How and why did MK fail to achieve to be a profitable national airline?

The complex situation in which air Mauritius finds itself is not new. All successive governments due to their interference and incompetence in the field of aviation have led to the chaos we the workers have to endorse today.

The former political regime decided to order 6 Airbus A350s of which two were delivered in 2017. In 2014, the elections changed the government and the new regime openly said that we are paying too much for these two A350s and that MK does not have the necessary funds to honor the deadlines of leasing of these first two A350. If this was true, that we did not have enough money to pay for these two planes why this same government ordered two additional Airbus A330 Neo at the list price of only 20 million USD less than the A350?

The same government decided to set up an Air Corridor, the principal reason that motivated the government was to fulfill the expectations of the Chinese international diplomacy in developing the new silk road. Therefore, even before starting to operate this Air Corridor we already knew that we were heading for a fiasco, transporting passengers to Africa via Singapore and Mauritius then to fly them to Maputo and Dar ES Salam (on average 2 to 3 passengers) while the Asian companies fly directly to big HUBs like Johannesburg, Nairobi, Addis Abbeba without counting the HUB in the middle East. MK absolutely had to go through Singapore to respect the desired principle of the Air Corridor. Before we operated a triangle Mauritius Kuala Lumpur Singapore Mauritius, and with the Air Corridor we were forced to do Mauritius Singapore Kuala Lumpur Singapore Mauritius, the extra leg Kuala Lumpur Mauritius with ZERO income drastically weighed down the accounts of the national airline. We estimate that the cost of this operation represents more than 2 million euros per year, this since the installation of this Air Corridor. The routes through China to the detriment of our niche market that we literally gave to Emirates, also helped us to dive even deeper into the abyss, BEIJING, Wuhan, Shengdu Catastrophic in terms of marketing and commercial.

Yet in an article published by l’Express on the 10^th July 2018 Mr Prem Sewpaul, from the communication department of MK said that the “l’Air Corridor se porte bien.” And he even added that Air Mauritius was considering to increase the traffic from 4 to 5.

Was there any collusion?

Then this year comes COVID with the placement under voluntary administration of air Mauritius at the request of the board of directors. The world of aviation remains frozen, the countries are closed, but at the same time a strong demand for air freight is felt, so that Air Mauritius receives several requests for quotation they have all been rejected, one request from ACMI (Aircraft Crew Maintenance and Insurance) for 2 A 330 for 2 years with a possible extension of 4 years was also proposed to Air Mauritius all of which were rejected.

The income from these cargo flights could undoubtedly have preserved the employment of all the pilots and employees of the company. You should know that for this kind of on-demand operations the flight is paid for before leaving Mauritius, imagine the cash that could have seriously helped the administrator in his task. Recently traffic rights were given to Ethiopian airlines for freight, while we are with the planes grounded. Emirates does extraordinary marketing in South Africa to bring South Africans to Mauritius via Dubai. With the bankruptcy of SAA there is currently a strong demand for cargo from Africa to India, Asia and Australia in both directions, this is accessible to us if we had the marketing and sales skills to exploit these markets.

All these reasons justify our refusal to accept unpaid leave, refusal that we have officially expressed to the administrator, the EVP flight ops and EVP HR.

How is it possible to take LWP with a company that categorically refuses substantial income to preserve both the company and the jobs? How is it possible to accept part-time job when a national airline is managed as a corner store?

Today in Mauritius the private sector has a very high demand for cargo, for example tones of aquaculture fish need to be exported, and thousands of laboratories farmed monkeys also need to be sent to London!

What do we do? Isn’t it the role of somebody to ensure that MK earns income in order to save the company? Back in time the company ordered the A 319 and again it was not judicious, these planes are short haul and was used by Air Mauritius for medium haul, flights of 6 hours to Cape Town and Johannesburg. Often it was necessary to choose between carrying of fuel to reach the destination or the luggage and make a fuel stop, like the A330 NEO ordered more recently, the manufacturer has never been asked for a performance guarantee depending on our destinations. Does Air Mauritius learn any lessons from its previous mistakes?

In 2008 the company agreed for long term fuel hedging at an approximate price of 120 USD the oil prices fell down a few months after and very hard to escape due to strong contracts. Fuel hedging is a common practice, companies practice this fuel hedge on periods averaging over 6 months maximum and between 40 and 60% of their estimated consumption, but Air Mauritius choose to have 100% hedge over 12 months, MK played at the casino and lost!

Kot travayer finn fote???

Emirates arrived in Mauritius with GOLD bridges to the detriment of MK, we closed Melbourne, Vienna, Munich, Zurich, Geneva, Brussels, Manchester and Amsterdam to give Emirates everything on stage! some destinations were highly profitable but very poorly managed in terms of marketing and commercialization and without forgetting how that concurrently the hedging also helped to close these destinations. Following these closures of large European routes which was our niche market, our rocket scientists’ directors of Air Mauritius have decided to go to China, with as result an absolute FIASCO, millions of euros swallowed up and never reimbursed, to date China owes a colossal sum which is apparently lost forever. Yet, the Chinese market should not be neglected, of course, but China will never be the European market for Mauritius. The Chinese will come once but not twice, while the European comes back to our island several times.

The political interference and absence of real strategic objectives has traditionally created a situation where the company was not profit making oriented. This graph shows the absence of constancy in the revenue of the company which is yet operating on the same market like other airlines which do not show such disastrous financial results with such inconsistency. Worst is that this company is on the market and investors on the stock market exchange could easily be misled while investing in Air Mauritius thinking that it is a private company operating independently from the activities of its main shareholder: The State. The sequence of events leading to the purchase of the A350 is yet another live example of this total absence of strategic objective. Shouldn’t it be the responsibility EVPs to say no to the board when the decisions taken will affect the financial situation of the company? Doesn’t the company have a Chief Financial Officer?

The configuration of the planes ordered, particularly the A 350, did not help to make profits. The income on a flight is mainly done on the business class and the premium economy class then comes the economy class, all the companies in the world have a configuration of 34 Business 24 premium and 265 average for the economy class, we MK have 28 business seats and 302 in economy. The paradox of this situation is that Mauritius sells to the wealthiest people IRS, RES and PDS but does not offer to these people the right tool to travel. In business and in premium it is where the immediate profitability is, several studies prove it. The problem with Air Mauritius has always been its management, its strategic plan, its absence of business plan and the political interference. If we look at what is happening in other places, what do you observe? After 6 months of operation, FINNAIR publicly announces that the Airbus A350 is an exceptional aircraft as a profit maker. Air France made the same statement only 6 weeks after starting its operation. Here in Mauritius, officials said we are losing money with this aircraft; I believe we are the only country in the world not being able to make profit flying with the Airbus A350.

We consider that the A 330 NEO as said above which has never benefited from a market study for MAURITIUS consequently resulting in lost making travels to Europe. But would have been perfect for Australia, India, South Africa and Hong Kong, in fact it is very good for flights of maximum 10 hours but unfortunately too expensive, it would have been necessary to have more than the classic A330, i.e. 60 million USD less than the A330 NEO as per the manufacturer’s site catalog price.

After reading all the above information which clearly demonstrates how the major shareholder users the company at will without any consideration for the financial consequences of its decisions. Can we seriously consider that if the company reduces its manpower and its labor cost this would change something for the future of the company?

To add some more facts to help each of you to find an answer to the above interrogation, let us remind you of some other forgotten events: Overfly clearance: it was confirmed that MK was paying for overflying clearance over Soudan and Egypt as 10 times more than other airline did for a very long time. Who signed this contract and why? Numbers represents something like 1 billion instead of 300 million!

Did anybody receive any commissions for that?

Ten years ago, it was decided to open an aeronautical engineer training center with the collaboration of New Zealand. the center was opened with the purchase of very high-tech equipment and the creation of a study class, the business had to turn 6 months, today everything is covered with dust and spider web, a monumental mess.

The examples are legion but no one apart from the employees seems to have to pay. Only the employees, who are responsible citizens paying their taxes, fines and bills, they are the ones’ who will have to endure financial distress. Shouldn’t the responsibility of all board directors be engaged? Oh no it is not possible, as the COVID Act has suspended the duties of directors from its legal consequences in case of failure from their part during the COVID period. On the other hand, for the employees of MK the Ministry of Labor amended the Workers’ Rights Act 2019 with the now famous section 72A, exempting the administrators from the obligation of negotiations and by so doing removed all protection for us, workers.

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La résilience des employés d’Air Mauritius a-t-elle une limite ?

Depuis les années 1990, MK a connu plusieurs événements majeurs qui ont tous demandé une grande solidarité et des efforts constants chez les employés de MK afin de garder la compagnie à flot.

Les deux guerres du Golfe, La caisse noire, Le Hedging saga, la crise financière, les décisions politiques incorrectes (e.g Air Corridor) sont autant d’épreuves que les employés ont dû surmonter au fil du temps.

Cependant, la descente aux enfers a débuté avec l’épisode de la caisse noire en 2001. C’est là que le « propriétaire in vin locataire ». En effet, avec l’éclatement de cette affaire, MK a perdu des entités et services, transférés à Airports of Mauritius Ltd (AML) et Mauritius Duty Free Paradise (MDFP), qui généraient des revenus. MK se retrouva, par la suite, privé de ces revenus et même à payer pour les services sans bénéficier de « privilèges » que les gouvernants du jour préféraient offrir à la concurrence. Les employés ont assisté, impuissants, au démantèlement des secteurs a haut revenus, comme le Duty free, vers d’autres entités.

Les acteurs du scandale « carnet la boutik » ont eu « bonne presse », mais personne n’a pensé à planifier à la suite… Après un retentissant procès, les coupables ont été désignés, jugés et tout le monde a repris son chemin. Les employés ont eu à faire face au démembrement de la compagnie avec beaucoup de résilience. Ils ont multiplié leurs efforts pour garder MK dans les airs avec fierté. Le défilé des CEO (9 de 2001-2020), des EVP HR, des membres du conseil d’administration et autres nominés ou protégés politiques n’ont fait qu’aggraver les choses. Ceux-là même sont partis avec des « golden hand shake » sans avoir à rendre compte de leurs mauvaises décisions et multiples stratégies bidons.

Beaucoup s’accordent à dire que certains évènements étaient à l’échelle internationale et que MK avait peu de contrôle sur ces derniers.

Il est, donc, compréhensible que la série d’événements qui se sont déroulés à Air Mauritius depuis 2015, les décisions « trial and error » ainsi que les changements amenés par les nominés politiques incompétents et capricieux aient été suivis avec un malaise considérable dans des milieux concernés. Le corridor aérien entre l’Asie et l’Afrique fait un tort immense à Air Mauritius. Aussi, desservir le Mozambique et la Tanzanie, l’achat des avions sans aucune planification, l’amateurisme sur le dossier de la Chine ont creusé d’avantage le gouffre financier à Air Mauritius. La faillite de la SAA, a qui les deux A350 avait été loués, et la Covid 19 ont donné le coup de grâce à notre oiseau national.

Un drame humain se joue actuellement sous nos yeux et les responsables bénéficient d’une immunité et n’ont de comptes à rendre à personne.

Le joujou est cassé ! Mettez-le a la poubelle et achetez-en un autre…

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The Top 10 reasons:

EMPLOYEES SHOULD NOT SUFFER ANY SALARY COST

1. Sale of 5 aircrafts. Bundled, market value: USD 30.20m, but sold at USD 14.5m. Is anybody earning a commission on that transaction?

2. Flydubai a subsidiary of Emirates is coming to MRU on a weekly basis as from November 20. It’s a freighter. At the same time no cargo strategy at MK despite cargo is the main revenue stream currently.

3. MK has been run as a ministry despite being listed on stock exchange. The government should now be fully responsible for the payroll of MK.

4. There is no clarity on the after voluntary administration. How the board will re-engineer the company or CAPA report will be implemented.

5. The government and major shareholder has never shown any determination to appoint a CEO with a good track record and a strategy of his own for the company.

6. The one who are actually helping the administrators to create that mess are protected by high profile politicians.

7. The trustees at pension level have been provided with a safe way out rather than being sued.

8. No proper Early Retirement Plan with a proper replacement strategy have been planned, those who have reached 60 years and above should be allowed to retire with their pension. Same for those nearing 33  1/3 years’ service.

9. The law since 2019 have not been implemented in favor of the Airmate staff, who should have integrated MK. Now they should be reshuffled to ministries to avoid redundancy. But yet nothing has been communicated regarding their assignment in the future.

10. The major shareholder has not used his capacity of head of state to help saving the company when this situation is the direct consequence of its interference. A solution would have been to organize the refinancing of new aircrafts by building up a separate team made up of private n public top guns to negotiate with the lessor with the sponsorship of the MIC.