividend yield of approximately 7.2%, which is at the top end of the dividend range for the airline industry. There have been other airlines that have announced dividends of a similar magnitude in the recent past, but all of them are characterized by very strong balance sheets, very strong operating results, very strong cash balances and very strong cash-to-EBITDAR and debt-to-EBITDAR ratios and that's absolutely where we find ourselves. So after these strong results, we were able to make the announcement, as I say, not only of the ordinary dividend at the top end of the range; but also a special dividend, which I repeat, translates to a dividend yield of 7.2% on the present share price. So just to perhaps expand a little bit on these headline numbers. I should also mention that we have revised the dividend policy from 20%, which was in the policy that we published at the time of the IPO a year ago. That has been revised with the agreement of the Board of Directors from 20% to a range of between 30% and up to 50%. So going forward -- let me just repeat that, we now have a policy approved by the Board of Directors that will enable us to pay a dividend up to 50% of net profit as we go forward into the future. So I think that really sums up the key points that we wanted to discuss with you as headline figures. But I think a very important point to mention is that there were really 2 significant headwinds last year or 3 significant headwinds last year in the airline industry. One was the pressure on unit cost through high inflation not just here, but throughout the world. Second or 2, was the pressure on unit yields, which seem to reflect a slowdown in price increases over the course of the last 18 months. And third, specific to us and many other airlines, is of course the problem of the Pratt & Whitney engines specific to the powdered metal contaminating various spare parts of those engines resulting in those engines having to come off-wing and causing aircraft being grounded. If I can just tackle all of those 3 in the order that I raised them. At the beginning of the year you will remember that when we announced Q1 2024, there was a significant negative difference between unit cost and unit revenue. That narrowed in quarter 2. It was nearly eliminated in quarter 3. And in quarter 4 we completely reversed it. So in quarter 4; unit revenues were up by 6.6%, unit cost was up by 2.6%. So that is a positive differential of plus 4%. And you can see the trend that has therefore taken place during the year and that evidently is a very positive trend in the right direction and going in the right direction. And that's of course one of the reasons why we were able to announce such strong Q4 results and that's the reason why we've been able to announce these strong full year results. And that is the reason of course obviously why we have felt in a position to pay a dividend not only at the top of the range, but also the special dividend as I have mentioned. As far as powered metal is concerned, those issues of course do persist as we had already said. But notwithstanding those problems, we have been able to manage the fleet in such a way that we have grounded a number of aircraft during the low seasons to enable those aircraft to be used within the limit of the constraints caused by the powdered metal problem in the peak seasons. And that again is a trend that we'll continue into 2025, i.e., we will have the maximum number of aircraft available to us in the peak seasons. So that really concludes sort of my part of the presentation. I'll hand over to Ibrahim now and then of course we'll have a Q&A.

Thank you, Peter. Good morning, good afternoon to all, ladies and gentlemen. Starting off with the Q4 results. Despite the fact that Q4 is normally a slow season, it has been an extremely strong quarter with improvements across all key metrics for both of our brands and of course impacting positively on the year closed. With 5.8% capacity growth and RPKs growing by 9.2%, the load factor in Q4 is up by 2.6 percentage points from 79.1% to 81.7%. The RASK, excluding NRIs in Q4, improved by 6.6% as Peter just referred to opposed to a 2.6% unit cost increase and increasing or turning the delta to positive in Q4 with 4 percentage points. This was achieved by proactively managing the capacity in favor of high margin routes and maintaining our core focus on efficiency across both of our brands of Air Astana and FlyArystan. Overall for the industry, 2024 was a challenging year. The airlines have experienced continuous cost inflation, unit revenue pressures and restrictions by the OEMs; which limited the industry capability to expand capacity and EBITDAR. I'm pleased, therefore, to report on the strong results of the Air Astana Group in line with expectations that we set out at our IPO a year ago. We have before explained the advantage of our dual brand model allowing us to align capacity to the highest margin business and thanks to our unique geographic location, how we are able to dynamically reallocate capacity. 2024's results illustrate a successful execution of this dynamic capacity management. Our strong Q4 has resulted in a positive performance for the full year with a 9.2% ASK growth and 10% RPK growth. The load factor improved by 0.7 points from 72.8% (sic) [ 82.7% ] to 83.5% for the year. And as we previously discussed, RASK was managed upwards 2.6% for the year almost entirely offsetting the 2.7% increase in the unit costs and differentiating us from the rest of the industry. For the full year, revenue increased by 12.4% to $1.3 billion and adjusted EBITDAR was $338.6 million, up 16.1% year-on-year and ahead of the 9.2% increase of our ASK. Our full year EBITDAR margin of 25.9% marked an increase of 0.8 percentage points demonstrating our efficiency with one of the highest EBITDAR margins in the industry. Our balance sheet remains strong with an improved cash to sales ratio to 37.3% ahead of available facilities and a low leverage of 1.2x net adjusted debt-to-EBITDAR, gearing well below the guided range that we set. The confidence driven by the combination of strong results in 2024 and the balance sheet well ahead of our guidance enabled us to make the proposal for an ordinary dividend ahead of schedule as well as the special dividend that Peter referred to and we'll be reverting back in the further part of the presentation. And with that, I will be handing back over to Peter.

Right. So we ended the year -- and I think I've already mentioned the fact. We ended the year with an increased and simplified fleet ahead of the plan. So we ended the year with 57 aircraft in total. That number has increased to 60 aircraft as of now. The E2 fleet obviously is now out of service. There's 1 remaining E2 fleet that is remaining to be redelivered at this time to the workshop to have its engines removed in accordance with its return conditions and that effectively means that the fleet has been simplified to the simplest fleet profile that Air Astana has ever had in fact in its 23 years of existence. We're now down to effectively 2 fleets, the Airbus 320 family fleet and the 3 Boeing 767s. We added more Airbus family aircraft last year, 8 A320s and 2 A321s. And as I mentioned, the E2s was taken out of service and the last E2 will leave the country very shortly. We also have modified a number of our A321 long-range aircraft with a third fuel tank. Now you'll be aware of course that Airbus have launched last year the 321XLR, XLR standing for extra long range. We have decided not to take the XLR. It's an expensive aircraft in terms of its purchase and operating lease price. And so we decided that we would modify our LRs through an approved plan with Airbus to add a third auxiliary fuel tank. That's been very successful. We've modified 4 aircraft so far, we have 2 more to go so we'll have done 6 by the time summer rolls around. And that has enabled the range of the aircraft to increase from around 3,600 nautical miles to 4,200 nautical miles and that means that we can fly nonstop from Almaty to London now with a full payload. We can fly nonstop from Almaty to Seoul with a full payload, from Almaty to Phu Quoc and Phuket, from Astana to Phuket and next year from Almaty to Tokyo. So it's quite a major development there and we're very happy with the performance of that aircraft. I think we've talked about Pratt & Whitney engines sufficiently. So I don't propose to go into any more detail on this other than to say that we have a program that we've been operating for the best part of 18 months whereby we ground the aircraft in the low season. And what that does of course is it preserves the life of the spare parts affected by the powdered metal problem. It preserves the life, which means that we can keep those engines on wing longer by virtue of not flying them. So that by the time the peak season rolls around, we can bring those aircraft temporarily back into service without exceeding the reduced life of the spare parts affected by powdered metal. We did also take a further 4 A320ceo. That's the older type of Airbus 320, which is powered by the V2500 engine, which does not have that Pratt & Whitney problem. And we also were able to successfully conclude an agreement with Pratt & Whitney to acquire extra Pratt & Whitney 1100 engines. That's the engine that's affected by powdered metal to again enable us to put those engines on wing and have those aircraft flying. So I think that sums up that slide of the Pratt & Whitney. We can go to the next slide. Ibrahim, I think I'll pass it back to you.

Thanks, Peter. We're back to the financials for the group and for the 2 brands. And despite industry-wide challenges, we grew our ASK by 9.2% as we continue to ramp up capacity in high growth markets to protect our yield benefiting from our unique position in the heart of Eurasia. You can see again that we largely offset the unit cost pressures in the year by increasing the revenue per ASK by 2.6%. And the RASK/CASK differential that improved progressively over the first, second and third quarters turned to positive in Q4 with a positive delta of 4 percentage points. We had guided earlier that in 2024 the CASK growth would be exceeding the RASK growth. So we are pleased that our actions mean that across the full year the 2 indices have broadly aligned. The revenue grew by 14.3% in Q4 and the EBITDAR by 39.6% with the 4.1% improvement in margin maintaining it as one of the best in the industry. Turning to the breakdown by brand. Air Astana grew its capacity by 7.3% in 2024, which was largely driven by international network growth accounting for 80% and the higher margin routes in Asia. RASK, excluding NRI and intergroup revenues, increased by 1.3% in the year despite the industry-wide pressures and this was ahead of the CASK growth of 0.5%, continuing the positive trend between the RASK and the CASK that had been positive since Q1 for the Air Astana brand. For the full year, revenue grew by 8.7% to $963.4 million and EBITDAR was up 7.7% to $237.2 million at a stable margin of 24.6%. The Air Astana brand in 2024 accounted for 70% of the ASK, 70% of the group revenue and 70% of the group EBITDAR. FlyArystan on the other hand continued its high growth performance in the underserved domestic and Central Asian markets. In 2024, FlyArystan increased its capacity by 13.9% and RPKs by 11.4% with the addition of 5 aircraft in 2024 and another 2 that have followed in the subsequent period in 2025. The load factor remained very high at 87.3% flown or 90% on a sold basis. The RASK performance of 7.8% growth meant that the revenues grew by 24.3 percentage points, almost 10% higher than the ASK growth underpinning the strong results of FlyArystan in 2024. It is encouraging that after a year of consolidation for FlyArystan with still impressive double-digit growth, the fourth quarter tells us that FlyArystan is in a good place competing for capacity within the group. We have expanded capacity this year while proactively managing the Pratt & Whitney issues that Peter has gone into detail before to support both growth and yield. The fleet growth from 49 to 57 in the year was ahead of the guidance rising to 60 as of today and well on track for 63 aircraft by the year-end. FlyArystan continued to stimulate local air traffic with domestic capacity up 21.9%. ASK of the group ended up the year with 131% up above 2019 levels and with the load factor also higher at 83.5% with 0.7 percentage points growth over 2023. This was driven by growing demand across our extended home market in Central Asia and Caucasus as well as the nearby mega markets. As with the engine challenges, we have proactively managed capacity to support the margins. The group's flexible dual brand model has enabled us to generate internal competition for capacity between the 2 brands as well as our routes based on the highest margin. This has proven to be extremely effective, maximizing both load factor and marginality again in 2024. As a result of the successful execution by the commercial management team, we have once again positively differentiated ourselves from the wider industry with the revenue per ASK growth. We have continued to grow unit revenues from 1% in the first half to 1.8% in the third quarter and enhancing that further to 6.6% in the last quarter of the year. The RASK in 2024 is now 11% of the 2019 pre-COVID levels. And turning to the unit costs, our unit cost remains a key competitive advantage and we are focused on retaining this leadership position. Despite inflationary pressures, our focus on operational cost efficiency kept full year CASK growth at a modest 2.7%. With a quarterly positive trend turning the RASK and CASK differential to positive in Q4, the annual delta has been reduced to a negligible level of 0.1 percentage points for the year. That is beating the guidance where we had indicated a higher CASK than the RASK growth. And again, this was the key driver of the improvement of the EBITDA margin that we just reported. Looking to the main cost elements for the year. The fuel component for CASK was maintained almost at the level at 2023. And the weaker tenge exchange rate meant that a positive cost impact that only partially included for Q4 and should be more visible in the quarters to come. The ownership costs reflected under depreciation and amortization grew by 6.9%, which is partly a result of the voluntary resting of the Pratt & Whitney mitigating plan. The D&A CASK increase was partly offset by slower growth in engineering and maintenance costs where we book the largest part of the compensations that we're getting from our manufacturers. The CASK of handling, lending fees and others increased by 5.8%, which were driven by the industry-wide cost inflation, higher airport rates and the group's continued investment into the customer experience that factored positively in the revenue per ASK growth. The full year effect of the pilot salary adjustment in May 2023 was eliminated as of the middle of 2024 and we continue investment into operating staff remuneration with increased flight duty allowances for our cabin crew from September 2024. As a result of which, our total employee cost increased by 2.8% for the year. With all those, we remain one of the most efficient airlines in the industry. Our CASK in 2024 remained favorable compared to the remainder of the industry and sustained as a competitive advantage. While Air Astana's $0.694 beats all legacy carriers, the $0.0503 of FlyArystan makes it a highly competitive airline in the LCC sphere while it still has opportunity to gain from economies of scale going forward. As a result, the group's EBITDAR margin of 25.9%; 24.6% for Air Astana and 28% for FlyArystan; are among the very highest in the industry. This puts us in a strong position to deliver further growth and take market share in an inflationary environment for the remainder of the industry. Moving on to the balance sheet. Our balance sheet remains robust in 2024. Our cash level at the end of the period of $488.7 million was up by $214.7 million or 78% on $274 million a year ago. This includes IPO proceeds of $120 million meaning the business has generated an additional $95 million of cash during the year. The cash-to-sales ratio stood at 37.3% prior to the facilities available, which are equivalent to another 13% of annual sales, which would take us above 50% if that were to be included. That is in a very comfortable zone compared to the target of 25% of the guidance. And as a result of new aircraft deliveries, the total debt increased by 24% to $889 million, almost entirely consisting of capitalized leases. In view of our very strong cash position, we voluntarily brought forward the balance of finance lease payments on our A320 family aircraft and as a result of that, we paid the finance leases of the entire Airbus fleet whereby our balance sheet is now almost free of finance lease liabilities bar a small portion of the 767 payments. And we have been carrying, as you know, 0 corporate debt for a long time, which remains to be the case at the close of 2024. With a very strong cash position and EBITDAR, we once again are accelerating our double-digit growth and our leverage is now as low as 1.2x. This places us amongst the lowest leveraged and most liquid airlines globally despite being one of the fastest growing in the sector. And with that, I will hand back over to Peter.

Thank you, Ibrahim. Next slide, please. So we've talked about this of course a lot before and you're familiar with our position on this. Our geographical location of course obviously makes us unique and is a key differentiator as we like to say and this is particularly the case. I'd just like to refer back to a reference I made a few minutes ago with regard to the technology of the Airbus 321 long-range aircraft. 10 years ago it would not have been possible to have flown narrowbodied aircraft to London and to Seoul and to Frankfurt and to Phuket and Bangkok and Phuket and so on and so forth. That has all changed by virtue of the introduction of the A321LR, which we brought into service. You might also remember in 2020, the COVID year. We were the first people to sign for that aircraft in fact in 2015 at the Paris Air Show. And as I mentioned a few minutes ago, we have and are in the process of modifying some of that fleet to increase its range even further, which of course enhances this unique geographical location to which we like to refer: Kazakhstan not being in the middle of nowhere, being in the middle of everywhere. So in 2024 on the back of this, we were able to launch 21 new routes; 14 of which were launched in Q4 with particular expansion to the Middle East destinations such as Jeddah, Medina, Abu Dhabi and Dubai. One of the things that happened last year was a significant increase in the amount of charter business. In fact when we divide the aircraft up into various route groups which we use to sort of slice and dice the airlines' commercial operation, it was the charter operation that in fact grew at the fastest pace albeit from a low base of course and that continues to be the case today. And so the charter program to Colombo, Phuket, Doha, Antalya, Bodrum, Batumi, the Male, Sharm El-Sheikh and Sanya in China continues at pace. And FlyArystan also has had a very highly successful charter program to some of those destinations albeit from different parts of Kazakhstan and indeed to cities such as Goa and 1 or 2 others. So that's a very important part of our business. In 2025 we've already announced new routes and started new routes in fact to Vietnam; to Phu Quoc, Nha Trang and Da Nang in Vietnam. Vietnam is becoming a very popular tourist destination. We will shortly start flying into Mumbai in addition to flights we already have to Delhi and we are also just about to start flying to Guangzhou in China and that's in addition to Beijing, Urumqi and Sanya. And as I mentioned before at the risk of belaboring the point, I'd just like to say again. The decision to take to start flying to Guangzhou was taken in isolation of any industry developments. But since that time, we are delighted to have entered into discussions and indeed have signed an MoU with China Southern, as we say China's powerhouse airline with a vast distribution and fleet and operating network right across China. And should that MoU be able to be translated into a full codeshare and I have no doubt that will be the case and that is of course a major development as far as our presence in one of the world's very largest travel markets is concerned. So as of 31st of December 2024, the passenger network covered 107 routes; 74 international and 33 domestic and 45 destinations in 22 countries. And as you can see, the bulk of that growth last year, as we have said, has come from China, India, the Middle East and when we say the Middle East; of course [ Dubai ] and Saudi Arabia; and Southeast Asia. So if we can go on to the next slide, please. And this just gives you an idea of how we have -- I mean obviously an airline by definition has a great opportunity to be flexible in terms of its capacity deployment. And therefore and indeed in Air Astana, we have a very dynamic and very fast-moving commercial and operational team, which is able to switch capacity fairly quickly depending on market trends. And I think this slide demonstrates that whilst Europe and certain other routes have had a relatively slow year; routes all across Asia, the Gulf and Saudi Arabia have done extraordinarily well as indeed as domestic and that has contributed to the 10% growth in capacity and passenger carry that we've been able to report today. We go to the next slide. This is obviously very important. We've talked about this before as well. As the year has progressed, we've enhanced our ability to perform the C checks or the heavy checks on aircraft about once in 18 months and we've been able to enhance our capability. As an aircraft ages, these checks become -- as you would expect of course, they become more and more extensive and one needs to be licensed and they need to have the capability to handle the increased intensity of these C checks as they progress with the life of the aircraft. And therefore, the most intense of these checks is called the 12C check. Some of you who know the industry may remember, it used to be called the D check. And we have completed 2 of these already and the third is under process. So effectively that means that the entire spectrum of heavy checks of the Airbus fleet can now be done in-house. Obviously this has an issue in terms of capacity if the aircraft expands. As the airline expands with more aircraft, of course we need more facilities to do this, more people. We have an extensive apprentice training program for engineers. Our pilot program, generally speaking, receives the highest profile in terms of either taking young men and women straight from university or from school and turning them into airline pilots. But we have an equally important and extensive program involving maintenance personnel, engineers and mechanics. We also have finally concluded an agreement in Almaty for the location of a second large hangar in Almaty and we will shortly be breaking ground on a new hangar in Astana and it's actually Astana where we do the heavy checks. So that's an important development. We can just go forward to the next slide, please. Let me talk a little bit about training. Of course obviously we have a license training program. Cadets are taken at a young age and I'm speaking about the age of sort of early 20s and they are sent for their commercial pilot license training in Europe, the Flight Training Europe in Paris and Spain and the Atlantic Flying Training School in Cork in Ireland. After their commercial pilot license and they come back, they do their [indiscernible] generally speaking of course today's fleet. We have a fleet and they come back and after 2 years, they're flying with Air Astana. We now have approximately 300. We've had this program going since 2009 and we have approximately 300 young men and women who are now coming out of that program with full European licenses and flying for Air Astana. But of course all pilots have to go through recurrent training and this requires a full motion license from our simulator. We have 1 already that was constructed about 18 months ago. It's operating at absolutely full capacity now. And we have broken ground, therefore, on a second simulator. This is part, as you remember, of the proceeds that we raised at the IPO last February. And the second simulator contract has been concluded and we expect that simulator will be open and operating by the fourth quarter of this year. If we just go forward a bit, I think the thing I wanted to mention here. We also mentioned, as you will remember, during the IPO in and around there that the proceeds would also go towards enhancing the company's ground services capability. I'm pleased to say that we have now received approval and are in the process of planning for the establishment of a separate company, Air Astana Terminal Services. And that company, which will be a 100% fully owned subsidiary by Air Astana, will start operating in early summer and it will initially start operating as a passenger and ramp handler at Almaty Airport and that will be extended to Astana Airport. We already have various services, passenger handling services, for our own flights. We also have de-icing services. That's right in the picture there with an aircraft being de-iced. But we will extend this to full ramp handling and of course obviously that capability will be available to third-party airlines, third carrier airlines. And that's a very exciting business that we look forward to getting into in both Almaty and in Astana. We continue to make progress in terms of emissions. Of course obviously the more new aircraft we bring in, the lower the emissions become. And fuel-tankering, of course obviously that's very important to enable fuel savings. which again is a program that we operate very effectively. If we go forward and talk a little bit about customer service, obviously a terribly important subject. Air Astana is a full-service airline. It's a 4-stars Skytrax airline. One of the key selling points is the fact that we do and always have offered a very high level of customer service on the aircraft both in business class and in economy class. And finally, we're extremely pleased to say that after 23 years of operating as an airline, we finally have a dedicated airport lounge at our home airport in the new Terminal 2, a very good terminal. The new Terminal 2 of Almaty Airport that was constructed in June of this year and the lounge was opened in Q4 of last year, the new Shanyraq and it is, dare I say, an extremely good facility. It's extremely comfortable. It's operated in joint venture with the airport [ TAV ] and it's been extraordinarily well received by our elite and business class passengers. If we can go forward. We continue just on the theme of service excellence. We're all aware these days that it's not just the so-called service delivery touch points at airports and on aircraft upon which an airline is judged, but also the digital experience of people who've gone to the airlines' website or on to the airlines app. We've revamped the website and we think the website is working very well now. We've updated the Nomad Club in terms of its benefits and in terms of access to the Nomad Club site for our large number of Nomad Club members. We've introduced self-service kiosks for FlyArystan. FlyArystan even as a low cost airline, of course obviously needs to be a high quality low cost airline. And finally, we are working on the app as we speak. Now many of you have commented that the app needs work, needs to be improved. We recognize that and we expect that the new app will roll out at the end of April, beginning of May. So that's that. If we go on this, if you indulge me for a second. We're delighted of course that we were voted Best Airline Central Asia and India -- Central Asia and CIS in fact it is now. They've slightly changed the regional grouping. But we won that I think for the 13th year in succession in 2024. And FlyArystan has been awarded Best Low Cost Airline for Central Asia and CIS for the second year. So these awards are all very well. But the main point is that they're a reflection of the fact that the company continues to invest heavily in service delivery in both brands I'd stress. If we go on, I'd just like to sort of again make the point that we continue to take our environmental responsibilities very clearly and we continue to take our social responsibilities very seriously. We did contribute substantially not just in terms of cash, we did make a $2.7 million donation. But also we carried a large number of passengers effectively pretty much at 0 cost from the affected flood areas, which were in Western Kazakhstan back in April of this year, plus of course a large amount of emergency supplies and freight into that affected region. And in terms of governance, we continue to have an extremely strong Board of Directors. We added an Independent Non-Executive Director to the Board this year. Delighted to having Mr. Diyas Assanov, who is also the Regional Head of Siemens here in country. But we continue to have a very strong Board consisting of representatives from Samruk-Kazyna, BAE Systems, myself and of course the Independent Directors. So if we go forward, obviously we're a growth airline. This is absolutely the profile that we are. The country is growing, the economy is growing, regional air travel is growing and we are able to grow with those opportunities not just in Central Asia, but also in the Caucasus. And of course obviously this connection to these mega markets nearby; India, Gulf and Saudi Arabia, Korea, Japan and of course particularly China as well as Southeast Asia. This is our great strong and unique growth opportunity and the reason why the company will, in our opinion, continue to do very well. So I'd now like to hand it back to Ibrahim again to talk about this very important point, dividend. And I'd just like to repeat the dividend payout this year consists of both the ordinary dividend and the special dividend. Ibrahim might like to go into more detail on that.

Thank you very much, Peter. As we mentioned earlier, as a result of the very strong performance of 2024 and a healthy balance sheet, the Board has proposed both an ordinary dividend for 2024 earlier than guided as well as a special dividend. The dividend that has been proposed by the Board of Directors to the AGM is as follows: an ordinary dividend of KZT 17.7 per common share or KZT 70.9 per GDR of 4 shares, a special dividend of KZT 36 per common share or KZT 143.9 per GDR. The total proposed dividend ordinary and special combined translates into KZT 53.7 per common share or KZT 214.8 per GDR. This on the last closing price translates into a 7.2% dividend yield. In addition to that, going forward the Board of Directors has approved a new enhanced dividend policy stipulating a dividend of 30% to 50% of annual consolidated net income subject to all the conditions that are set out in the dividend policy. We have also pursued a share buyback program since April 2024 with over 4.5 million shares acquired to date with a total consideration of $8.2 million. These shares have been used to meet our obligations towards our employees' incentive programs. The first vesting of shares and GDRs to employees took place last February under the employee share ownership plan, the first of its kind in Kazakhstan. As of 17th February, all employees that were employed at the time of the IPO are now shareholders of the Air Astana Group. In addition to the completed first part of the program, yesterday the BoD has approved the second phase of the program with the purchase of shares or GDRs up to $5 million.

Yes. Thanks very much, Ibrahim. Thank you very much. So I think we're just going to wrap up here really and go into Q&A. I'm sure you've got lots of questions. So again we just want to -- this slide is a little bit of publicity really rather than anything else. Nothing that's any new. But we hope that today's results have demonstrated that we are not only talking the talk, but we are also being able and demonstrably walking the walk of these 3 key elements which drive our business and indeed drive our day-to-day activities and indeed our lives and that is growth, efficiency and excellence. So with that, I think we'll sign off and we'll get on to the Q&A. Thank you very much for listening.

Thank you, Peter. Thank you, Ibrahim. Dear operator, we are ready to take the questions. Thank you.

[Operator Instructions] I see our first question comes from Anton from Citi.

Three questions, please. First, very impressive quarter in FlyArystan with 31% EBITDAR margin. There's a question though whether we should think about this as a normalized level for the quarter and what underpins that? Also related to this, does it mean that we should kind of adjust our expectations for margin for Air Astana for other quarters if you change something in the network? So that's the first question on FlyArystan. Secondly, congratulations on launching the ground and terminal services. Is it possible to walk us through the cost and revenue implications and how we should think about quantifying it? And thirdly, finally, on the Russia-Ukraine potential ceasefire and peace, have you decided when and where would you start flying should that happen? And how do you view the competitive environment should Russian carriers come back to the market?

Anton, perhaps I'll do these questions in the reverse order that you raised them because the third question is something that everybody is going to be very interested in. So as far as Russia and Ukraine is concerned, I mean obviously we stopped flying to Ukraine on the 24th of February. I should be absolutely completely accurate about that. We stopped flying to Ukraine on the 24th of February and we stopped flying to and over the Russian Federation on the 11th of March. Now obviously like everybody else I guess, we're watching the news. So obviously nobody, neither us nor anybody has any insider information as to what may or may not happen, perhaps even the protagonists themselves. But the point is that of course we consider what might happen in the event that there is -- I mean it's not only a cessation of hostilities of course, but also a lifting of sanctions. So it's not just ceasefires and so forth, but it's also a lifting of sanctions. I mean obviously, Anton, none of us are in a position to know when that will happen and the news is as confusing this morning as it's been for the last 2 or 3 weeks. But be as it may, in our commercial leadership group meetings which happen every month, we of course obviously do consider what we might do in the event that sanctions are lifted and things can go back sort of towards the status quo ante of 24th of February 2022. And yes, I mean we would certainly be interested in resuming flights to the Russian Federation and indeed resuming flights to Ukraine where we also had a good operation. But we're not holding our breath for it. Just to make 1 point absolutely clear. Russian carriers are already flying to Kazakhstan. So it's not as if Russian carriers will come back into the market. They're already here. We're not flying to the Russian Federation, but the Russian carriers are flying. The change that might happen would be if Russian carriers are able to resume their flights to Europe because then of course obviously the Russian carriers would be in a position to operate hub and spoke flights back to Europe as they used to do from here. But the same of course obviously applies to the Ukrainian carriers. Now again I'm not qualified to comment on whether or when that might happen. But just to make it absolutely clear, the Russian carriers are already here in Kazakhstan. So that would not be a new development. And yes, we would go back into both of those markets if the geopolitics were to radically change and of course the sanctions. So that's on that point. As far as what we call 2Hos is concerned, Air Astana Terminal Services, obviously we're not really in a position here. We can't give any guidance. Anton, can you still hear me? Can we just ask anybody who's not talking to mute themselves, if you wouldn't mind? So we can't give any guidance, Anton, on 2Hos as we call it, Air Astana Terminal Services because we're not in a position to do so. All we can say is this. Air Astana has obviously less than 50% of international traffic going to and from Almaty Airport. So therefore, what that means is that more than half the business that's presently operating into and out of Almaty internationally is fair game as far as competition is concerned for ground handling and that's what we'll be going for. So that's really all we can say on that point. As far as FlyArystan's last quarter is concerned, yes, I mean it was a strong quarter. It was a strong quarter. Again we can't comment on FlyArystan going forward into 2025 other than what we said at the time, which is the forward-looking profile for both FlyArystan and Air Astana in Q4, for the first couple of months of Q1 was strong. That's all we can say. But yes, obviously we're very pleased that FlyArystan has recovered quite considerably in fact since April of last year and has put in a good solid set of results not just in Q4, but really from about the end of Q2 right through for the whole year. So that's a good development. Anton, does that answer your 3 questions?

Yes. Thank you, Peter.

So we'll be now moving to the next question. We have a text question from Mohit from Two Ocean Group. How could you explain the high volume of trades in stocks during the last month when AIRA went from KZT 699 almost up to KZT 800 per stock.

So I'm not quite sure that I understand the question and even if I did understand it, I don't think I can answer it. Irina, can you answer that question? It's about the stock price movement.

The stock price movement and I understand it's the volumes which are traded. So we could not really comment on the volumes as it's on the open trades and increase in share price as well. So we're not as a company in the position to comment on the capital market movements.

[Operator Instructions] Next question comes from Jaina from Jefferies.

It's Jaina Mistry from Jefferies. Three questions if I may. Wondering if you could quantify the FX impact to EBIT in 2025 and how you're thinking about that and how spot evolves? Question number 2 is around Pratt & Whitney and I wondered if you had a broader view on when the Pratt & Whitney issues will resolve in the market? And then question number 3 is around CASK ex-fuel, I saw it came down in Q4. Is this the right run rate to think about for 2025 and what are the moving parts here? How are you thinking about wage inflation per ASK, et cetera, into next year?

In the early meetings, we have been talking about the natural hedge that we have in place between the costs and the revenues of the company. In case of a 10% drop of the exchange rate, we would see a reflection on the EBIT in the range of about $12 million assuming that we would not be able to improve the RASK, which we normally would be doing once we see such a movement. To the extent possible, we would be seeing opportunities how far we could improve the tenge revenue base when that happens. In terms of your question to the fuel cost, Jaina, roughly 2/3 of our cost is domestic uplift from Kazakhstan. That cost is quoted in tenge largely. Those contracts are stable. So in the Q4 fuel cost that you see, you can follow the trend of the exchange rate through the quarter, which implies that only a portion of that cost improvement is reflected in Q4 and then that could be rolled going forward for again roughly 70% of our fuel uplift. The international uplift, the market price is indeed ranging lower than what we thought it would be. To give a flavor of the upside risk, we have hedged all 3 quarters of 2024 at positions largely at $75, $80 and a portion at $85. So the upside risk is covered with call options, which means that if there were to be downside on the fuel price, we would be fully benefiting from that.

Yes. And finally, Jaina, you asked a question on Pratt & Whitney. Well, as we reported last time around, the time from off-wing to on-wing hasn't changed, it's still 18 months. And obviously there's a vast number of aircraft around the world that are affected by this. I think it's a total of something like 3,000-plus engines so it's well over 1,000 aircraft. So certainly it's all of '25, all of '26 and we would think at least half of '27. So we don't see this problem really going away until towards the end of '27. And we have to remember that there isn't sufficient MRO capacity, Pratt engine shop capacity. You're not suddenly going to get 3,000 engines flooding back into the market and 1,500 aircraft suddenly flying again. So it's a longer process and it looks to us as though it's not really going to work its way out until, as you say, at the end of 2027.

That's very clear. And I just wanted to clarify the question on CASK ex-fuel. That's where the question was. I think on your slides for Q4, it showed a decline in CASK ex-fuel, but let me know if I read that wrong. Now I was wondering around the drivers of this and whether that is the run rate for '25.

Okay. Got your question. In terms of the CASK excluding fuel, indeed the trend has been improving. In terms of the depreciation and amortization cost that was impacted in Q4 with the planned and intended lower utilization that should be improving with increased utilization during the summer. In terms of employee costs, we had the pilot wage review in May of 2023. The full year effect of that was completed in the first half of the year. And in terms of the passenger costs, we mentioned that the cost increase has been about 5.8%, part driven by the inflation and the high increase of particularly Air Astana on international flights, but that is again accompanied with higher revenues and particularly a higher revenue per ASK. And we have been consistently stating that we continue to invest into the product. That investment is again one of the reasons why the commercial team is able to continue achieving a higher revenue per ASK. Those are the key drivers of the nonfuel costs, Jaina.

That's very clear. One last question, if we have time. I wondered if you could talk to CapEx guidance for 2025 and if there's any update there.

Yes, sure. I mean a large part of our CapEx, Jaina, is driven by the investments that we're making into the product, refurbishments that we are doing of the aircraft. Those form approximately 80% of our total CapEx and a big part of the remainder of the 20% is investment into IT infrastructure, which again translates into increased efficiency and of course investments that we are making into the website in 2024 and the app that we are doing in 2025. In terms of the proceeds, we've been talking about purchase of engines that are both on track and advanced. The ground services CapEx is another item that we were talking about at the time of IPO. And the big cash outflow starting in '25 and '26 is towards the hangars, which was again a key item for the IPO proceeds that we talked about prior to the IPO. Those are on track. As Peter mentioned, we are planning to break ground in Astana before the end of the year and plans are now firmed up for the hangar in Almaty. The total investment into those are earmarked to be in the north of $70 million.

Brilliant. So that's total CapEx about $70 million?

For the hangars, yes. About 1/3 of that is planned for in 2025 and the remainder in '27, '28. And I interrupted you, you had another question?

It was just a sense check. Do you have guidance specifically for CapEx in '25? Is that in total 1/3 of that $70 million or is there more to it?

No, no, I'm not able to provide that, Jaina. To clarify, the $70 million is split into 2 main parts. I said 1/3 of that will be in 2025 and the remainder in '26 and '27.

We are moving now to the next question from Jakub from Wood & Co.

Jakub here. Also 3 from my side. And first, I would follow on Anton's question. Could you please share any initial feedback from discussions that you may be having with insurance companies or lessors regarding this potential restarting of flying to and over Russia? Then my second question, could you please give us some update on the competition landscape in Kazakhstan and whether there have been any new entrants or any other notable activity from your competitors so far this year? And lastly, on '25 capacity, could you remind us what is the timing of deliveries and potential returns? And also in the context of the engine resting program, I would imagine that we will see slower growth in the winter and then acceleration of the capacity growth in the summer. And if this is right, could you give us some rough indication on what kind of pace of ASK growth for FlyArystan and for Air Astana do you think is attainable in summer '25 versus summer last year?

Let me just tackle those 2 first, Jakub. No, we haven't had any discussion with the insurance companies on Russia and Ukraine. As we said before I think to Anton, we think it's too early really. I mean it's very difficult to see any visibility on what may or may not happen and it's too early. So no, it's premature to have those discussions. The discussions that we're having are internal discussions. But at this point, of course they're only theoretical. As far as local competition is concerned, I think you're referring to some earlier notes that you put out yourself in fact on the threat of competition from Qazaq Air and its potential sale or partial sale to Vietjet and the establishment of local competition. So let's just remind ourselves shall we that so-called agreement was signed back in the summer last year. Vietjet was supposed to start operating or Qazaq Air with Vietjet that was supposed to start operating I think A320 aircraft in the domestic market in September. They didn't come in September. They were now supposed to come in October, they didn't come in October. They were supposed to come in November, they didn't come in November. They were then supposed to come in December, they didn't come in December. We were told beginning of this year, they haven't come this year and here we are in March and we see no sight of them. So I guess everything happens in life eventually. But as of now, we have no visibility on them at all nor is there any other local competition on the horizon. As far as your third point is concerned, I mean the engine resting programs continuing of course. I mean you're absolutely right. I mean the growth we had last year, which was just less than 15%, that was very staggered. During the summer period we had an average I think of 6 aircraft grounded and of course in the winter period, we had an average of I think 12 to 13 aircraft grounded. So therefore, that sort of low teens growth that we had or 12% growth that we had last year was, roughly speaking, staggered rather haphazardly over the year depending on that aircraft operating profile. The same will be the case in '25. Now obviously I can't give you the exact growth figure for '25. But what I can tell you is that exactly that profile will continue. There is a planned program to have a small single figure number of aircraft grounded in June, July, August, September and obviously a double figure for the other months. Beyond that, Jakub, you have to forgive me, I can't go into any more detail.

This is very helpful. Just on the last question, could you remind us what is the schedule of aircraft deliveries during the year?

I don't have that absolutely at hand. We've had 2 in the last couple of weeks. I don't have it absolutely. We've got 4 more aircraft arriving and 1 leaving. So I think I mentioned earlier, there's 1 Embraer still in the hangar just waiting to go depending on the slot for its engine removal in the engine shop out of the country of course. And we have 4 more aircraft planned for this year; 3 A321s and 1 A320. I can't remember the exact date, but they're all going to sort of come in over the course of the next 8 months.

We are moving now to the next question from Nikolai from RenCap.

Congratulations on a successful year. I have a question. If it's possible, please tell me what approximate proportion of the group's international traffic growth for 2024 is attributable to FlyArystan and what to Air Astana?

Nikolai, very nice to welcome you to this forum. I think it's the first time you've been here. So it's nice to have you here. Thanks for the question. Ibrahim, do you have the detail of this?

Yes, sure. Actually Nikolai, in 2024 almost 80% of the growth of Air Astana was coming from the international side. As Peter mentioned, towards the end of the year we had a total of 22 new routes that were launched, 14 of which were launched in the last quarter of the year. And almost all of the international growth was on the Air Astana side. And that implies that the focus for FlyArystan going forward is to have a higher growth on international routes.

Thank you. We are seeing no further questions. So now I would like to pass the line back to Air Astana team for closing remarks.

Well, thank you. Thank very much again to all of you for being online for this presentation. It's been a pleasure for myself and Ibrahim to make this presentation given the fact that we're pretty pleased with what we've been able to say and communicate to you. And thanks for the questions that came. I guess many of you will probably have questions that you'll think about in due course and again just get those through to us and we'll get back to you with a response as quickly as possible.

Thank you very much. This concludes today's call. You may now disconnect the line.

Thank you very much.

Thank you. Bye-bye.