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Air Mauritius - Nifty at Fifty

November 22, 2017



Air Mauritius has grown to become a world class carrier over the past 50 years, and now, with a major investment programme in progress, the island carrier is gearing up for the future.





Mauritius’s economy grew by 3.6% in 2016, according to analysts at the African Economic Outlook. Mauritius benefits from political stability and sound macro-economic management, with increased foreign direct investment (FDI) sustaining growth. Mauritius also benefits from its strategic positioning as a gateway for investments from Europe and Asia into Africa.

The Mauritian government’s long-term strategic vision has been set out in the country’s long-term policy, Vision 2030, and the short-to-medium term 2015-19 Government Programme which calls for a more diversified and inclusive economy.

Air Mauritius will be a key catalyst in the island nation’s development process. The airline is headquartered at the Air Mauritius Centre in Port Louis, Mauritius, with its main hub at Sir Seewoosagur Ramgoolam International Airport.

The company was set up in June 1967 by Air France, the British Overseas Airways Corporation (BOAC) enterprise, and the government of Mauritius. The carrier is 51% owned by Air Mauritius Holdings Ltd, which is in turn majority-owned (43.83%) by the Mauritian government.

The airline has seen considerable development over the years, and presently flies to 24 destinations throughout Europe, Asia, Australia, Africa and the Indian Ocean, using Airbusses as well as ATR 72s.

In June 2017, Air Mauritius released its financial results for 2016/2017, which showed a profit of 26.9 million Euros (Rs1.06 billion). This performance, the best ever posted by the company, is up 67% from the previous financial year.

During the 2016/2017 financial year, the number of seats provided over the network increased by 6.1% to 2,136,394 and the number of passengers carried increased by 6.9% to 1,602,632, resulting in a 1.3% increase in revenue to 494.8 million Euros (Rs19.5 billion), a record for the company.

Load factor was up one point to 79.6%. The carrier indicates that the only disappointment was the 6.9% drop in yield that slid to 255 Euros, from 270 Euros the previous year. Air Mauritius attributes this dip to the fierce competition that prevailed during the year.

The two significant factors that usually impact company performance, the price of oil and the Euro/Dollar exchange rate, remained stable throughout the financial year. “However, the volatility of these factors remains a cause for concern and requires close monitoring given their potential impact on results. The competitive environment reached unprecedented levels, influencing ticket prices. Pricing below cost is not sustainable in the long run,” the airline said in a statement.

Air Mauritius had a flying start in the beginning of the new financial year with the celebrations of its 50th Anniversary on 14 June. The carrier has been organising a series of events and outreach programmes for its employees, clients, travel, tourism and freight partners, and institutional partners.

The occasion was also an opportunity to gain insight from the past 50 years in order to plan for the future. The company has initiated a massive investment programme in new aircraft, products and training strategies. In February, the airline announced that it was spurring up its fleet renovation programme with the addition of two new Airbus A330-900neos in September and October 2018. This in addition to the six A350s already on order. The A330neos will be equipped with modern seats, a new in-flight entertainment programme, and on-board Wi-Fi, similar to that which is available on the A350. Moreover, the cabins of two A340s, two A330ceos (Current Engine Option) and two A319s are being refurbished to align the standard of equipment across the fleet. The revamp of the cabin interiors is planned to be completed by June 2018.

The replacement of the two A340-300Es, whose leases will expire in November and December 2018, by the A330-900 aircraft is key to modernising the fleet, and should offer enhanced passenger experience and comfort, operating efficiencies and technological innovation. The new aircraft will also allow Air Mauritius to improve its products and competitiveness in the current dynamic and challenging market environment. The two aircraft will initially serve the medium-haul routes of Guangzhou, Hong Kong, Delhi and Perth. The A330-900s will be on long-term operating lease from Air Lease Corporation (ALC).

This decision to acquire the A330s follows a thorough evaluation process and accelerates the fleet renewal programme of the airline. The A330-900neo, which was officially launched in July 2014, is powered by two new generation Rolls Royce Trent 7000 engines. The aircraft is also equipped with a new cabin interior design, high-span wings and sharklets as well as new systems.

Figures from Air Mauritius show that the new A330s consume at least 20% less fuel, compared to the current A340-300E. The A330-900 will be configured in a two class layout, with 291 seats (28 business and 263 economy class) with full-flat seats in business class.

In October, Air Mauritius took delivery of its first of six Airbus A350-900s, becoming the first in the Indian Ocean to do so. The Mauritian airline has chosen a two class layout with a total of 326 seats, comprising 28 in Business Class and 298 in Economy Class.  Four will be purchased directly from Airbus and two leased from AerCap. The carrier will deploy the aircraft on its expanding route network connecting Mauritius with Asia, Africa and Europe.

While this investment in aircraft, products and destinations weighs heavily on the airline’s finances, it is a precondition to its sustainability.

Meanwhile, the airline’s network is seeing increased services to London and Singapore, and the introduction of new operations to Amsterdam, as part of its Air Corridor programme. There will also be a twice-daily service to Pierrefonds, Reunion Island. Furthermore, Air Mauritius is revisiting its service to China, with a view to consolidating it. The Asia-Africa Air Corridor was inaugurated in March 2016 to provide better travel options between the two continents through the hubs in Mauritius and Singapore.

Together with Air France/KLM, the Amsterdam operation was introduced from October 2017. The Amsterdam route should allow the airline to target the Dutch market as well as other lucrative European markets, particularly the Nordic countries where KLM has a strong foothold. Moreover, seasonal operation to Geneva is planned between November 2017 and February 2018.

Air Mauritius continues to face various challenges and intense competition, leading to yield erosion in most markets, cost escalation, fluctuation in currencies and a volatile fuel price. The airline has already experienced yield erosion as competition has intensified in its home market. As it starts to pursue more sixth freedom traffic, maintaining profitability may be difficult. If Air Mauritius succeeds at increasing its share of the Africa-Asia market, it will need to rely mainly on more sixth freedom traffic.

The carrier reports that various measures are being taken to meet these challenges and their impact on the performance of the company during the financial year 2017/18.

In other developments, Air Mauritius signed an memorandum of understanding (MOU) with Flysafe Ghana, an entity set up for the creation of a home-based airline in Ghana. In late August, a delegation from Accra visited Mauritius to explore the opportunities for collaboration for the setting up of an airline.

Air Mauritius could be a strategically important partner for any new carrier. Over its 50 years of existence, Air Mauritius has acquired expertise and experience of global standards. Its maintenance and operations processes are compliant with the requirements of key regulators, including IATA’s Operational Safety Audit (IOSA), and with those of the European Aviation Safety Agency. Air Mauritius has expertise in fields ranging from full aircraft maintenance and engineering, flight operations, full cabin crew training, ground operations, finance, IT systems, aircraft planning and scheduling, sales and distribution and regulatory quality systems, among others.

Ghana on the other hand is ideally situated to become a hub for western Africa. It is less than six hours from Europe and at the heart of a region home to more than 350 million inhabitants. The neighbouring countries enjoy high economic growth rates and have seen the fast rise of their middle class, which means that the demand for air traffic is forecasted to increase.

Air Mauritius’s interest in Africa is in line with the country’s economic strategy.

Analysts suggest that Asia and Africa are where the real opportunities lie for Air Mauritius, as they are the larger growth markets for the Mauritius tourism sector – although visitor numbers from Europe continue to increase. Mauritius is also geographically well positioned for Asia-Africa transit traffic, while it is not positioned for Europe-Africa traffic (except for connections within the Vanilla Islands).

In the meantime, Air Mauritius won two distinctions at the 2017 World Travel Awards. The Amédée Maingard Lounge, the airline’s premium lounge in Mauritius, was elected Indian Ocean Leading Airport Lounge. Air Mauritius also won the Indian Ocean Leading Airline, in the Economy Class category.

So far, things are looking up.



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