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driver of the business of this small, competitive yet consistently profitable company.
The Indian Ocean island of Mauritius is experiencing vigorous economic growth, and
its local air carrier has undergone strategic change and market realignment to take
advantage of the growth of the island both as a business hub and as a tourist
destination.
Air Mauritius was the recipient of the African Aviation Award for "African Airline of
the Year 2002" from African Aviation Journal in recognition of its achievements in
several key areas in the past year, including route development, fleet modernisation,
customer service, profitability and financial performance. Mauritius is the most
economically active country in the Indian Ocean island region and is taking the lead
in economic development, which presents many opportunities for the airline. Air
Mauritius operates routes into Africa, Asia, Europe and Australia.
Air Mauritius runs its core financial and human resources management systems on
ERP application products, and aggregates its organisational data on a single
database.
"Our Information Systems department is poised to support the new challenges
facing the airline business, both in the light of the growth opportunities and the
negative impact of international incidents," says Sushil Baguant, Chief Business
Support Executive at Air Mauritius. "We compete with the major airline operators,
which means we have to not only be competitive with regard to pricing, but also
provide a better service.
"Ultimately, though, all our activities have to be focused on delivering a better,
differentiated service to our customers, and this principle has been built into our
mission statement." Customers include individual passengers, travel agencies, tour
operators and freight forwarding companies.
Competitive pricing hinges on the ability to control costs and maximise resources,
and Oracle Financials plays a critical role in supporting these functions. The most
significant costs are those associated with fuel and aircraft, the former being subject
to constant price fluctuations. Operational data is leveraged to allow multi-faceted
analysis of key performance indicators and allows management to readily feel the
financial pulse of the company in order to optimise profitability through reporting
tools such as a Financial Analyser.
Interfaces have also been developed to harmonise information between the Oracle
ERP systems and other applications such as the airline's Passenger and Cargo
Revenue systems and Aircraft Maintenance system, among others. This has ensured
the capture of data at source and the enhancement of the quality and reliability of
information. In its incessant drive to continuously rationalise and streamline its
business processes across the organisation, Air Mauritius is planning to roll out
Oracle Financials to its offices around the world.
To manage its 2400 employees, Air Mauritius runs a Human Resource Management
System (HRMS), including employee self-service for quicker related HR decisionmaking processes and more staff empowerment.
With the database and financial and human resource management systems in
place, Air Mauritius has a stable information technology infrastructure upon which to
base growth. These systems provide the foundation for further development,
iii) the nature and scope of its network of operations and its consequences for fleet planning;
iv) the appropriate organisational structure and the resolution of the corporate governance/
operational paralysis dichotomy.
- Need for a sound Air Access policy
In the long term, this could be the Achilles? heel of Air Mauritius. No Government, up to now, has
built capacity to articulate a sound, coherent and sustainable air access policy that reconciles the
corporate objectives of Air Mauritius and the interests of other stakeholders.
Worse, in many cases in the past, the Chairman of Air Mauritius was also the head of
Government delegation for air services agreement ! In the absence of clear policy guidelines, we
have adopted a very ad hoc, short-term, lop-sided and lobby-driven approach that often results in
blatant contradictions.
For instance, Emirates is granted traffic rights even if there is hardly any traffic between the Gulf
and Mauritius. Unsurprisingly, it carries 90% of non-Gulf/Mauritius passengers. A typical case of
trade diversion instead of trade creation ! Most of the traffic (passengers and cargo) are from/to
Europe and India that were previously carried by other airlines serving Mauritius.
At the same time some French carriers are denied rights even if the volume of business is huge
between France and Mauritius. Furthermore, Singapore Airlines? request for fifth freedom rights
was turned down.
Officially we are against charters. Yet over 35% of our tourists do not stay in four and five-star
hotels. We do not allow the likes of ?Nouvelles Frontires? to bring their passengers on their own
aircraft but we have no problem with the same passengers travelling on Air France and Air
Mauritius or flying to Reunion from France and then connecting on Air Mauritius to here.
Better we practice what we seem to vilify. When a scheduled carrier like Lufthansa pulled out on
the Germany-Mauritius route, we accepted the designation of Condor, even if it is a charter
company. Alitalia, a scheduled flag carrier, has been replaced by Air Europe, a charter operator
between Italy and Mauritius. Equally SwissAir has given way to Balair, another charter carrier on
the Switzerland-Mauritius run.
We simply cannot continue with this ad hoc, discretionary, fragmented and lobby-driven approach
to air access. We need to fully comprehend the issues and articulate a clear, coherent, and rulebased air access policy that is understood by the stakeholders. For sure Air Mauritius would
defend its corporate objectives; undoubtedly hoteliers would like more flights and more airlines
operating to Mauritius in order to fill their rooms; and the travelling public would prefer more
choices with its impact on competition, prices and services. So is life.
However, we must fully understand the consequences of each option, even if all of them would
argue that their position best defends the national interest ! Government must manage this
contradiction. It has a duty and a responsibility to arbitrate and propose a pathway that will
provide predictability. It is a challenging choice.
Can the country rise to this challenge ? One must have hope even if we seem to have
considerable difficulties to address the much simpler problem of matching seats in the air with
rooms on the ground, inspite of several committees set up by various governments over the
years.
Contradictions, conflicts and confrontations will have to be skilfully managed. There are examples
on both sides of the success/failure divide. Maldives has embraced a very liberal air access
policy with almost open skies and multiple designations. As a result, many airlines serve the
country and the tourism sector does well. However, this policy has killed its nascent airline. It
would like to resurrect it. It would be almost impossible to do it unless massive subsidies are
given.
On the other hand Singapore has benefited from a well articulated and well planned and
implemented liberal policy. Both country and airline have been winners. Success or failure
depends on a host of factors, even if the odds are heavily stacked against small airlines surviving
in a very liberal access policy. We need to find out in which category we are and whether there is
an intermediate path that we can tread. But the policy must be spelt out clearly and
unambiguously so that all stakeholders know the rules of the game.
The lack of clarity in the air access policy is a Damocles? sword that hangs dangerously over the
head of Air Mauritius. The saga between Air Mauritius and Emirates illustrates this eloquently.
Initially Air Mauritius was the only operator on the Mauritius-Dubai route. This was hailed as a
pathbreaking move to fill in a gap in the Gulf.
A few months later, Emirates commenced operations with three weekly flights. Air Mauritius had
no choice than to review its strategy. Both carriers operated for a while. Yet this different situation
also was welcomed as another milestone in the air transportation landscape. Anybody with a
knowledge of the airline industry should have understood that Air Mauritius could not compete
against Emirates because it simply could not vie with itself from Europe and India!
Unsurprisingly, the national carrier was forced to withdraw from the route and to enter into a facesaving code share agreement with Emirates. This too was presented as a great leap forward.
From being the sole operator, to flying in competition with Emirates and to pulling out of the route
with a meaningless soft block agreement? all were doctored as good moves !
How can we expect Air Mauritius to plan for its aircraft reequipment if there is no certainty and
predictability about the access policy? What would happen if tomorrow Emirates were allowed
more than 4 flights per week, if the French Government insisted on dual/multiple designations, if
Brussels ruled against the alleged monopoly of AF/MK on the France/Mauritius route, if the EU
negotiated as a single block with Mauritius ? We are simply not ready to meet these challenges.
Strategic alliance and market positioning
The airline industry is undergoing transformational changes. It is being rationalised and
consolidated, through take-over bids, mergers and acquisitions, cross equity participations,
strategic alliances and similar types of agreement. In Europe and in the USA, there will probably
be no more than four strong carriers in the medium term.
Air France is currently negotiating to ?take on? two major European airlines (Alitalia and KLM).
Other regions will be no exception, even if some medium- sized carriers may survive in specific
niche markets. Many analysts have a good idea as to who would be the consolidators and the
consolidatees. Rationalisation and consolidation will happen in Africa too.
Air Mauritius must gear itself to finding a very strong partnership with a major carrier, preferably
with one from our main tourist supplying region. Concurrently it must have code share/marketing
and similar type agreements with strong airlines in Asia, Southern Africa and Australia. This is
instrumental to ensuring its long-term growth and viability and avoiding the risks of
marginalisation.
Otherwise it would be impossible for Air Mauritius to compete against the mega carriers that will
dominate the industry. The decision is a challenging one but it is critical. There will be some
pains in terms of loss of ?autonomy of the decision making process?, but the long-term gains will
be significant if these agreements are well negotiated as alliances and partnership will become
the norm of the airline industry.
There is probably need to revisit the ownership structure of Air Mauritius. The ownership has
been dictated by circumstances and historical factors rather than being conceived to help Air
Mauritius meet the current and future challenges. Should the airline continue to be subjected to
the whims and caprices of the Government of the day with abrupt changes in the top
management with every alternation of power ?
Neither the MD of Air France nor that of BA is unceremoniously dumped everytime there is a
change in Government in France and in Britain. Because of the ingenious financial engineering
put in place when Air Mauritius was listed on the Stock Exchange, Government can decide on
almost everything with basically only 27% of the shares (52% of the holding, inclusive of SIC?s
share, that owns 51% of the airline).
Is that ownership structure compatible with the trend in the industry and more importantly will it
help or hinder the progress of Air Mauritius and its ability to meet the daunting challenges?
Besides the share of the small holders, is there not a case to streamline the ownership structure
around one or two key and active strategic partners as opposed to the current diffused pattern?
While three airlines own shares in the national carrier, their participation is very passive. Major
decisions are taken elsewhere. Who would be the best strategic partner or partners for Air
Mauritius? And how should the ownership structure be revisited both to reconcile conflicting
views and to satisfy the ?substantial ownership and effective control? clause in air services
agreement so that the sovereign traffic rights of Mauritius are not questioned?
Of course, in the worst case scenario, Govt should keep a ?golden share? for strategic and
security reasons and have a short list of reserved matters that requires its approval (like some
countries have done in sensitive areas).
Air Mauritius should not put the cart before the ox. It must decide on its network strategy first. Will
it continue to fly to 10 cities or more (as some seem to suggest) or will it pursue a strategy based
on many frequencies to strong hubs?
The choice of the right equipment will depend on which network strategy is chosen and
competition will be tough between Airbus and Boeing and also between engine manufacturers. It
will also dictate who the strategic partners are likely to be.
The same exercise should be carried out for the African, Indian, Asian and Australian network.
Few flights to many cities or many services to few gateways with strong redistribution capacity. It
is a very difficult decision; the consequences must be thoroughly assessed. But it is key to the
future of the airline.
Management paralysis
Context, history and people are often important in shaping the success or otherwise of an
organisation. Undoubtedly, for good governance it is desirable to split the post of Chairman and
MD in an organisation. It also acts as a check against corporate malfeasance.
However, the case of Air Mauritius clearly shows that the effective presence of two active persons
at the helm of the national carrier has been an absolute calamity. Whether it is a systemic failure,
a people?s problem, a struggle for power by surrogates, or a lack of clear definition of
responsibilities is another matter.
The cohabitation of Tirvengadum and Poonoosamy was a disaster as there were two bosses on
board. Even if it was more surreptitious and less publicised, the relationship between Sudhoo
and Chidambaram was at best very chequered. Many of the responsibilities of the MD were
transferred to the Chairman or to committees. Both have offices at Air Mauritius? headquarters
and there is bound to be parallel, if not conflicting, management, with clearly-defined camps.
Will it be a different game between Sudhoo and Pillay. The jury is out. I have my doubts. The
same cause will produce the same effects even if the sequence of events and the magnitude of
the conflict could be different. The worst would be the existence of two camps that will breed
mistrust, thus paralysing the decision-making process and encouraging a blame game culture.
It has happened in the only two occasions where the posts were split and the two individuals
active in running the company. The question remains how to reconcile the need for corporate
governance and the necessity to avoid perpetual conflict, daily confrontation and shenanigans !
The solution, while possible, is not obvious.
However it is plain that the current arrangement will fail just like the previous two. Also, the freshly
appointed MD will inherit the new top management structure of Air Mauritius in which he had no
say whatsover.
New CEOs are known to be loath to structures which are not their own. Will he review the set up
or will he keep it unchanged? Especially as there are other and probably more efficient and
effective ways of managing the airline.
These are indeed uncertain and testing times for the national airline. However it would be unwise
to believe that the current problem of Air Mauritius is one of ?management style, leadership,
governance? and ego only. The new MD will be the fifth in six years, the third in three years.
Some have gone for political reasons, some for alleged corporate malfeasance, some for lack of
leadership.
In one or two cases, the reasons for their resignation, forced or voluntary, are shrouded in a cloak
of mystery as people hesitate between political hype and spin on the one hand and figleaves on
the other. Inspite of his good track record, the new MD may become an unwitting casualty and
perpetuate the syndrome of lack of longevity at the head of Air Mauritius if the issues raised in
this paper are not holistically addressed in a coherent, dispassionate, professional and non
partisan manner.
One can only hope that the ?Paille-en-Queue? weathers the storm, stays clear of any turbulence,
remains strong on its flight path and has a safe and soft landing. From an aeropolitical, strategic,
operational and organisational standpoint.
By Rama SITHANEN
There is probably need to revisit the ownership structure of Air Mauritius. The latter has been
dictated by circumstances and historical factors rather than being conceived to help Air Mauritius
meet the current and future challenges. Should the airline continue to be subjected to the whims
and caprices of the Government of the day with abrupt changes in the top management with
every alternation of power?
Anyone with an eye on the travel industry will see that there
has been a lot of activity around Air Mauritius in the last year
and that it has begun to make ripples that will get it noticed
even by its biggest competitors. The fact is that Air Mauritius
is not simply a regional airline but one that flies each week to
four continents and is punching way above its weight in the
global industry. As an example, this month alone it
announced that it is about to re-establish two weekly direct
flights to Durban, one of South Africas most vibrant
commercial centres, and had expanded its services to
Johannesburg and Nairobi in order to reinforce connectivity
to Africa and better position Air Mauritius as a bridge
between Africa and Asia.
Mauritius has economic, political and cultural ties with Europe,
Asia and Africa. On the other hand, from an airline connectivity
perspective it is not ideally situated and is at a disadvantage
connections with other airlines, the higher the QSI. Armed with the
QSI, supported by a global database, he says, it is possible to make
changes that will increase it deals with other airlines, changes to
flight times then work out whether the entire travel industry,
down to individual agents, are giving Air Mauritius the market
share that is its due.
An important factor affecting the airlines credibility in the market
was the frequency of its long haul flights, which at 2.2 per week
put it on a par with charter companies. Emirates has competed
successfully in Mauritius precisely because it grew its frequency
from three to five, and then to seven flights a week, he says.
Frequency stimulates the market and takes people away from
competitors. Today BA flies to Mauritius four times a week from
Gatwick: we fly the same number of flights from Heathrow.
Neither gives a perfect service; but if we work together we can
cover the entire week.
The 7 Step Plan grew out of Seabury APGs network model, which
uses planning and financial evaluation tools to estimate the
market share the airline should achieve. The first step is to
concentrate the network, with fewer destinations, greater
frequency and more alliances like the one Viljoen outlines while
suspending unprofitable routes. Step 2 identified ways of
maximising revenues. The company initiated a number of
measures to boost sales, like rewarding frequent flyers better,
making better use of e-commerce and entering partnerships with
other airlines, banks or car hire companies. Cost reduction across
the board and disposal of non-core assets were taken care of in
Steps 3 and 4.
Step 5, described as a game-changer by Viljoen, would see the
replacement of Air Mauritiuss fleet of old A340-300 aircraft with
new generation Airbus A350 or Boeing 787s, attracting partner
airlines and saving up to 25 percent in fuel. That will take some
time to implement, of course and is expected to be complete by
number of rooms available in the tourism sector has continued to increase, while tourist arrivals have not grown
at the same pace. This resulted in a structural imbalance between the number of rooms available and the
number of arrivals. It is today estimated that there is a deficit of some 500,000 tourists for the number of rooms
available.
The share of the pie being further divided among tourism operators has caused a price war which is affecting the
quality of service provided to guests. Moreover, the amount of revenue for the sector has also been adversely
affected. Whilst tourism arrivals have increased by 2.9% in 2013, revenue for the sector has decreased by 6.5%.
However, there are positive signs of recovery. Some European markets like Germany and the UK have had
positive growth while emerging markets like China and India have continued on their positive trends, he says.
He is optimistic that Mauritius can do the leap. Other forms of tourism like eco-tourism, health and wellness
tourism, sports tourism or religious & cultural tourism co-exist very well with the classic sea, sun and sand
tourism. Rather than being competitive to each other, these different forms of tourism are a plus for attracting
more visitors to Mauritius, he suggests, adding that the medical sector has for some time been associated with
tourism. Medical tourism offers patients coming to Mauritius treatment such as cosmetic surgery, hair grafting,
dental care or infertility treatment at a lower price, and then the possibility to recover in resorts.
The outlook for Beachcomber in 2014 is rather on the bright side. The year will be marked by two key events.
The full-fledged opening of the Royal Palm Marrakech Hotel, which is the brand new product of the Group and
the renovation of Royal Palm Mauritius, a flagship of the Mauritian tourism industry. The Royal Palm Mauritius will
undergo a major renovation. The revamping will include the overhaul of all suites, the creation of a new category
labeled Ocean Suites as well as a series of improvements designed to enhance the exclusive aura of Royal
Palm.
Alternative tourism worthy of attention
Apart from luxurious hotels and expensive resorts, alternative tourism holds the seeds for potentially profound
change. Adventure tourism is rapidly growing in popularity as tourists seek unusual holidays, different from the
typical beach vacation. It is a type of niche tourism involving exploration or travel to remote, exotic and possibly
hostile areas, where travellers are provided a challenge, thrill or intense experience. Adventure travels usually
include physical activity, cultural exchange or interaction, and engagement with nature and sometimes, it involves
seeking an encounter with natives or feeling part of the history of a place.
Uri Cypin, managing director of Mauritius Luxury services and of the ABZ Group gives a fairly good rating to the
tourism industry in Mauritius. One can be sure to have a variety of hotels to choose from; colonial, modern, villa
resort, spa resort and so on. Mauritius offers a large selection of holiday activities, making it an ideal destination
for couples, families and even for solo holidaying, he says, adding that his company, Mauritius Attractions, offers
more than 200 activities to choose from.
Safari, hiking, water sports, fishing trips, air activities, historical site tours and many other adrenaline booster
activities are on the list. The main challenge we are encountering is the collaboration with other local
organizations. They still have to modernise their operation and recruit more qualified staff for better partnership
and thus increasing the credibility of Mauritian tourism, he adds.
High spending tourists are rare
Whilst the objective of government is to attract at least 2 million tourists in a near future, the fact is that we are
struggling to cross the one-million mark. Latest figures indicate that, whilst we have received more tourists in
2013 than in 2012, the actual tourism receipts have gone down. According to specialists, Mauritius has changed
its strategy, banking more on Asian tourists (mainly Chinese and Indians) than traditional European tourists.
However, there is no evidence yet whether the new segments are high spenders.
Furthermore, European tourists are no longer spending well enough in the island. Another issue is that retired
tourists tend to spend a lot more but so far we have not been able to target this sizeable market. The modern-day
tourist is also not necessarily after sun, sea and sand. New activities have to be identified to cater to different
types of tourists, such as inland tourism, nature trail, etc.
Munaf Pathan, a travel agent based in Gujarat, told this paper that though Mauritius is famous the world over as
an attractive tourist destination, the fact remains that some niche markets are not being targeted. For example,
Gujarat State is renowned for its industrialists and high income earners, but the absence of a direct flight
between Ahmedabad and Mauritius acts as a deterrent. It is cumbersome to travel through Mumbai or Dubai, he
explains.
Similarly, Pakistan remains an important tourist source for Mauritius. Javed Chaudhry, from Tour Links, Lahore,
told us that Pakistan has a growing middle class population with high spenders, especially among the youth and
these people look out to new destinations abroad, apart from the traditional Dubai and Singapore. Mauritius has
a lot to gain if it taps this market. Unfortunately, Mauritius is not really so much visible in Pakistan. We need more
awareness campaigns to boost bilateral tourism, he explained. The absence of a direct flight is also a drawback.
Administrative issues
Whilst trying to increase the number of tourists visiting Mauritius is a laudable initiative, it is also worth trying to
increase the average duration of stay per tourist. Issues such as visa application and visa extension procedures,
if further simplified could contribute to boost tourism. Tourism is also linked to property acquisition in Mauritius.
RES/IRS villa buyers who do not spend the whole year on the island do rent their villa to next of kins and friends.
This is another opportunity to exploit, by maximizing the use of these villas, rather than leaving them empty for
most of the year. Encouraging foreigners to purchase an apartment in Mauritius means they will be tempted to
travel to the island frequently.
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Long opposed the management style of the company, Raj Ramlagun this time comes to greet this position and
expressed hope that "other similar actions are taken at other levels."
These reactions are noted on his part as a result of a redistribution of load management team of Paille-enqueue. The approach, he said, "complies with the requirements of a company in receivership."
Appointments in the past were rather made "for the purpose of rewarding people close to the CEO."
The criterion of competence was far from being a primary concern as would normally be the case can be heard
in some quarters of the company.
The changes occur in the wake of the arrival of the new Chairman Thomas Dass. "To go forward with such an
overhaul, the CEO must have had the highest levels of fire" could still be heard from the new list defining the roles
and responsibilities of each was released Tuesday, September 18.
Among the changes noted, Donald Payen was Executive Vice President Customer Services and Corporate
Communications has been assigned to Plaisance to perform functions it has occupied in the past in the
department of Customer Experiences Ground and Inflight Services.
This is Donald Payen was the official spokesperson of Air Mauritius. Sudh Ramjuttun who was assigned to the
airport at Plaisance Airport and leaves the Ground Operations, to head the Department of Strategic Planning,
Network, Fleet, Alliances & Cargo Port Louis Fouad Nauraully takes charge of Legal and Corporate
Communications Company Secretary. Under him, a position remains vacant, the Senior Manager of Corporate
Communication, which will certainly take over external communications.
If Andr Viljoen retains his position as CEO, other reallocations were made. Thus, Pramil Banymandhub takes
charge of Flight Operations and will also be responsible for the crew of Straw-tailed.
Indradev Buton will head the Information System Department, Procurement and Facilities.
Shashi Puddoo, he will be responsible for Human Resources and the Department of Organization Development
and Ashok Keerodhur, that of Technical Services.