Air Mauritius Shows Drastic Fall in Profits

By Eddyson Lugangwa Posted 20 September 2006 @ 09:38 am EET     Print     Reprint     E-Mail     Comments

Port Louis, Mauritius (IBTimes.com) - Air Mauritius is tightening its belt. As its annual report revealed it last week, the profits of the local airline have decreased by half. Even worse: there is not much hope that this situation will improve in the near future.

The opening of air access and regular rises in oil prices may cause even more problems to the company. But, instead of lamenting over bad news, the management has already started to reflect on how to turn the situation to their advantage.

The managing director, Nirvan Veerasamy, was quick to react after he realised the profits of the company had fallen from Rs 739 million to Rs319 million. He announced that Air Mauritius had changed its order concerning the purchase of one Airbus aircraft. Instead of purchasing an A340, the local company decided it would buy an A330. Of course, it may present fewer advantages in terms of space or comfort but it will above all help the company save Rs 500 million. This choice appears even more interesting for the company as this aircraft is also expected to be more economic in the long-term with reduced oil consumption compared to the A340.

Competition on the horizon

It is clear that the regular rises in oil prices are one of the major problems of Air Mauritius. But, as they do not have much control over such factors, the company board has to look into other avenues to save money and try and increase profits in the future. The more so as competition is on the horizon

In the annual report of the company, the chairman of the board, Sanjay Buckory, made it clear that competition is one of the factors that will lead to a drop in the growth rate. Even though Corsair remains the most dangerous competitor for the local airline it is inaugurating its first flight from Paris on 24th October it is far from being the only one.

Virgin Atlantic, an international airline, should start its activities in Mauritius as from next year. And last but not least Qatar Airways is said to be about to settle an agreement with the Mauritian authorities on the Europe Persian Gulf Indian Ocean route. With highly competitive prices and a good standard, Qatar Airways could prove to be a major player in the sector in the future.

The government took the decision to open air access on certain conditions to increase the number of tourist arrivals and increase growth in that sector. Air Mauritius now has to adapt. This is why cost reduction is a top priority for the local airline. But this will not be enough; easier procedures (like the e-ticketing) and the search for new markets may well do the rest.