Air Astana JSC published its financial results for the first quarter of 2026. We assess the report as moderately negative. Despite decent revenue growth, operating expenses increased at a much faster pace, resulting in a net loss. Cost pressure related to Pratt & Whitney engine issues persists. The spread between revenue and costs per available seat kilometer turned negative. EBITDAR declined by 22% year-over-year, while the margin decreased from 20.5% to 14.6%. As a result, the quarterly net loss increased significantly compared to last year. Positive signals included continued growth in international passenger traffic, a recovery in load factor to 83.3%, and the rapid reallocation of capacity from Gulf routes to Asian and Indian destinations. In our valuation model, we reduced our forecast for passenger traffic both in the country and for the company, and slightly lowered margin assumptions. On the other hand, we note a modest increase in average revenue per passenger. As a result, the updated target price per share stands at 740 tenge with an upside potential of 9%. Our recommendation remains “Hold.”
Key valuation factors. The main source of pressure remains the Pratt & Whitney engine issues and the faster growth of the cost base relative to capacity. In the first quarter, the company recorded only 2 AOG events compared to 22 during the whole of 2025. However, we view this as a seasonal effect of lower winter utilization rather than a signal of improved reliability. Management’s statement that the volume of scheduled repairs in the first half of 2026 will be comparable to the entirety of 2025 indicates continued pressure on available capacity during the peak season. The accumulated number of engines requiring repair is expected to persist until the end of 2028. The company secured 6 additional engines (4 leased and 2 owned) to mitigate the problem. The main positive factor was the continued growth in revenue per available seat kilometer. Management noted that in March, load factor and average fares exceeded plan by 9 percentage points and 10%, respectively, driven by recovering yields, elevated demand during Ramadan and Nauryz, and an increase in fuel surcharges from March 2026. International passenger traffic increased by 12.8% year-over-year, while domestic traffic declined by 8.7%, in line with the strategy of reallocating capacity toward higher-margin international routes. In March 2026, the company launched a direct Almaty–Shanghai route operating three times per week, increasing the total number of weekly flights between Kazakhstan and China to 23 (versus 11 in the first quarter of 2025), with plans to raise this number to 50 by the end of June.
Revenue: growth in international routes and weakening sale-and-leaseback segment. Quarterly revenue totaled 165 billion tenge (+11% YoY). Passenger transportation revenue increased by 13% YoY to 156.5 billion tenge. Scheduled flights grew by 12% YoY, while charter flights rose by 31% YoY, reflecting elevated demand for alternative destinations following the suspension of flights to the Middle East. Brand performance varied: Air Astana posted 15% YoY growth in passenger revenue to 126 billion tenge thanks to international routes, while FlyArystan grew only 8% YoY to 30.6 billion tenge, indicating continued deceleration in the low-cost carrier’s growth trend. By region, the main driver remained “Asia and the Middle East” (+16% YoY to 82 billion tenge). Revenue from CIS destinations increased by 24% YoY, domestic routes rose by 10% YoY, while European routes showed modest growth of 6% YoY. Cargo transportation revenue declined by 4% YoY to 2.8 billion tenge.
Margins: widening gap between expense growth and revenue growth. Operating expenses in the first quarter totaled 172 billion tenge (+18% YoY), exceeding revenue growth by 7 percentage points. The largest contributors to expense growth were engineering and maintenance (+30% YoY), personnel expenses (+22% YoY), passenger servicing (+27% YoY), and depreciation and amortization (+14% YoY). Fuel expenses rose moderately by 8% YoY. This was due to the fact that 70% of fuel is sourced domestically in Kazakhstan, while international fuel purchases were fully hedged at $70 per barrel. For the Air Astana brand specifically, operating expenses rose by 17% YoY while revenue increased by only 14%, resulting in an operating loss of 4.9 billion tenge versus an operating profit of 4.8 billion tenge a year earlier. At FlyArystan, operating expenses rose 16% YoY while revenue increased just 8% YoY, deepening the operating loss to 3.3 billion tenge from 2.9 billion tenge. Costs per available seat kilometer rose by 20% YoY to 7.30 cents, exceeding revenue per available seat kilometer (7.01 cents), thereby confirming a negative spread. EBITDAR totaled 24 billion tenge (-22% YoY), while the margin fell to 14.6%. Cash reserves declined to $442 million versus $514 million a year earlier. The cash-to-revenue ratio fell to 29.6% from 38.4% a year ago, approaching the lower boundary of the median guidance range at 25%. Net debt/EBITDAR increased from 1.4x to 1.9x.
Our opinion and changes to the valuation model. First-quarter results generally aligned with our base-case scenario: margin pressure from engineering and maintenance expenses persists, and the transition of the full-service brand into an operating loss confirms the validity of our conservative stance on the company. Positive aspects of the report include continued growth in revenue per available seat kilometer, the recovery in load factor to 83.3%, and the reallocation of capacity toward alternative destinations, demonstrating the company’s strategic flexibility. Nevertheless, visibility regarding margin normalization remains limited through the end of 2027. In our valuation model, we reduced forecast passenger traffic both for the country and the company, and slightly lowered our 2026 margin assumptions amid persistently high oil prices and the absence of fuel price hedging for the second half of the year. As a result, our updated target price for Air Astana shares stands at 740 tenge, implying a 9% upside from the latest market price. Our recommendation remains “Hold.”