The alacrity of changes at the helm of Air Mauritius ? five Managing Directors in 6 years and three in three years ? could lead some to conclude that the problem of the national airline is primarily ?a people, leadership, governance, management style and emotional intelligence issue?.

Even if this has contributed to the predicament of the airline, I submit that there are more deep-seated issues that must be addressed, key decisions made, contradictions resolved, conflicts managed, clear guidelines articulated in order to equip the carrier to meet the daunting challenges of a highly competitive industry.

Changing one person will not make a difference if fundamental and structural issues affecting Air Mauritius are not comprehensively addressed. Admittedly, some of these decisions are very complex and indeed very challenging and in some cases there would be zero sum game solutions.

Both Government and the airline have to meet these issues head on if the new MD and his team are to have a chance of transforming Air Mauritius into a viable and robust airline that reconciles its corporate objectives with our national interest.

The new MD comes to the job with some good credentials in terms of track record at Mauritius Telecom, even if he will have to work very hard to compensate for his lack of industry specific expertise. He will also have to quickly decide whether the organisational structure that he inherits will facilitate or complicate his mission delivery.

Four issues are key to determining whether the new MD will succeed where others have failed or been unlucky. These are

i) the air access policy and its implications for the alleged contradiction between our national interest and the corporate objectives of Air Mauritius;

ii) the strategic positioning of Air Mauritius on the industry chessboard;

iii) the nature and scope of its network of operations and its consequences for fleet planning;

iv) the appropriate organisational structure and the resolution of the corporate governance/ operational paralysis dichotomy.

- Need for a sound Air Access policy

In the long term, this could be the Achilles? heel of Air Mauritius. No Government, up to now, has built capacity to articulate a sound, coherent and sustainable air access policy that reconciles the corporate objectives of Air Mauritius and the interests of other stakeholders.

Worse, in many cases in the past, the Chairman of Air Mauritius was also the head of Government delegation for air services agreement ! In the absence of clear policy guidelines, we have adopted a very ad hoc, short-term, lop-sided and lobby-driven approach that often results in blatant contradictions.

For instance, Emirates is granted traffic rights even if there is hardly any traffic between the Gulf and Mauritius. Unsurprisingly, it carries 90% of non-Gulf/Mauritius passengers. A typical case of trade diversion instead of trade creation ! Most of the traffic (passengers and cargo) are from/to Europe and India that were previously carried by other airlines serving Mauritius.

At the same time some French carriers are denied rights even if the volume of business is huge between France and Mauritius. Furthermore, Singapore Airlines? request for fifth freedom rights was turned down.

Officially we are against charters. Yet over 35% of our tourists do not stay in four and five-star hotels. We do not allow the likes of ?Nouvelles Frontières? to bring their passengers on their own aircraft but we have no problem with the same passengers travelling on Air France and Air Mauritius or flying to Reunion from France and then connecting on Air Mauritius to here.

Better we practice what we seem to vilify. When a scheduled carrier like Lufthansa pulled out on the Germany-Mauritius route, we accepted the designation of Condor, even if it is a charter company. Alitalia, a scheduled flag carrier, has been replaced by Air Europe, a charter operator between Italy and Mauritius. Equally SwissAir has given way to Balair, another charter carrier on the Switzerland-Mauritius run.

We simply cannot continue with this ad hoc, discretionary, fragmented and lobby-driven approach to air access. We need to fully comprehend the issues and articulate a clear, coherent, and rule-based air access policy that is understood by the stakeholders. For sure Air Mauritius would defend its corporate objectives; undoubtedly hoteliers would like more flights and more airlines operating to Mauritius in order to fill their rooms; and the travelling public would prefer more choices with its impact on competition, prices and services. So is life.

However, we must fully understand the consequences of each option, even if all of them would argue that their position best defends the national interest ! Government must manage this contradiction. It has a duty and a responsibility to arbitrate and propose a pathway that will provide predictability. It is a challenging choice.

Can the country rise to this challenge ? One must have hope even if we seem to have considerable difficulties to address the much simpler problem of matching seats in the air with rooms on the ground, inspite of several committees set up by various governments over the years.

Contradictions, conflicts and confrontations will have to be skilfully managed. There are examples on both sides of the success/failure divide. Maldives has embraced a very liberal air access policy with almost open skies and multiple designations. As a result, many airlines serve the country and the tourism sector does well. However, this policy has killed its nascent airline. It would like to resurrect it. It would be almost impossible to do it unless massive subsidies are given.

On the other hand Singapore has benefited from a well articulated and well planned and implemented liberal policy. Both country and airline have been winners. Success or failure depends on a host of factors, even if the odds are heavily stacked against small airlines surviving in a very liberal access policy. We need to find out in which category we are and whether there is an intermediate path that we can tread. But the policy must be spelt out clearly and unambiguously so that all stakeholders know the rules of the game.

The lack of clarity in the air access policy is a Damocles? sword that hangs dangerously over the head of Air Mauritius. The saga between Air Mauritius and Emirates illustrates this eloquently. Initially Air Mauritius was the only operator on the Mauritius-Dubai route. This was hailed as a pathbreaking move to fill in a gap in the Gulf.

A few months later, Emirates commenced operations with three weekly flights. Air Mauritius had no choice than to review its strategy. Both carriers operated for a while. Yet this different situation also was welcomed as another milestone in the air transportation landscape. Anybody with a knowledge of the airline industry should have understood that Air Mauritius could not compete against Emirates because it simply could not vie with itself from Europe and India!

Unsurprisingly, the national carrier was forced to withdraw from the route and to enter into a face- saving code share agreement with Emirates. This too was presented as a great leap forward. From being the sole operator, to flying in competition with Emirates and to pulling out of the route with a meaningless soft block agreement? all were doctored as good moves !

How can we expect Air Mauritius to plan for its aircraft reequipment if there is no certainty and predictability about the access policy? What would happen if tomorrow Emirates were allowed more than 4 flights per week, if the French Government insisted on dual/multiple designations, if Brussels ruled against the alleged monopoly of AF/MK on the France/Mauritius route, if the EU negotiated as a single block with Mauritius ? We are simply not ready to meet these challenges.

Strategic alliance and market positioning

The airline industry is undergoing transformational changes. It is being rationalised and consolidated, through take-over bids, mergers and acquisitions, cross equity participations, strategic alliances and similar types of agreement. In Europe and in the USA, there will probably be no more than four strong carriers in the medium term.

Air France is currently negotiating to ?take on? two major European airlines (Alitalia and KLM). Other regions will be no exception, even if some medium- sized carriers may survive in specific niche markets. Many analysts have a good idea as to who would be the consolidators and the consolidatees. Rationalisation and consolidation will happen in Africa too.

Air Mauritius must gear itself to finding a very strong partnership with a major carrier, preferably with one from our main tourist supplying region. Concurrently it must have code share/marketing and similar type agreements with strong airlines in Asia, Southern Africa and Australia. This is instrumental to ensuring its long-term growth and viability and avoiding the risks of marginalisation.

Otherwise it would be impossible for Air Mauritius to compete against the mega carriers that will dominate the industry. The decision is a challenging one but it is critical. There will be some pains in terms of loss of ?autonomy of the decision making process?, but the long-term gains will be significant if these agreements are well negotiated as alliances and partnership will become the norm of the airline industry.

There is probably need to revisit the ownership structure of Air Mauritius. The ownership has been dictated by circumstances and historical factors rather than being conceived to help Air Mauritius meet the current and future challenges. Should the airline continue to be subjected to the whims and caprices of the Government of the day with abrupt changes in the top management with every alternation of power ?

Neither the MD of Air France nor that of BA is unceremoniously dumped everytime there is a change in Government in France and in Britain. Because of the ingenious financial engineering put in place when Air Mauritius was listed on the Stock Exchange, Government can decide on almost everything with basically only 27% of the shares (52% of the holding, inclusive of SIC?s share, that owns 51% of the airline).

Is that ownership structure compatible with the trend in the industry and more importantly will it help or hinder the progress of Air Mauritius and its ability to meet the daunting challenges? Besides the share of the small holders, is there not a case to streamline the ownership structure around one or two key and active strategic partners as opposed to the current diffused pattern?

While three airlines own shares in the national carrier, their participation is very passive. Major decisions are taken elsewhere. Who would be the best strategic partner or partners for Air Mauritius? And how should the ownership structure be revisited both to reconcile conflicting views and to satisfy the ?substantial ownership and effective control? clause in air services agreement so that the sovereign traffic rights of Mauritius are not questioned?

Of course, in the worst case scenario, Govt should keep a ?golden share? for strategic and security reasons and have a short list of reserved matters that requires its approval (like some countries have done in sensitive areas).

The operational network of MK

Here again contradictions and conflicts must be sorted out. Air Mauritius will have to make a very important decision on its fleet reequipment in the near future. It has the right aircraft both for the regional and the domestic network. However its choice of long-haul planes is highly contingent on the network that it intends to serve.

The airline must choose between two competing strategies. Does it maintain its current network of few services (in many cases only one flight per week) to many countries or does it embrace a new one based on frequencies to some major hubs. In terms of market penetration, efficiency, unit cost improvement and alliance structures, the choice should be obvious.

However, there is probably need to allay the unnecessary fears of some with proper communication. While the strategy of many airlines has changed considerably, some people still believe that we have to fly to a maximum of cities in order to diversify our tourism market base. This is not true as evidenced by the increasing trend of major players investing massively in the development of major and powerful hubs and gateways.

This is the future of the airline industry. A strong hub with many spokes that suck the traffic from other markets to the centre, which then redistributes it. For instance, more than 50% of the traffic carried by Air France to Mauritius and to Seychelles are not from France. Frequencies to few places and driving down unit cost of production will determine whether airlines succeed or not.

Singapore Airlines and Sri Lankan Airlines carry more traffic between Japan and Maldives over Singapore and Colombo than a Maldivian based airline could with direct services between Maldives and Japan. Equally SAA and BA transport more passengers between UK and Namibia over Johannesburg than Air Namibia could probably do on direct flights between Namibia and London. Such is the power of strong hubs and efficient connections.

Should Air Mauritius maintain few frequencies to 10 cities in Europe? Does it have to operate to two cities each in Switzerland, Italy and Germany? There are major airlines with much bigger tourist markets than Air Mauritius that fly more frequently to far fewer cities in Europe and never to two places in the same country. Of course that does not mean that they do not carry passengers from cities that are not served on line.

On the contrary, they could transport more with many frequencies to strong hubs and good marketing arrangements with powerful airlines. Is there a case to continue to fly to Brussels once a week when there are 15 flights per week between Paris and Mauritius and Brussels is only one hour by train from Paris airport. And some airlines have their flight numbers on trains between Paris and Brussels.

South African Airways, Kenya Airways, Singapore Airlines and others have many services to few places and then use code share agreements (with their flight numbers included) to take beyond passengers to their final destinations.

Air Mauritius should not put the cart before the ox. It must decide on its network strategy first. Will it continue to fly to 10 cities or more (as some seem to suggest) or will it pursue a strategy based on many frequencies to strong hubs?

The choice of the right equipment will depend on which network strategy is chosen and competition will be tough between Airbus and Boeing and also between engine manufacturers. It will also dictate who the strategic partners are likely to be.

The same exercise should be carried out for the African, Indian, Asian and Australian network. Few flights to many cities or many services to few gateways with strong redistribution capacity. It is a very difficult decision; the consequences must be thoroughly assessed. But it is key to the future of the airline.

Management paralysis

Context, history and people are often important in shaping the success or otherwise of an organisation. Undoubtedly, for good governance it is desirable to split the post of Chairman and MD in an organisation. It also acts as a check against corporate malfeasance.

However, the case of Air Mauritius clearly shows that the effective presence of two active persons at the helm of the national carrier has been an absolute calamity. Whether it is a systemic failure, a people?s problem, a struggle for power by surrogates, or a lack of clear definition of responsibilities is another matter.

The cohabitation of Tirvengadum and Poonoosamy was a disaster as there were two bosses on board. Even if it was more surreptitious and less publicised, the relationship between Sudhoo and Chidambaram was at best very chequered. Many of the responsibilities of the MD were transferred to the Chairman or to committees. Both have offices at Air Mauritius? headquarters and there is bound to be parallel, if not conflicting, management, with clearly-defined camps.

Will it be a different game between Sudhoo and Pillay. The jury is out. I have my doubts. The same cause will produce the same effects even if the sequence of events and the magnitude of the conflict could be different. The worst would be the existence of two camps that will breed mistrust, thus paralysing the decision-making process and encouraging a blame game culture.

It has happened in the only two occasions where the posts were split and the two individuals active in running the company. The question remains how to reconcile the need for corporate governance and the necessity to avoid perpetual conflict, daily confrontation and shenanigans ! The solution, while possible, is not obvious.

However it is plain that the current arrangement will fail just like the previous two. Also, the freshly appointed MD will inherit the new top management structure of Air Mauritius in which he had no say whatsover.

New CEOs are known to be loath to structures which are not their own. Will he review the set up or will he keep it unchanged? Especially as there are other and probably more efficient and effective ways of managing the airline.

These are indeed uncertain and testing times for the national airline. However it would be unwise to believe that the current problem of Air Mauritius is one of ?management style, leadership, governance? and ego only. The new MD will be the fifth in six years, the third in three years. Some have gone for political reasons, some for alleged corporate malfeasance, some for lack of leadership.

In one or two cases, the reasons for their resignation, forced or voluntary, are shrouded in a cloak of mystery as people hesitate between political hype and spin on the one hand and figleaves on the other. Inspite of his good track record, the new MD may become an unwitting casualty and perpetuate the syndrome of lack of longevity at the head of Air Mauritius if the issues raised in this paper are not holistically addressed in a coherent, dispassionate, professional and non partisan manner.

One can only hope that the ?Paille-en-Queue? weathers the storm, stays clear of any turbulence, remains strong on its flight path and has a safe and soft landing. From an aeropolitical, strategic, operational and organisational standpoint.

By Rama SITHANEN There is probably need to revisit the ownership structure of Air Mauritius. The latter has been dictated by circumstances and historical factors rather than being conceived to help Air Mauritius meet the current and future challenges. Should the airline continue to be subjected to the whims and caprices of the Government of the day with abrupt changes in the top management with every alternation of power?