One ocean, one airline? - African Business Magazine
One ocean, one airline?

One ocean, one airline?

Currently, airlines belonging to the five Indian Ocean islands are struggling to survive against international carriers. Is forming a regional airline the solution? This was the nub of the discussion during the first Indian Ocean Commission Conference on connectivity held in Port-Louis last month. Report by Nasseem Ackbarally.

The Indian Ocean Commission (IOC), comprising the Comoros, Réunion, Seychelles, Madagascar and Mauritius, is an intergovernmental organisation created in 1982 to provide mutual support to its members and to take a unified stance on issues when necessary. Currently, four carriers are domiciled in the IOC, while no less than 16 foreign carriers operate into the region.

Many of these foreign carriers operate under non-competitive code share and revenue pooling agreements, to the detriment of the national carriers. The principal, hotly contested, item on the agenda of the first conference on air connectivity to be held by the IOC, was on whether it made more economic and strategic sense to merge the airlines into one, strong regional organisation or to maintain the status quo.

Proponents of the first option argued that a regional airline would attract more foreign tourists as it would enable them to easy hop from one destination to the other. It would also improve the improve the business climate, facilitate trade and investment, and expand economic cooperation in the region and with the rest of the world. It would develop logistics related to air cargo, thus creating a regional air-sea platform.

It would also enable the national airline to withstand competition from other airlines serving the region and would strengthen the links between the populations of the Indian Ocean region by bringing them closer through reduced travel costs.

“We have been foolish by not launching a regional airline for the past 20 years,” argued George Chung Tick Kan, a Mauritian entrepreneur, whose companies are among the most prominent in offshore business, printing and publishing. “We are late and today we need not one, two but three regional airlines to serve the islands every day for everybody’s benefits – be it tourism, textiles, trade, financial services,” he thundered. He pointed out that the Indian Ocean is the only region in the world not to have a regional airline.

He said that hundreds of thousands of Chinese tourists overflew the Indian Ocean islands every week to spend extended time in Johannesburg. “We are unable to bring even some of them sleep a few nights in our region – in Madagascar, in the Seychelles –places that have some of the world’s most beautiful beaches.”

The Indian Ocean forms a unique market and it should be sold as one product, he stressed. He lamented the fact that people in the region think of London or Paris for holidays but do not consider, for example, Madagascar, a fabulous country that was within easy each for the same purpose. The reason for this, said George Chung Tick Kan, was simple: “We reach the big island in 75 minutes but we have to wait for 72 hours to get the next plane.” IOC’s secretary-general Jean-Claude de L’Estrac went further and warned that if the islands did not move forward, their national airlines will disappear.

He asked: “How will air companies face the rising costs of operations? What should be the role of national air companies? What role for the states? To what extent should the airspace be liberalised?

How could one prevent the commercial strategies of airlines from hampering the interests of the economies of the countries they are supposed to serve?” The ideal thing, for him, he said, would be to merge all the four ailing airlines, Air Mauritius, Air Madagascar, Air Seychelles and Air Austral, mutualise their resources and identify an international strategic partner that will connect them to the world.

De L’Estrac added that it was a waste of time and energy to try and prop up the weak performances of all the Indian Ocean airlines. Air companies in the Indian Ocean all face the same constraints: narrow markets; remoteness from the main tourist and export markets, i.e. the EU and the US, and the escalating fuel and operational costs. National carriers fragment the market and damage both their regional and international competitiveness.

Delegates put forward several models to improve the prospects of air connectivity in the region. The simplest idea was to create a regional airline which would only serve within the region and each country would retain the operation of long haul services. Another suggestion involved retaining the national carriers for regional duty and farming out long-haul flights to a major international carrier.

A third suggestion was to create a regional airline belonging to all the countries that would undertake all flights, including intercontinental ones. Yet another view was to create a regional airline but retain the national carriers and the final suggestion was for the establishment of a low-cost carrier restricted to serving the region.

Since a regional air strategy appears essential to the sustainable development of each country of the Indian Ocean, the conference adopted a decision to call for a meeting of region’s civil aviation ministers to work out a road map. It was made clear that a coherent regional and open air policy contributes to economic development.

As an example, Hannah Messerli from the World Bank, put forward projections that shows that Singapore will double its tourist arrivals between 2004 and 2017, thereby tripling its tourism receipts and in the process adding two or three economic growth points. Maintaining the “status quo is not an option,” Jean-Claude de L’Estrac told the delegates. He warned that if a regional airline was not created, the people of the IOC would spend the next 20 years living with the consequences of the status quo before anybody else would raise the issue again.

Air connectivity has in fact got a real stake in economic development. If the IOC’s secretary-general does not succeed in what he wants to achieve – the creation of a regional airline in the Indian Ocean – the populations of the region will have live another 20 years of status quo before anybody else will want to tread the same path again.

Air Mauritius says “no” to IOC project

Air Mauritius is the biggest and most successful airline in the IOC region. It has, for a long period of time, supported the tourism industry of the island. But it fortunes has dimmed over the past few years.

The challenge for its chairperson, Dass Thomas, is to return the company to profitability. To achieve this, a 7-Step Recovery Plan has been set up by its board. Dass Thomas has made it clear that at this stage, Air Mauritius will not participate in the creation of a regional airline. “Air Mauritius cannot be left to die while we are setting up a new regional airline,” he says. Air Mauritius is coming under attack from several quarters. “We took some decisions and others will be taken and I know these will not please all the stakeholders,” Thomas observes. It would have been easy for Air Mauritius to sell some of its assets and reduce the size of the company to a bare minimum and earn money. But Thomas does not believe in such a solution because he wants a sustainable solution. Dass Thomas says Air Mauritius plays an important social, economic and diplomatic role for Mauritius. “It has to survive,” he adds. However, he does not believe that the IOC’s project is dead even before being born. But at this stage, he avers, Air Mauritius cannot engage in it.

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Written by African Business Magazine

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