Even with a Rs 30 billion cheque in hand, shopping was never going to be easy for Air Mauritius. The national airline has been mulling over the purchase of up to four new aircraft since November. Courted by Boeing and Airbus, Air Mauritius has yet to be seduced.

Initially scheduled for December last, the choice will not be announced very soon. After careful consideration of the offers tabled, Air Mauritius seems set to change course. Purchasing new aircraft is too risky at this moment in time. Manufacturers are fighting for market supremacy by innovating and launching new models. Some are entirely new aircraft, others are derivatives but all will decrease operational costs while increasing passenger comfort.

New models will make older ones obsolete in a couple of years. The national airline would thus prefer to lease aircraft while waiting for the opportune moment to order the revolutionary aeroplanes. The priority is to replace its two ageing Boeing 767s after 17 years? service. Air Mauritius is also listening to proposals to replace two of its Airbus A340s whose leases run out in the next two years. Boeing?s offer consists of the B777-200ER and the B777-300ER. Airbus believes Air Mauritius would be better off by buying the A330-200 and the A340-300E. However, all these models will be obsolete in a few years thanks to the launch of the Boeing 787 and the Airbus A350. The technological upheavals which have occured in the last months have forced a rethink.

This revolution in air transport is pushing airlines to review their policies. Buying new aircraft now is potentially suicidal. The lapse between ordering and delivery of new aircraft is an average of 18 months. The aeroplanes ordered this year should therefore be ready in 2007, just when the revolutionary models will start flying.

<B>Increase profit margins</B>

A couple of years after delivery, the residual value of older models will be practically zero. The older versions will be less competitive than the new aircraft as the latter will offer more comfort and consume far less fuel. Hence companies with a fleet of the latest aircraft will be able to woo passengers with cheaper fares while increasing their profits margins.

The reason for such an ultra fast depreciation lies in the performance of new aircraft. None embodies the radical changes more than the B787 Dreamliner, one of Boeing?s first entirely new family in 13 years. This twin engine aeroplane, built from composite material, will burn up to 20% less fuel than conventional aircraft. Less pressurised new cabins will virtually eliminate jet lag. Boeing has attracted 193 firm orders for the Dreamliner, forcing Airbus to hit back with the A350 ; This model will use the fuselage of the A330, the engines of the B787 and innovations implemented in the A380. Far from being a mishmash, it will boost comfort, reduce costs and enhance profitability.

The launch of the A350 programme marks an important shift in Airbus?s strategy. The Europeans had long insisted that the future would belong to bigger hub-to-hub aircraft. Hence the launch of the A380, which can carry up to 850 passengers on long-haul flights. Boeing?s strategy was to bank on smaller planes which could fly point-to-point and bypass the busy hubs. The A350 programme validates the Boeing strategy. Then again, both manufacturers want to have a foot in every market segment. For exemple, a Boeing 747-400 Advanced could be created to rival the A380.

Meanwhile, Air Mauritius is happy to sit on the fence. Its passengers will still fly in new aircraft soon but the rules of the game have changed. A short-term solution would involve the entrance of new players, namely lessors. Whichever plan Air Mauritius executives choose, the duel between Airbus and Boeing is set to intensify.