Kazakhstan's Asian hub foundation

Richard Maslen August 18, 2016

As the world's largest landlocked country, Kazakhstan, the dominant nation in Central Asia, has historically been a key trading point between Europe and Asia along the famous Silk Road. The name ‘Kazakh’ actually comes from the ancient Turkic word ‘qaz’, ‘to wander’, reflecting its nomadic culture which now provides a multi-cultural nation that is home to more than 131 different ethnicities.

With a total land area of over 2.7 million square kilometres, equivalent to the whole of Western Europe, Kazakhstan is the ninth largest country in the world. It generates over 60% of Central Asia’s GDP, primarily through its oil/gas industry, which helped it establish itself on the global stage after it became the last of the Soviet republics to declare independence following the dissolution of the Soviet Union in 1991.

The country’s increasing wealth is driven largely by its vast mineral resources, which include the world’s largest chromium, vanadium, bismuth and fluorine reserves. While the discovery of the Kashagan oilfield in the northern Caspian Sea, one of the world’s biggest oil finds in almost three decades, has positioned the country as an increasingly important player in the global energy market.

Supported by rising oil output and prices, Kazakhstan’s economy grew at an average of 8% per year until 2013, before suffering a slowdown in 2014 and 2015 sparked by falling oil prices and the effects of the Ukrainian crisis on trade and visitors. This resulted in the country devaluing its currency, the Tenge, by 19% in February 2014 and by a further 22% in August 2015.

However, Kazakhstan remains the leader among the Commonwealth of Independent States (CIS) in terms of Foreign Direct Investment (FDI) attracted per capita with more than $190 billion in gross foreign investments since its independence in 1991.

But despite its growing wealth, Kazakhstan remains shrouded in mystery and intrigue and is still something of an unknown quantity, particularly among tourists, although visitor numbers are on the rise as the Kazakhstan Government actively looks to diversify its Economy and grow tourism investment.

According to Travel and Tourism Intelligence Center data from consumer insight firm Canadean, domestic tourist volumes in Kazakhstan increased from 3.9 million trips in 2010 to 6.1 million trips in 2014, expanding at a CAGR of 12.1%.

Looking ahead it is forecasted that domestic tourist volumes are will increase at a CAGR of 5.1% to reach 7.8 million trips in 2019. International departures from Kazakhstan grew at a rate of 15.6% to reach 10.5 million in 2014, while inbound tourism to Kazakhstan recorded a CAGR of 11.9% between 2009 and 2014.

This data highlights that neighbouring Kyrgyzstan will continue to be the dominant market for international arrivals growing close to the two million annual visitor figure by 2019, but growth is also predicted to return to the Russian market from this year with rises in visitors from Tajikistan and China. There is also expected to be growth in inbound tourism from Europe, supported by the enhanced air connectivity offered directly by Air Astana and via other intermediate points with foreign air carriers. Germany is currently the largest source market in Europe with around 115,000 annual arrivals in 2014, a number that is set to grow to almost 195,000 by the end of the decade.

Improving road and rail connectivity is certainly helping to enhance connectivity within Kazakhstan and into neighbouring territories, but the scale of the country means that air transport will be important in helping the nation to grow international links and enhance domestic connectivity.

For many years after its independence Kazakhstan was blighted by a story of failed carriers, poor safety records and creaking infrastructure which was managed under the remnants of a former Soviet regulatory framework. However, it now has a strong national carrier in the form of Air Astana, a joint venture between Kazakhstan’s Samruk Kazyna National Welfare Fund and BAE Systems and independent competition from the likes of Bek-Air, SCAT Air Company and the recently established state-controlled domestic operator Qazaq Air.

The main points of arrival for visitors into the country are the former capital, Almaty, located in the south of the country in the shadow of the Trans-Ili Alatau, part of the Northern Tian Shan mountain system that separates Kazakhstan from Kyrgyzstan, and its newly developed capital, Astana, located more centrally in the country. Increasing direct international links are now also being offered from smaller cities in Kazakhstan.

The former capital

Almaty remains the major commercial and cultural centre of Kazakhstan, as well as its biggest population centre. A gateway to the popular Medeu Skating Rink and Ski resort, the city has many attractions, most of which can be seen from a cable car ride up to Kok-Tobe Hill.

The city has its roots in the medieval settlement Almatu that existed near the present day city. In a region thought to be the ancestral home of the apple, a disputed theory holds that its name is actually derived from the Kazakh word for 'apple' (алма). Due to development by the Soviet Union and relocation of workers and industries here from European areas of the Soviet Union during World War II, the city has a high proportion of ethnic Russians and Ukrainians.

Almaty is located in a tectonically active area and historically has suffered significant damage from earthquakes and flooding with the wooden structure of Zenkov Cathedral in Panfilov Park a rare example of a building surviving the 1911 Kebin earthquake which flattened most of the city’s buildings.

It is served by Almaty International Airport (ALA), which this summer is linked to 15 domestic points and 31 international destinations by 25 carriers. Its departure capacity is pretty evenly split between domestic and international seats, with the important Almaty – Astana corridor accounting for 48.2% of domestic and 24.5% of total capacity.

Overall capacity is up 1.1% this summer and although direct flights are now longer offered to the likes of London, Prague, Samara and the domestic points of Taraz and Urdzhar, a new link has been established by Yamal Airlines from Ekaterinburg in Russia.

Additional flights have also been added by Air Astana to Tehran, Aeroflot to Moscow Sheremetyevo, KLM to Astana and onwards to Amsterdam and Qazaq Air to Semey, while capacity growth has also been seen in a number of markets including Dubai and Sharjah in the United Arab Emirates (UAE) and Kyzylorda within Kazakhstan.

A new capital focus

While Almaty highlights old Kazakhstan, the planned city of Astana illustrates the new. It is home to many futuristic buildings, hotels and skyscrapers and as the seat of the Government of Kazakhstan, is the site of the Parliament House, the Supreme Court, the Ak Orda Presidential Palace and numerous government departments and agencies.

Located alongside the former 1830s settlement of Akmoly, latterly known as Tselinograd and Akmola, it became the capital of Kazakhstan in December 1997 and was renamed as Astana, which means ‘the capital’ in Kazakh in May 1998. With an extreme continental climate it is the second coldest capital city in the world after Ulaanbaatar, Mongolia.

The city is served by Astana International Airport (TSE), which this summer is linked to 15 domestic points and 26 international destinations by 25 carriers. Its departure capacity is more heavily biased to the domestic market (60.2% this summer), but is expected to see significant international growth in the future as it gains more significance.

Astana will be the host city for the Expo 2017 international exhibition between June 10, 2017 and September 10, 2017, with a legacy that will see the site become a financial centre for the country. The event is expected to attract exhibitors from more than 100 countries, with participation by 15 international organisations and 10 leading innovation and technology companies.

The symbol of Expo 2017 will be the pavilion of Kazakhstan which will be housed in one of the biggest complete sphere structures in the world. In addition to the Museum of the Future, the Sphere will accommodate a museum telling the history of the country.

“We are the capital of one of the most developed countries of the world which is known for its natural resources so we are the perfect place for people to consider the question of future energy and renewable resources,” Alisher Pirmetov, director general - first deputy chairman of the board of the organiser told Routes News during a recent visit to Astana.

“One of the most important goals for Astana Expo 2017 will be the development of inbound tourism to Kazakhstan, with the event expected to attract more than two million visitors from Kazakhstan and around the world. We have already signed several major contracts with local and foreign companies worth €111 million,” he added.

A new hub for Central Asia

Astana International Airport is preparing itself for the growth and an expanded terminal structure is under construction to grow capacity to handle the expected rise in domestic and international traffic. While the independently managed Almaty International Airport is already suffering capacity issues at peak times, the capital’s airport is set to more than double from its present capacity of 3.6 mppa to almost 8.2 mppa ahead of the opening of Expo 2017.

New links from flydubai to Dubai, KLM to Amsterdam (with an onward leg to Almaty), Qazaq Air to Taldykorgan and Air Astana to Bangkok and Dubai (replacing an Abu Dhabi service) and capacity growth on existing routes means capacity at Astana International Airport is up 10.8% this summer versus last year. Air Astana is also completing a network review that will likely see Astana become the main hub of its operations as it seeks to take advantage of transfer flows to support the traditionally small O&D flows across its international network.

FACT - Why does Astana International Airport have the code TSE?
Despite being the second largest city in the country, Astana is now be firmly established as the political capital of Kazakhstan, the ninth largest country of the world. The planned city is the seat of the Government of Kazakhstan, but many people still query why its international airport has the unusual IATA code of ‘TSE’. Well, this is due to its historical development and a story of many identities. The city was originally founded in 1830 as the settlement of Akmoly and served as a defensive fortification for the Siberian Cossacks. In 1832 the settlement was granted a town status and renamed Akmolinsk before being renamed Tselinograd in March 1961 to mark its evolution as a cultural and administrative centre of the Virgin Lands Campaign. This is why the code ‘TSE’ was allocated to Astana International Airport when the new facility just over ten miles south of the city opened in November 1963, replacing an older former military airfield that had served since the early 1930s. However fast forward another three decades and Tselinograd was replaced by Akmola in 1992, a modified version of its original name meaning "a white grave". It replaced Almaty as Kazakhstan’s capital on December 10, 1997 and just six months later on May 6, 1998 was renamed again as Astana, which literally just means “the capital” in Kazakh.

“We have only a small home market so a transfer model is key to the development of Astana as the financial centre of Kazakhstan,” Paulo Ricciotti, advisor to the chairman of state-controlled Airport Management Group explained to Routes News.

“We will never become the Doha or Dubai of this world for sure, but can certainly become a hub into our extended home markets and develop Astana International Airport as the hub for Central Asia, connecting a major city with secondary cities across the region,” he added.

An original plan to construct a new international terminal adjacent to the current structure, built in 2005, and transfer that to domestic operations has grown into an integrated model that will allow the airport to expand and contract during variations in domestic and international traffic flows and also allow local carrier Air Astana to more efficiently operate its fleet between local and foreign routes.

The new facility is due for completion by the end of January 2017 and a three month operational delivery programme will be completed ahead of a soft opening around May 2017 and the opening of Expo 2017 the subsequent month. The airport has also recently constructed a new business aviation terminal to grow executive movements and handle VIP arrivals and departures.

Five-Star Resort Comfort

Located in the eastern foothills of Kokshe Mountain in the north of Kazakhstan in Akmola Region is the Burabay National Park, the Kazakhstan equivalent of the UK’s famous Lake District and known unofficially as Kazakhstani Switzerland. And on the banks of Lake Shchuchye is the Rixos Borovoe, currently the only five star resort hotel in Kazakhstan.

The modern hotel is an example of the newly developing tourism product now available in Kazakhstan. It is home to 200 rooms and alongside offering the comforts one would expect of a five-star establishment, provides a base for visitors to explore what many describe as the fairy tale landscapes of the region.

“Mostly our guests are of age from 25 to 45 and travel with young children as we are considered as a family resort hotel,” explains Artur Zinullin, sales and marketing manager, Rixos Borovoe. “We also have meetings and events facilities and are occupied by MICE groups during weekdays. And of course, casino guests as well.”

The majority of guests at the facility are domestic visitors from Kazakhstan, many living and working in Astana and visiting to escape from the growing city. There are also strong flows from Russia with the region located close to the border to the Federation’s industrial regions.

“The Government is now paying much attention on developing of tourism industry and Borovoe is on its priority list. Due to upcoming Expo 2017 we have much interest from tourism agencies of China and Europe, complementing the rising interest from Russian tourists,” adds Zinullin.