Air Mauritius - Understanding the MK crisis
In his first Budget speech for the fiscal year 2020/21 on June 4 2020, the Mauritian Minister of Finance, Economic Planning and Development, Renganaden Padayachy, told parliament that the government had earmarked MUR7-9 billion (USD175-225 million) for Air Mauritius to keep the company afloat.
Like over 70% of airlines (IATA source), Air Mauritius had only three months of cash-cover by March 2020. It’s more a question of survival with a day-to-day management of crisis.
The airline is cutting staff numbers by 50%. Employees of various departments are waiting for their letters in an atmosphere of anguish and uncertainty. Trade unions are trying to negotiate or delay the process while employees are looking for alternatives in a very complex scenario.
Air Mauritius entered voluntary administration following a total collapse in revenues due to the COVID-19 crisis in April. The airline announced this dramatic measure following a board meeting which met on June 22 to consider the latest financial status. Sattar Hajee Abdoula and Arvindsingh K. Gokhool of Grant Thornton were appointed, under sections 215 and 216 of the Insolvency Act, as administrators of the company.
Last January, a Transformation Steering Committee was set up to address the financial difficulties of the airline and to review its business model for ensuring a sustainable future. Consultations were held with all stakeholders in view of elaborating an action plan to be submitted to the board. It seems that the nomination of Sherry Singh as president of the committee caused some tension which finally led to the resignation of the airline’s CEO, Somas Appavou, in March. Even though, he said it was a “personal choice” as he had accepted a work proposal abroad, the “latent tension” was quite noticeable within and without the company.
Then, came the crisis which aggravated the situation, plunging the airline in an imbroglio.
An official statement outlined the dire situation. "Unfortunately, travel restrictions and the closure of borders in all our markets and cessation of all international and domestic flights in an unprecedented crisis, has led to a complete erosion of the company’s revenue base. Furthermore, there is uncertainty as to when international air traffic will resume and all indications tend to show that normal activities will not pick up until late 2020.”
The official statement also said that Air Mauritius would not be able to meet its financial obligations in the foreseeable future. The decision was therefore taken to place the company into “voluntary administration in order to safeguard the interest of the company and that of all its stakeholders”.
Administrators even warned early June that bankruptcy and the setting up of a new company could be options. “The liquidation of Air Mauritius is becoming an increasingly visible option.”
No partnership with Ethiopian in the air
Following press articles regarding an eventual partnership with Ethiopian Airlines, the joint administrators of Air Mauritius denied any ongoing discussions with the leading and most profitable African airline. They said that the administration process was progressing following the positive creditors meeting which was held on May 4, and added that in line with their mandate, they are working with the stakeholders to explore all the possible avenues to keep the national airline afloat and enable it to take off once this sanitary crisis is over.
“Since our appointment as administrators, our mission has remained the same. We are fully committed to safeguarding the interests of Air Mauritius, of its employees, shareholders and trade partners. The stakeholders should rest assured that we will keep them updated as we progress in the administration process given the strategic importance of our national carrier for our economy, especially for the travel and tourism industry,” said Sattar Hajee Abdoula, one of the administrators and chief executive Officer of Grant Thornton.
Ethiopian had previously shown an interest in getting into a partnership with Air Madagascar which had huge financial problems. But no deal was sealed as Air Madagascar wanted to remain the majority shareholder. It was finally Air Austral, the Reunion Island carrier, which finalised a partnership with Air Madagascar. But this partnership seems to be flapping wings.
A partnership between Ethiopian Airlines could be interesting for both parties as despite its financial turmoil, Air Mauritius has a solid and diverse network, an efficient plurilingual staff, a renewed fleet including 2 A330neos, and a five-decade experience in air transport. One should also bear in mind that partnerships necessitate a balance of power even during hard times.
Cargo and humanitarian operations
Even during the closure of the Sir Seewoosagur International Airport to passenger traffic, humanitarian flights for the repatriation of stranded passengers and tourists, Mauritians working abroad especially in affected countries and the transportation of medical supplies were maintained.
Air Mauritius resumed its commercial cargo operations to and from some designated destinations (Paris route) early May. Cargo services have since adapted as demand evolved.
International commercial passenger flights will remain suspended until August 31 while scheduled domestic services to Rodrigues Island will resume from July 1. According to Air Mauritius, “flights are scheduled to resume on September 1 subject to all conditions, including opening of borders and lifting of travel restrictions, being met”.
Commercial operations have been suspended since March 29, 2020 following the outbreak of the COVID-19 pandemic and the travel restrictions imposed in most countries part of the Air Mauritius network.
From the Piper Navajo to the A330neo, the Paille-en-Queue has flown a long way to connect the insular state to the world. It all began on June 14 1967 when Amédée Maingard negotiated with the first partners namely Air France and BOAC to launch the national carrier of Mauritius.
Whatever the option chosen, aviation specialists point out that efficiency, good governance, independence in decision-making and management, and confidence are prerequisites before starting afresh.
