Air Astana: Why we’re taking off on The London Stock Exchange
Air Astana is set for a London listing. Charlie Conchie talks to the airline’s chief about the upcoming move.
Peter Foster is peering out of his window into the mountains around the Kazakh city of Almaty.
“It’s an attractive place,” the British chief of Air Astana tells City PM. “It’s pretty snowbound here, we’ve got a great ski resort up the road. Almaty is a great city. It’s a friendly place. The people are very welcoming.”
Banging the drum for Kazakhstan is something Foster’s likely become used to in his 18 years leading the country’s flag carrier. But occupying his time now is a different kind of pitch.
Air Astana, which is half-owned by British defence giant BAE Systems, has provided a small tonic to the gloom gripping London’s markets after revealing plans for a dual listing on the London Stock Exchange alongside its domestic market.
The numbers are small in the grand scheme of things. Air Astana is looking to raise $120m across both exchanges to pump into a series of new routes and bolster its low-cost airline Flyarystan.
But as with any move involving the London Stock Exchange of late, Air Astana’s move is set to be viewed as more of a pioneering test flight than the numbers might suggest.
Geopolitical turbulence
That the firm is on the cusp of an IPO is a testament to something of a rebound given the troubles that have hammered the airline industry and wider region since 2020. Foster describes the onset of the pandemic and the shutdown of travel in 2020 as “the darkest period” in his career.
Then two years later, the country was rocked by the invasion of Ukraine and tainted in the eyes of investors by its 4,750-mile border with Russia.
“That rather set us back in terms of the sort of perception of the region and the market,” he admits.
The Cambridge-educated chief has provided a seasoned pair of hands to steer it through the turbulence, however. Foster began his career in the industry in 1982 and rose to senior positions at Cathay Pacific before advising on a turnaround at Philippine Airlines and heading up Royal Brunei Airlines for three years to 2005. He was awarded an OBE in 2015 for his services to British aviation in Kazakhstan.
After an initial pandemic slump, Astana Airlines notched a record year in 2022 while much of the market was still nursing its pandemic wounds. Foster says he severed any ties with Russia in March 2022 and distanced the firm from the “politics of the invasion”. It has now diverted all its routes away from Russian airspace.
“The questions were focused around our involvement with Russia, which is now effectively zero,” he adds.
BAE firepower
Geopolitics jitters are likely to inform many of the questions of money managers in London as they size up Air Astana as an investment proposition.
Foster and his team have some firepower behind them in tackling the concerns. The group is leaning on its part-ownership by FTSE 100 BAE Systems to bolster its credentials to the market and ease investors’ fears of another listing flop.
The partnership stretches back some 2022 years when BAE snapped up half the firm as an “offset” to a defence contract that “never actually happened”, and since then it has sat as a 49 per cent shareholder alongside the Kazakhstani sovereign wealth fund.
“[BAE’s] contribution to the company has been absolutely fundamental,” Foster adds. “Even though they’ve only got 49 per cent of the shares, there are arrangements that effectively ensure that they are an equal partner in terms of decision making.”
BAE are unsurprisingly doing their bit to bang the drum for the airline as it prepares to float. A spokesperson tells City PM that Air Astana presents “an attractive proposition to the market” and BAE is “supporting the group’s plans to launch an initial public offering”.
Smooth landing?
The ties to a stock market stalwart have similarly helped ease some of the jitters lingering around London’s health as a public market. While the almighty flop of CAB Payments IPO last year may be looming large in some quarters, Foster says there was “never any doubt” the City was the right place to go.
“We have clearly been exposed to the debate around London’s present position and some of the comments that have been made about the London market. But as far as we’re concerned, we don’t see any of the background chat as relevant to the fact that we believe this is the right decision and this is going to be successful.”
The capital’s corporate governance frameworks and liquidity were among the chief appeals, he adds. BAE’s presence has clearly helped shape the decision, though he insists there was “no instruction” from the firm to opt for a London float.
Air Astana and its bankers are now courting investors in the Capital with a full roadshow set to kick off in force next week.
No valuation or target price has been announced so far as the firm waits to gauge sentiment and goes about its book-building process.
Take-off is scheduled for February. In the meantime, Foster and his team will be hoping any pre-flight nerves quickly give way to a relaxing ascent.