Air Astana Group Successfully Completes its IPO: The Largest Airline Group in Central Asia and the Caucasus

Monday, 11 March 2024


On February 15h, 2024, Air Astana Group (“the Group”), the largest airline group in Central Asia and the Caucasus regions by revenue and fleet size, announces completion of its initial public offering, the most substantial privatisation in the Republic of Kazakhstan to date with majority participation by local investors.

This is the first IPO achieved simultaneously on three stock exchanges: the Kazakhstan Stock Exchange, Astana International Exchange and London Stock Exchange. The total deal size for the IPO was c. USD 370 million (assuming full exercise of the over-allotment option), valuing the Group at c. USD 847 million.

FEAS Secretariat with the  Head of Investor Relations of Air Astana Group Ms. Irina Martinez, CEO of Astana International Exchange Ms. Assel Mukazhanova and Chairman of the Management Board of Kazakhstan Stock Exchange Ms. Alina Aldambergen  to know more details about the IPO.

Irina Martinez, Head of Investor Relations at Air Astana Group 

1. Can you give an overview of your business and its products or services?

Air Astana Group is the largest airline group in Central Asia and the Caucasus regions by revenue and fleet size. 

The Group operates a fleet of 50 aircraft split between Air Astana, our full-service airline that operated its inaugural flight in 2002, and FlyArystan, our low-cost airline established in 2019. 

We provide scheduled, point-to-point and transit, short-haul and long-haul air travel and cargo on domestic, regional and international routes across Central Asia, the Caucasus, the Far East, the Middle East, India and Europe.

We are one of the fastest-growing airline groups in the world, carrying around 8 million customers annually and delivering award-winning levels of service on board our aircraft. 

2. What led your company to decide to go public at this particular time? 

The IPO had been planned for several years but was repeatedly delayed by macroeconomic disruptions. Now the market backdrop is now more stable and we are well positioned as one of the fastest growing airline groups in the world. Our post-Covid recovery has outstripped global peer averages, delivering Adjusted EBITDAR CAGR of 19.0% between 2019 and 2022.

We are confident the Group is ready for the next stage of its growth story on the public markets. 

3. How does your company plan to use the funds raised through the IPO?

The funds will enable us to expand our fleet and capture the growth opportunities from the underserved aviation market in Kazakhstan.  We plan to increase the number of aircraft in our fleet from 49 at the end of 2023 to 80 at the end of 2028. These will enable us to add new routes and thicken existing routes, particularly to large markets on our doorstep such as China. The funds will also go towards the purchase of a second full-flight simulator and the construction of a hangar in Almaty Airport. 

4. Can you discuss the process of preparing for the IPO, including any challenges faced?

It has been a long process for Air Astana which has included several setbacks outside our control. Clearly, the most significant challenge was the Covid-19 pandemic which shut down the travel industry overnight. More recently, we have seen the conflict in Ukraine which impacted international perception of the region and required all traffic to be diverted away from Russian airspace. We had to wait for macroeconomic conditions and investor sentiment to improve before we could confidently proceed with the IPO. 

We were also the first Kazakh business to list domestically and internationally simultaneously on three exchanges. Although this structure added complexity, we successfully completed an IPO which was multiple times oversubscribed and ensured that local investors received 58% of the offering. 

5. Overall, how was the IPO process and what is your suggestion to the companies that are thinking about going for an IPO in the future?

The most important factor when considering an IPO is that you have a compelling story for investors which demonstrates financial and operational excellence. Once you have this in place, it comes down to planning, resilience and lots of hard work. 

I also think it is important to have an IR team early in the IPO process. Too many companies leave this until post-listing, which is a missed opportunity for building relationships with investors and reduces the team’s effectiveness. The team must liaise regularly with the global coordinators and syndicate banks to ensure they can develop the equity story and build the book.  

Ultimately, it is a group effort which requires everybody across the business to understand and be supportive of the IPO process. 

I am immensely proud of what we achieved and look forward to continuing our journey as a public company.

Assel Mukazhanova, CEO of Astana International Exchange

1. In general, how do you attract new listings and encourage companies to raise capital through your exchange?

Since its inception in November 2018, AIX has been fully operational, dedicating its efforts to cultivating an ecosystem and fostering a critical mass of instruments and issuers on our platform. Today, we can say we’ve completed this phase of our work, boasting a diverse group of issuers spanning various sectors of the economy. Our product line is thoughtfully designed to cater to the funding needs of businesses.

Central to our approach is balance: we endeavor to provide maximum flexibility to businesses in structuring their transactions while ensuring strict adherence to applicable rules and regulations. This balanced approach underscores our commitment to facilitating seamless transactions while upholding regulatory integrity.

From an equity capital perspective, AIX actively participates in every IPO initiated by the Government under the state asset privatization program. This includes engagements with key entities, such as the largest uranium producer Kazatomprom, the leading oil and gas operator KazMunayGas, the grid/electricity company KEGOC, and the premier Kazakhstani and Central Asian airline, Air Astana. AIX has played a pivotal role in facilitating these significant IPOs, contributing to the growth and dynamism of the equity market.

Moreover, the private sector represents another vital avenue for equity listings, yet its potential remains largely untapped. AIX collaborates closely with privately owned companies, cultivating a robust pipeline of transactions anticipated in the coming years. Additionally, we are witnessing a surge in listings initiated by foreign companies. Notably, Polymetal International PLC, one of the world’s Top 15 gold producers,  listed on AIX since 2019, chose to redomicile to the AIFC jurisdiction, signaling a trend that several other companies are considering replicating. This underscores AIX’s growing international appeal and its status as a preferred listing destination for diverse entities seeking to access capital markets efficiently and effectively. 

Historically, Kazakhstani companies have demonstrated a strong preference for tapping international markets, primarily in London, to raise equity capital. Consequently, over the last decade, anywhere from 65% to 93% of trades in securities of Kazakhstan public companies have been conducted in London, with only a fraction distributed among local exchanges. Our primary objective is to redirect this trend and localize the market.

By fostering a robust environment for local IPOs, we aim to encourage a shift in investor behavior. As more IPOs are executed locally, we anticipate a corresponding increase in international investor interest, drawn by the allure of promising assets. This shift not only signals a significant opportunity for market localization but also serves as a catalyst for further market development and growth. Through concerted efforts, we aspire to enhance the visibility and vibrancy of the local market, positioning it as an attractive destination for both domestic and international investors alike.

When considering the debt capital market, our primary objective remains the continual refinement and modernization of our products and solutions to effectively address the evolving needs of businesses seeking to raise funds. Today, we are witnessing the fruition of these efforts: our investor base continues to expand with the addition of newcomers, while previous issuers who have utilized AIX are inclined to return with fresh ideas and initiatives. This trend underscores the confidence and trust that market participants place in AIX’s capabilities and highlights our commitment to fostering enduring partnerships within the debt capital landscape. 

2. How would you describe the IPO process of Air Astana, and what advice would you offer to companies considering an IPO in the future?

The triumph of Air Astana’s IPO was clearly driven by Kazakhstani retail investor base. It’s evidenced by AIX’s more than 29 thousand orders received for the amount of over KZT 100 billion, where half of that originated from retail investors. Just for comparison purposes the number of orders placed two years ago during IPO of Kazmunaigas was aroound 6000 only for KZT 1.1 bln.

Air Astana’s IPO marks a significant shift in the dynamics between the domestic and international markets, with the domestic order book surpassing its international counterpart for the first time. The milestone positions AIX to render future IPOs of Samruk Kazyna Fund’s assets on local market even more accessible and appealing for the citizens of Kazakhstan and international instituions.

3. How does the stock exchange plan to support and promote Air Astana to investors?

As part of the Air Astana IPO AIX provided Kazakhstani investors with the opportunity of conditional trading immediately after pricing of the IPO for the first time ever in Kazakhstan. 

Local investors were able to trade on the home exchange alongside with the global investors at the London Stock Exchange simultaneously. Such an opportunity was available in Global Depositary Receipts as well as Common Shares with the settlement in US dollars. Investors’ sentiment was very positive, and it is proven by the results of conditional trading.

4. Can you discuss the listing process for the new company, including any requirements or criteria that had to be met?

First and foremost, any company from any jurisdiction has the opportunity to leverage AIX for capital raising, provided of course there is investor appetite and potential issuers meet the listing/prospectus requirements and committed to make the on-going disclosures as required. In essence, potential issuers are not obligated to be AIFC participants, although exploring the AIFC jurisdiction could offer valuable advantages.

While there are a set of rules and regulations to adhere to, there are no unexpected surprises or deviations from the norms experienced when tapping into markets like the LSE. ESG and Islamic instruments follow similar standards, with additional requirements such as Fetwa and verification of ESG nature applied.

Among the key focuses, corporate governance requirements stand out prominently. Cultivating a robust corporate governance culture in the market is one of our strategic goals. This emphasis underscores our commitment to promoting transparency, accountability, and investor confidence, essential elements for the sustainable growth and development of the capital market ecosystem.

Alina Aldambergen, Chairman of the Management Board of Kazakhstan Stock Exchange

1. In general, how do you attract new listings and encourage companies to raise capital through your exchange?

Like other exchanges, KASE has several departments that referred to as the front office, and their task is to search for and attract new issuers, issue new financial instruments, and attract new investors, as well as conduct various events for issuers and investors, including educational ones. The work of these departments is largely built like CRM teams, where the key asset is building and supporting relationships with clients.

KASE also cooperates with various state institutions, international financial organizations, and various development institutes.  As part of this work, various programs have been approved and introduced to create attractive conditions for entering the Exchange. For example, in cooperation with the “Damu” Entrepreneurship Fund, a program was developed that allows subsidizing the coupon rate on bonds. This program is designed for small and medium-sized enterprises (SME). Also, a guarantee instrument was developed with the fund, allowing the use of the fund’s guarantee up to 50%.

The KASE exchange closely cooperates with international financial institutions such as EBRD, EDB, ADB. In collaboration with them, the “PreListing Support Program” was developed, which allows for the reimbursement of expenses related to preparation for listing, funded by the presented IFIs.

Together with JSC Sovereign Wealth Fund “Samruk-Kazyna,” the Privatization Program for national companies “People’s IPO” was written. Within the framework of this Program, organizations such as JSC “KazTransOil,” JSC “Kegoc,” JSC “KazMunayGas,” and JSC “AirAstana” have already been listed on the Exchange.

The front-office workers of the exchange provide consultations to potential investors, essentially serving as a single point of contact for them, where they can obtain the necessary initial information.

2. How would you describe the IPO process of Air Astana, and what advice would you offer to companies considering an IPO in the future?

In the Air Astana IPO transaction, KASE acted only as one of the 3 exchanges where the airline’s shares are now traded. It should be noted that the KASE Exchange participated in all stages of the transaction and conducted all negotiations with local representatives of the consortium.

KASE also participates in all marketing activities of its potential issuers during IPO/SPO.

Considering the presence of central counterparty services, KASE offered market participants modern trading methods – subscription and collection of orders through the KASE trading system, the settlements for which were guaranteed by the central counterparty of KASE. Thanks to close cooperation with market participants during the subscription period, 19 KASE members, represented by brokerage companies and second-tier banks, submitted applications on behalf of their clients. As a result of the public offering on KASE, the issuer satisfied 36,283 applications to purchase 45,855,827 shares at a price of 1,073.83 tenge per share. The total volume of satisfied applications on KASE amounted to 49.2 billion tenge (equivalent to 109.8 million US dollars) or 76% of the volume of ordinary shares offered on the local market.

Demand on KASE amounted to 186% of the volume of ordinary shares offered on the local market, including: demand from institutional investors amounted to 50.8 billion tenge (42.1% of the volume of accepted applications, equivalents to 113.4 million US dollars), second-tier banks – 15.2 billion tenge (12.6% of the volume of accepted applications, equivalents to 34 million US dollars), brokerage-dealer organizations – 4.7 billion tenge (3.8% of the volume of accepted applications, equivalents to 10.5 million US dollars), and other legal entities – 3.6 billion tenge (3.0% of the volume of accepted applications, equivalents to 8 million US dollars).

It is also worth noting that this IPO introduced a unique opportunity for investors to participate in transactions within the pre-market (conditional trading). Thus, investors had access to trading securities before the start of trading.

As recommendations for future issuers, we could advise issuers and consultants to pay more attention to aspects of financial literacy for retail investors, but also to announce the process of making all key decisions more transparently and to follow these announcements. Moreover, in general, IPO transactions of local issuers should be more oriented towards placement in Kazakhstan and attracting investors from outside to Kazakhstani exchange platforms, rather than dispersing liquidity between domestic and foreign exchanges.

3. How does the stock exchange plan to support and promote Air Astana to investors?

During the roadshow, KASE invited and provided its platform for direct dialogue between institutional investors from Kazakhstan and the management of JSC “Air Astana”. Besides this meeting, KASE conducts regular monitoring and publication of all news related to the IPO transaction. On February 15, a ceremony was held to open unconditional trading of Air Astana shares on KASE. The ceremony took place via a video link simultaneously with the opening ceremony on AIX. From the start of unconditional secondary trading, all news regarding the issuer will be regularly published, and settlements for the shares will be conducted using a central counterparty. Later, in agreement with the issuer, Issuer Days will be regularly organized, where the company will present its operational results to investors. Additionally, such major issuers have the opportunity to be included in the KASE representative list, which creates additional attractiveness.

4. Can you discuss the listing process for the new company, including any requirements or criteria that had to be met?

The listing process is a complex procedure, but with proper preparation, the process of listing will take no more than 30 business days.  Being listed company provides companies with access to public capital markets and greater visibility among investors. By meeting the requirements of a stock exchange and effectively managing the listing process, a company can achieve its goal of becoming a publicly traded entity.

The process of listing a new company on the KASE as on other stock exchanges involves several steps and typically requires meeting specific requirements or criteria set by stock exchanges.

Talking about mentioned steps, firstly, once the company determines which stock exchange it wants to be list on, the company needs to prepare itself for the strict procedures of public ownership in advance. This involves assessing its financial condition, governance structure, business model, and growth prospects.

Secondly, engaging advisors is essential in the process of listing and going public. Many companies enlist the help of brokerage companies – underwriters and financial advisors, and audit firms to navigate the complexities of the listing process. These advisors assist in structuring the offering, preparing necessary documents for listing, and ensuring compliance with regulatory requirements. Furthermore, advisors help the company to prepare a prospectus or offering memorandum that provides detailed information about its business, financials, management team, and risks. This document is submitted to the regulatory authorities and made available to potential investors.

Thirdly, meeting exchange requirements. These requirements typically cover aspects such as financial performance, corporate governance standards and compliance with all relevant laws, regulations, and reporting requirements.

In general, if we talk about particular listing requirements on the KASE, they can be divided into listing criteria for large companies on the Main market (operating income at least ≈ 24,5 million USD, total assets amount at least 20,8 million USD, and the issuer’s existence period at least 3 years), and a specific market for small and medium enterprises (alternative market). On this market, there are no revenue or total asset requirements for issuers. 

In addition to the main listing criteria on the KASE Exchange, there are various incentives for SMEs as well as for companies planning to issue ESG bonds. These include reduced listing fees for green and social bonds. 

Furthermore, KASE has signed various memorandums with organizations that perform verifications of ESG instruments. If a potential issuer plans such a placement on the KASE Exchange, they will need verification according to the regulator’s requirement. KASE partners can offer a discount or full reimbursement of these expenses. This serves as an additional incentive for listing on KASE.

Basic listing requirements include availability of corporate governance code, financial statements carried out in accordance with IFRS and confirmed by an auditing organization from the list of auditing organizations recognized by the KASE, as well as securities accounting in the Central Depository system. Depending on the type of securities a number of additional listing requirements are set by the KASE.

All exchange rules, as well as detailed auxiliary information are available on the KASE website    

In addition, after going public, the company must adhere to ongoing reporting and compliance requirements set by the exchange and regulatory authorities. This includes filing quarterly and annual financial reports, holding regular shareholder meetings, and complying with disclosure obligations.