 STRATEGY |
 CHAIRMAN’S STATEMENT |
It is my pleasure to report that Air Mauritius posted a net profit of Rs 311 million
for the financial year 1997/98, and is now well positioned to drive towards its target of
one billion rupees profit by the year 2002.
Since I assumed chairmanship of the company in February 1997, Air Mauritius has
undergone significant improvements and developments, both financially and structurally.
And so as we prepared to enter in the next millennium, you can feel confident Air
Mauritius is well equipped to succeed in an ever-developing and changing aviation
marketplace.
The issues and problems that affected our results in the 1996/97 financial year have
now been resolved. One of my task last year was to address specific strategic and
operational issues in order to enhance revenue and to minimise cost growth as much as
possible. These actions have now been implemented and Air Mauritius is on track to achieve
its goal of becoming a world class airline. We’re in the process of making
cost-efficient changes to our fleet configuration and are regularly reviewing the route
net work. New alliances have been formed, we’ve also succeeded in restructuring
various operations to run more smoothly. We believe the outcome of these actions have
helped achieve a more productive balance of delegation and empowerment within the company.
For the first time
in its history, Air Mauritius exceeded a turnover of Rs 6 billion, in part due to a 9% in
both passenger and cargo tonnage. Gross travelled revenue rose by 8.8% to Rs 5.8 billion.
Our cargo operations made a substantial contribution to revenue, and I feel a great sense
of pride in telling you that Air Cargo News voted Air Mauritius the second best cargo
carrier to Africa in1998.
The only blight on these impressive figures was a 6% increase in costs, due primarily
to the continued appreciation of the US dollar. As we are powerless to control foreign
exchange fluctuations, management has taken a series of actions to try and minimise the
negative impact of this still strengthening currency. Most significantly, we have formed a
risk management steering committee that will monitor, evaluate and establish policies
regarding various risks affecting the company.
In addition to ensuring a strong return to higher levels of profitability, I considered
the creation of shareholders wealth another important issue when I assumed the leadership
of Air Mauritius. This commitment is yielding positive results, as shareholders fund
totalled Rs 4.3 billion this year. Net asset worth per share was Rs 84.57 and earnings per
share were Rs 6.07. The company has, for the first time, declared an interim and a final
dividend totalling 15%.
In order to continue shareholder’s wealth, revenue and profits, the management
team at Air Mauritius must stay apprised of all development in the airline industry.
Globalisation has lead to new rules leading the way forward, and market forces, not
regulation, are largely guiding these. Customers are demanding ever frequent services to a
wider scope of destinations, and alliances continue to breach cultural and political
barriers to allow airlines to survive and thrive in this highly competitive global
environment. I am glad to say our company has been proactive in this changing environment
and has taken the appropriate actions and initiatives which will transform Air Mauritius
into a truly world class airline.
One of these proactive moves has been to undertake a detailed assessment of our
company’s long term strategy. To help us do this, Air Mauritius has engaged the
highly reputable firm of consultants McKinsey & Co. to review the company’s
operations. Together, we will work to identify future opportunities that will generate
continued growth for our airline. We will keep shareholders and employees fully informed
of this transformation programme as it moves forward.
Another step we have taken to ensure our continued evolution in the years ahead is an
alliance with Air France. Air Mauritius signed a memorandum of understanding with
France’s national carrier in April 1998 that will allow greater access to existing
and future routes in Europe on a highly cost effective basis.
On the regional front, we have also formed a joint venture with Air Seychelles,
and since October 1997 have been operating services between Mauritius and the Seychelles.
This alliance has in turn paved the way for a four-way co-operation agreement on the
root involving Air Madagascar and Air Austral. Further to this, the creation of a regional
carrier for the Indian Ocean is still being discussed and talks regarding a multilateral
co-operation agreement amongst a number of airlines in the region have reached an advanced
stage.
Further afield in Africa, we were prequalified in the bidding for the
privatisation of Mozambique’s carrier LAM, before the government announced it was
suspending the capital share issue until further notice. In the meantime we have been
prequalified to bid for the potential privatisation of Uganda Airlines and are currently
in the process of conducting due to diligence before bidding.
Our ties with African Airlines have always been strong, as over the years Air
Mauritius has provided ongoing assistance in areas such as airline accounting, software
development, training and maintenance. Therefore, it seemed a natural development to form
an alliance with De Chazal Du Mee Consulting Co. Ltd. to create an airline management
company, CARAT ( Consulting for African and Regional Air Transportation) to respond to
various and frequent requests for assistance from these regional carriers.
During 1997/98 we
continued our fleet optimisation policy that aims to both carefully align capacity to
demand and to operate a young and cost effective fleet of aircraft. We added five new
aircraft during the year; one Airbus A340-300, two ATR 42-500 and two Bell ranger
helicopters, and released an ATR 42-300 and a Bell Ranger helicopter from service. We
believe the new and younger aircraft will enable us to provide better service to our
customers and help drive down operating and maintenance costs. A network and fleet plan
study, in conjunction with the Mckinsey transformation programme, is also under way.
We have also spent a great deal of time and resources addressing the needs of our
passengers. No effort has spared to add to their comfort, both on the ground and in the
air. We have created a customer care unit, upgraded our departure lounge at SSR
International Airport, enhanced individual video and audio systems in all classes of the
Airbus fleet, and recently launched a new line of dinnerware as part of our effort the
catering service.
All of these achievements would not have been possible without the company’s most
vital asset- its employees. The past eighteen months in office have given me the
opportunity more acquainted with my staff, who by virtue of their unflinching dedication
and loyalty, have risen to the challengers Air Mauritius has faced. Investing in our
company means investing in our people, because this will ultimately benefit our customers
as well. Last year we introduced the Total Quality Management (TQM) concept, and this has
now reached into every area of the company with widespread success. Numerous training
courses are on constant offer to our employees as we see to stay up to date on the latest
industry developments. I wish to thank all my staff for their contributions and assure
them of my continued support.
My colleagues on the management team and our board of directors must also be
congratulated for their dedication during the past year. In response to their needs, we
formed a Senior Officers Remuneration Committee to determine remuneration.
Looking forward, I would like to inform you that trading for the 1998/99 financial year
is going well, and Air Mauritius is confident that we are well positioned to take
advantage of an industry that continues to offer substantial growth.
On behalf of the board of directors of the management of Air Mauritius, I wish to
express our gratitude to the government of Mauritius, and in particular the Prime minister
The honourable Dr Navinchandra Ramgoolam, for their continued support of the company.
Nashiruddeen Mallam-Hasham
Chairman and managing director
Air Mauritius Limited.
| CREATING A WORLD CLASS AIRLINE |
In response to a more intense competitive environment and to expectations of future
growth in the airline business management launched a transformation programme in July 1998
aimed at widening Air Mauritius focus beyond quality to encompass world class performance.
The programme has been based on a three month review on the entire Air Mauritius airline
business supported by McKinsey & company. It addresses sales, operations and planning
as well as organisation structure, i.e. skill building and performance assessment; clear
target setting and reporting. | The programme sets the foundation for Air Mauritius to reach its vision of becoming a
world class airline which: operates in all its activities-sales, aircraft operations and planning as well as the best airlines in the world,
manages its organisation as well as the most successful companies in any business sector and
shares its success with the customers, shareholders and staff.
The programme itself has the specific goals of improving financial performance to Rs 1
billion profit, creating an organisation focused on people development and enhancing Air
Mauritius’ ability to serve its market effectively.
It is divided into 23 individual initiatives lead by full time Air Mauritius team
leaders and sponsored by top management. The teams report to a formal steering committee
headed by the chairman, which ensure that initiative are given sufficient resource and
management focus to be successful. Early results from the programme already indicate that
there is an enormous amount of enthusiasm in the organisation to change in a positive way.
| EURO |
The advent of the Euro from 1 January 1999 will have far reaching consequences
for companies dealing within the European monetary Union’s zone and those trading
internationally with Europe.
The implications for Air Mauritius are widespread as Europe constitutes the major
revenue provider. These implications are being identified and actions taken accordingly.
The pricing strategy is being reviewed to cater for cross-border tariffs and at the
same time discouraging the emergence of arbitrage purchases.
The computer systems are undergoing certain modifications to handle both the Euro and
the national currencies during the initial three years transitional period.
With the elimination of intra-European foreign exchange risk, resulting in the removal,
to a large extent, of the complexities of cash management, the company is on the right
track in developing the necessary mechanism at all levels for the introduction of the Euro
within all its systems.
Top of page
| INTERVIEW WITH MR NASHIR MALLAM
HASHAM CHAIRMAN AND MANAGING DIRECTOR OF AIR MAURITIUS |
18 December 1998
1. Air Mauritius has celebrated its 30 years of anniversary
last year, could you give us a brief historical background of your company.
Air Mauritius was set up on 14th June 1967 and started operations as a
handling company. It became an airline in the real sense of the term in 1972 when it
leased a small six-seater twin-propeller Piper Navajo and launched a weekly air-service to
Rodrigues island. This aircraft was the first to wear the company’s attractive
red-and-white livery, and the logo based on the straw-tailed tropical bird, locally known
as the "Paille-en-Queue".
In November 1973, the company leased a Vickers Super VC10 aircraft and
inaugurated a weekly service to London, via Nairobi. Similar joint operations were soon to
be established on the routes to Paris and Bombay respectively.
Since then the company continued on its expansion programme using
equipment such as the DH Twin Otter, B707, B747.
Today, the Mauritian Paille-en-Queue reaches out to 29 destinations. In
1994, the company started operating one of the most technologically advanced aircraft
available today: the Airbus A340-300. At present, our fleet is made up of 5 A340-300 , 2
B767-200ER, 3 ATR42 and 3 helicopters Bell Jet Ranger.
2. Tell us about your own professional experience.
I joined British Aerospace in 1981 and was appointed Vice President,
Marketing Operations in 1989 responsible for various regions of the world. In 1993, I was
asked to head the International and Government Affairs function with world-wide
responsibility as Vice President and subsequently joined BAe HQ at Farnborough with
assignments for the totality of BAe Commercial Aerospace. I was appointment Special
Adviser to the Prime Minister of Mauritius in 1996 and joined the Board of Directors of
Air Mauritius later that year. I took office as Chairman and Managing Director of Air
Mauritius on 17 February 1997.
Concerning Air Mauritius’s financial results, what are your expectations for this
year?
When I took over in February 1997, I took a footprint of the financial
status of the airline. For the financial year ended March 97 we posted a marginal profit
of MUR 57m. For the financial year 1997/98, a profit of MUR 311m was realised. We have
forged an alliance with Air France and we started code share flights on the
Mauritius-Paris route as from 25 October 1998. Although this alliance is at its very early
stage, I expect very positive contribution to our overall performance. Whilst the
Dollar-Rupee curve plays havoc on our accounts given the fact that our expenditures are
largely dollar denominated, I still expect a reasonable bottom line for this year.
4. What are the main actions you have taken in order to face
the international competition, to put it in other words, what makes you different from
other airline companies?
It is very important to reckon with the motivation of travel of
passengers to our part of the region. Mauritius is one of the most popular leisure
destinations and the tourism industry is the country’s third largest industry. Most
importantly, the government advocates an up market tourism policy and the national carrier
becomes an important instrument to achieve this objective. In this respect, Air Mauritius
offers a differentiated product in the market place as a scheduled carrier to exceed the
expectations of passengers. We operate state of the art technology aircraft with an
average fleet age under 5 years old. All seats in the three classes are equipped with an
individual video system.
We have upgraded our in-flight service to stay at the leading edge. In
a recent survey conducted by the BBC Good Food guide, Air Mauritius was awarded second
place for catering. All this is very encouraging but we cannot stop there. Our uniforms
for example reflect the multi-ethnic, multi-cultural identity of Mauritius. Put very
simply I want the holidays of my passengers to start when they board the aircraft. You
must remember that I have got a captive audience for 11+ hours. It is up to us to make
this flight as pleasant as possible.
5. Air Mauritius is in a restructuring process at the moment,
which are the main guidelines and objectives of this restructuring plan?
Our objective is to become a World Class Airline and for this to become
a reality, we are implementing a Transformation Programme. This Transformation Programme
has been devised by Air Mauritius with the assistance of Mc Kinsey and is now ongoing.
This Transformation Programme consists of a series of initiatives, which focus on boosting
sales, cost containment, optimisation of route profitability and building up of long term
strategy and organisation.
6. There is no doubt that Mauritius is a bridge between Asia
and Africa, becoming a financial centre in the region: Mauritius economy is often linked
to transport. The question is what have you done and what are you doing in order to
participate to this impressive economic development?
Air Mauritius is an important instrument in the development of
Mauritius in the wide sense of the term be it in the economic, social and cultural
development of the country. However, our main activities are associated to the tourism
industry and the development of the export processing zone. Activities of the tourism
industry and those of the national carrier are inextricably linked and growth in hotel
room capacity should commensurate with increase in seat capacity. Our contribution has
also been significant in the diversification of the market base for the tourism industry
as well as for our network.
Mauritius has been converted into an important hub in this part of the
region as a spin off of the national carrier’s expansion. This is applicable for
freight forwarding in the region as well as for passenger traffic. For the manufacturing
sector, the Export Processing Zone relies on the availability of freight capacity to
export finished goods and with our fleet of aircraft, we carry more than 60% of the total
inbound and outbound cargo.
7. You signed a partnership with AIR FRANCE, would
there be other partnerships underway?
In view of our geographical location, the size of the airline and the nature of our
traffic we have often been called a "niche player". Irrespective of this we have
to be proactive and formulate strategic plans so that we can remain above water in a world
of mega carriers. The alliance with Air France is a natural one given the very long active
presence of Air France in our region and the significant contribution of France to the
tourism industry. Having secured an alliance with a key player in Europe, we will be
active to consolidate our position on other axes i.e. Regional, South East Asia and India
which will evolve as a very important market.
8. Our readers are always interested in new business opportunities, in which
area of your activities are you interested to attract partners or investors?
Our Annual Report 1997-98 sets the tone for an answer to your question.
In addition to ensuring a strong return to higher levels of profitability, I considered
the creation of shareholder’s wealth another important issue when I assumed the
leadership of Air Mauritius. This commitment is yielding positive results, as shareholders
fund totalled Rs4.3 billion this year. Net asset worth per share was Rs84.57 and earnings
per share were Rs6.07. The company has, for the first time, declared an interim and a
final dividend totalling 15%.
Moreover we have set ourselves bottom line targets which we believe are achievable in
the time-scales defined by our Transformation Programme. As such the airline itself
represent a sound investment. As a group the company has significant shareholding in real
estate, basically the building which houses the company HQ and a hotel in Rodrigues. I
believe that we should stick to our core business which is the carriage of passengers and
cargo. I plan therefore to start a process of dis-investment in those activities mentioned
earlier.
9. Being the Chairman and Managing Director of Air Mauritius, what would be
your final message to our readers?
My final message to the readers of Forbes would be an invitation to visit Mauritius and
fly Air Mauritius to experience the hospitality of the Mauritian population which starts
on board the aircraft itself. |
