Air Mauritius back on track

Air Mauritius returned to profitability in March 2014 following bold and decisive actions initiated in 2012 under the 7-Step plan. In addition, the national carrier also announced crucial measures that would ensure its long-term economic sustainability. Unfortunately, on the other hand, exogenous factors again proved that the airline industry operates in an extremely volatile environment that has impacted the national airline of Mauritius for its financial year 2014/2015.

During the past few years, Air Mauritius successfully reengineered its network to meet the evolving demands of the market. Its aircraft schedule has been designed to better serve its hub in Charles de Gaulle as well as the mini hubs in Kuala Lumpur, Johannesburg, Perth and Nairobi – thus enhancing connectivity with Europe, Africa and the Australian and South-East Asian regions. These hubs are now better served with new and reinforced collaborations with partner airlines. The landmark agreement with Air France was reconfirmed and extended to cover greater avenues of collaboration and knowledge sharing in various functional areas. Moreover, an extended agreement was signed with Emirates airlines that opened up new possibilities for Air Mauritius on the Mauritius - Dubai route and beyond.

Air Mauritius also took a number of measures to stimulate growth of its various markets with a better presence on the web and social media, with the company becoming the leading Facebook site on the island with more than 600,000 likes. Web sales and web services have also been considerably stepped up. The company also launched Air Mauritius Holidays, the company’s travel agency arm, which sells holiday packages.

However, the operating environment of the airline industry has yet again confirmed its volatile nature. The business remains heavily dependent on exogenous factors such as the price of fuel (which still accounts for around 40% of operating costs), the exchange rate of the euro and economic conditions in its markets with Europe remaining the leading source of revenue.

The price of fuel has been rather favourable at the start of 2015 after having peaked at around USD 115 in June 2014 and trading at about USD 60 in February 2015. However, the impact of this drop has been substantially mitigated by the rate of the euro. The fuel budget of Air Mauritius currently stands at approximately MUR 6.5 billion a year.

As Air Mauritius has a large portion of its revenue in euro and pays a substantial amount of its expenses in US dollars, the depreciation of the euro currently trading at 1.12, severely impacts the financial performance of the Company.

But Air Mauritius continued to play its role as the national carrier of Mauritius by pursuing its strategy of growth and development of new markets. The company preserved its position as the leading airline serving the Mauritius destination. It has increased the number of seats offered across its network and in the third quarter (October to December 2014) of the current financial year, it grew capacity by 2%, offering a record number of seats.

In 2014, Air Mauritius witnessed two major developments that will have far reaching impacts on the long-term sustainability of the airline. In July 2014, Air Mauritius joined an elite group of 36 airlines worldwide that have been granted the 4-Star status by the international rating agency Skytrax. This distinction is a result of a number of measures to improve the company’s products and service offerings to its customers. Air Mauritius is now equipped to better face intensifying competition on the Mauritius destination.

However, the most significant game changing measure has been the firming up of an order for six new generation Airbus A350-900. This will have a broad impact on the airline’s competiveness on the market. The cabins of the A350 are larger and more comfortable than the aircraft currently in operation. It is equipped with state-of-the-art technology, including an entertainment system that will offer much broader choices of movies, music and games. The A350 is also designed to be fuel efficient, with cost per seat that can be up to 25% less than current aircraft in operation. It therefore presents a significant potential for service enhancement, efficiency gains and network reach.

2014 has been a year of mixed fortunes for Air Mauritius. It has lived up to its role as the national airline of Mauritius ensuring connectivity to the best of its abilities in the current operating and competitive environment. It is compelled to take crucial measures to ensure that it remains economically sustainable going forward in a global environment that is ever-changing.