Mauritius may not perhaps be the most obvious place to look for an airline with ambitious expansion plans. It is a small island nation, covered in sugar cane, ringed with white beaches and famous as one-time home of the extinct dodo. But Air Mauritius is indeed a carrier with international ambitions.
Although it is a relatively small national carrier, with seven widebodies and two turboprops, management is thinking big. Since the company's modest start in 1967 as a local handling agent, Air Mauritius has laid a solid and profitable foundation on which to expand beyond the island's shores. The move is being spearheaded by chairman Nashir Mallam-Hasham, a polished and confident former government adviser and a veteran of the UK aerospace industry after 18 years with what is now BAE Systems.
He envisages joining a global alliance and being listed on the Paris stock exchange. But not least he wants to see Air Mauritius lead the way in aviation development in the Indian Ocean and southern Africa. The privatisation of Uganda Airlines two years ago offered an opportunity, although the Mauritian carrier pulled out of the bidding process after it hit "certain problems". Another chance came with the privatisation of Mozambique's flag carrier LAM. That process is on hold. A more immediate target is Air Madagascar, in which Air Mauritius is pursuing a stake through a consortium which includes Air Seychelles, Air Austral and Air France plus potential private interests from Mauritius, Seychelles and Reunion.
"It is our intention to take equity in airlines within the region if it makes commercial sense and there is actual synergy commercially and otherwise between the two airlines," says Mallam-Hasham. "What I'm looking for is a degree of organic growth and a degree of increasing our economic space by looking outward." He also sees potential for growth through carriers in the region combining of traffic rights. The Air Madagascar proposal is part of this vision.
"The consortium makes sense, because even before the advent of Air Madagascar on the market, we were gradually moving from a bilateral type of agreement. We've already done it," he says, citing the example of when British Airways and Air France pulled out of the Seychelles. Air Mauritius joined Air Seychelles to provide a joint flight, initially using equipment from Air Austral and Air Madagascar. "What used to be a bilateral is suddenly multi-lateralised. This is what I wanted to achieve, to pool our resources to service the region."
Such a multilateral approach has not always worked. To improve regional services around the Indian Ocean, Air Mauritius, Air Seychelles, Air Madagascar, the Government of the Comoros Islands and Air France announced two years ago that they planned to set up a regional carrier to serve points off the south-east coast of Africa. The aim was to establish a carrier called the Indian Ocean Alliance operating two narrowbody aircraft, on routes around the region.
The project was later shelved - partly because Air Madagascar was being prepared for privatisation and partly because the Comoros Islands lacked aviation experience. Instead Air Mauritius is pursuing independent plans until it can "synergise with the various airlines in the region", says Mallam-Hasham.
Regional expansion
The airline has long needed a narrowbody jet to fill a gap in its fleet, which steps straight from the 48-seat ATR42 turboprop up to its seven widebodies: two Boeing 767-200ERs and five Airbus A340-300s. "If you look at our fleet, you will very quickly see that there is gap in the seating gradient," says Mallam-Hasham. A recent order for two A319s is to cater for the regional network and fill in on thinner routes such as to the southern Indian city of Chennai, formerly Madras. Air Mauritius plans to start services there from October as part of its route expansion plan.
Mallam-Hasham says the addition of narrowbody jet aircraft will also "release capacity and utilisation on the long-haul jets", which can then be used on new international services. Shanghai rights have been sought for some time, with the aim of extending Hong Kong flights to the mainland Chinese city. The carrier is continuing to press for rights to operate to Osaka, although approval to serve Japan has been sought for 15 years without success.
Cargo is another area that is growing steadily. It accounts for around 15% of revenues and the prospect of dedicated freighter aircraft entering the fleet is not far off, says planning director Indradev Buton. Currently, bellyhold capacity on its own fleet is supplemented by space on Air France freighters. "The next step will be to identify a suitable aircraft so that we have dedicated cargo operations - in the first stage a freighter aircraft for the region and, ultimately, to have long-haul operations with a freighter."
Alliance plans
Alliances are also part of Air Mauritius' growth plans, although it is not yet clear whether this will mean joining a global grouping. Air Mauritius has been invited by Air France and Delta Air Lines to consider joining their soon-to-be-branded multilateral alliance that so far includes Aeromexico and Korean Air (KAL).
"We've been invited to investigate joining the Air France alliance and if it makes commercial sense we probably will, "says Mallam-Hasham. The French carrier has long been a minority shareholder in Air Mauritius, alongside Air India and British Airways. That link with Air France has been developed over the past two years through a wide-ranging bilateral alliance. However, there is a caveat. "The one thing that I don't want Air Mauritius to do is to join any global alliance where you have a dominant partner syndrome. That we will refuse," he says, arguing that while he is not "savagely independent", neither does he think that his carrier deserves to be dominated by bigger partners. "While we are small, I think we are very smart and we have done very well."
Planning director Buton adds that there is a search for a partner in the Far East. A tie-up with KAL is a possibility. "We have started preliminary discussions with potential partners," he says.
Air Mauritius has gone international in another way. From April, it switched all accounting and financial reporting from Mauritian rupees to the euro. The bulk of the airline's business is with Europe, and apart from the UK, most of that is within the euro zone. Last year the airline arranged for export credit financing in euros for an A340-300.
"By reporting in euros, you've got a natural hedge against the various vagaries of exchange rate differences," says Mallam-Hasham. While he acknowledges some risks, the switch should make benchmarking and financial cost comparisons more straightforward, especially for the European outstations.
The local rupee at most only represents 20-25% of revenues, estimates Vinod Chidambaram, chief executive at Air Mauritius. The euro alone represents more than 55% of income, plus the aircraft financing. "We are trying to get a complete matching as far as possible of our costs and revenues in one currency, and all the others will be in minor currencies, and the risk will effectively go down," says Chidambaram.
Financial listing
The euro reporting could also help secure a listing on the Paris stock exchange. The carrier, which is listed locally, has been weighing up various overseas markets, including London and Singapore, but the French bourse is looking the most likely choice. "At this stage it looks like Paris could be the one that we choose, after very deep analysis of what it would mean for us to list there. The euro is probably one step toward that," says Mallam-Hasham. He stresses, however, that an overseas listing will not happen until the company has had time to "fully investigate and understand the implications".
The prime motive for such a listing has more to do with raising the airline's profile than raising cash. "It is the ability to increase the awareness of the airline itself as a business venture which we feel is a good investment," says Mallam-Hasham. "At this stage it is not a cash-raising exercise. If we go into Paris, it will increase the awareness of Air Mauritius."
He almost relishes the fact that such a listing would require greater disclosure from the airline. "We'll have to open our books completely. By doing so, people will see that a small airline like Air Mauritius is probably a good place to invest their money."
Source: Airline Business
