“Mauritius needs to continue having a national airline… But for how long and at what cost to the nation?”

Qs & As —

Raj Ramlugun , Secretary – Listed Companies Minority Shareholder Association

“SAJ is known to be a no-nonsense person and is said to be determined to have MK regain its glory. I trust him on that”

It’s no secret. Air Mauritius (MK) hasn’t been faring too well for a number of years. At this moment, its very future is at stake. Many do not accept arguments stating that this should be normal in view of difficulties several airlines are facing in the prevailing economic conditions at the global level. Of these, the Listed Companies Minority Shareholder Association (LCMSA) is one. Its members have been shouting out their anxiety about several failings of the company since a number of years in their individual capacity. The national stake is to make the airline not only survive its current predicament but to make it an effective contributor to the national economy as once it was. Raj Ramlagun, Secretary of the LCMSA, who also has a close acquaintance with the airline, is helping us understand what more should be done to redress the fate of the airline.

 

 

* The issues and questions raised by the Listed Companies Minority Shareholder Association, end July, just prior to the Annual Meeting of Air Mauritius, convey a deep sense of concern with regard to the governance culture prevailing within the national airline. Whether it has to do with the tendering processes for the provision of wheelchair facilities at the airport, awards of contracts for the purchase of tissues, cutlery, pens, children’s toys and other like items, to the recruitment of pilots and/or Vice-Presidents and Executive Vice-Presidents… all these loaded questions appear to be recurrent questions addressed to the Board for many years now. Those queries suggest that things have not improved. Right?

Indeed, at the core things have not improved at all. In fact, in many areas things have kept deteriorating in terms of Accountability, Governance and Work Ethics. The Board and management mechanisms for ensuring Accountability and Good Governance have been a real farce. More so, since 2005, with ill-timed and unhealthy interferences at various levels. We just hope the new Board will stop the onslaught of slogans and PR stunts and come down to translate these values in every decision-making exercise, whether for Business, Advertising, HR or Employee Relations issues.

In the absence of transparency concerning the Tendering and Procurement of contracts (which involves billions of rupees yearly and can include a whole array of items ranging from aircrafts spare parts, in-flight products, employee uniforms, crew hotels, office spaces at outstations, advertising, staff transport and other services you mentioned, etc.), the room for mistrust and speculations from stakeholders will continue to run rife.

The media and different stakeholders have kept ‘glorifying’ MK’s performance on the basis of published accounting figures. Which figures, when seen by well-informed stakeholders, never translated the real growth potential of Air Mauritius. These figures have kept displaying the minima through a mere Profit and Loss tabulation periodically for the general public. The general public and majority shareholder (the State) seem to have never been willing to question the rationales of those figures of MK’s performance against the background of its true potentials and the growth opportunities lost.

Should decision leaders inside the company, at Board level and at higher quarters not be held accountable for costly underperformance? At least, for ensuring no repeat and making Accountability and Good Governance living values henceforth.

Anyone with an average commonsense will tell you that the erratic performances of MK over the years cannot be simply attributed to a set of external circumstances, however objective and real (Jet Fuel price, parity Euro/Dollar, world recession, etc.). There are lingering internal problems at MK that are preventing the national airline from finding its right bearing and cruising altitude. Whether in terms of coherent Business Model, effective Management Structure, Optimum use of resources and consistent World Class Service delivery at all Customer touch points.

A sad performance when one realizes that MK had all the means (both human and technological) to fly higher and be better prepared to face the current tougher challenges. Why it failed to do so proactively? Was such question ever the concern of Board members, Top Management and other stakeholders? What justifies and who approved the top management structure under the pompous titles of Executive Vice presidents and Vice Presidents for such a relatively small sized company? A structure so heavy and ineffective that it seems to have crumbled under its own weight.

Worth mentioning is that if MK has kept surviving the storm over the years, it’s largely because of the protective shield provided by the government (though often ‘double edged’), but foremost , as a result of the delivery of its truly committed staffs in the Operations. On the business model fronts, lack of coherence and continuity has not allowed thorough implementation of any strategy and hence to gauge any long-term benefit for MK. From Mc Kinsey 1 & 2 to Seabury, how many more Consultancies are in store for testing the final the costs/benefits for MK?

What has foremost fed and fostered the internal malaise and weaknesses of MK is the instability at leadership level. Made worst when that instability is coupled and synonymous with the sheer incompetence of the jobholder. Whereby the incumbent gets to survive in the system through mere political patronage and clannish lobbyists and opportunists, both in house and from outside. An average of 1 CEO every two years for the past decade. Added to that yoyo of CEOs, we have had a shamefully amateurish approach with regards the true management of the company’s human resources for over 10 years.

Since 2000, there has hardly been any competent and stable leadership in MK’s HR. The same leadership vacuum and management ineffectiveness are tolerated elsewhere. Yes, we have people filling in the blanks (almost permanently in the interim state) but are they committed or competent to deliver to the level that is expected from them and for the salary and benefits they earn ? Or, is the Management Culture through unwarranted Consultants & Advisors set to endure at MK?

Yes, the whole Procurement Process and Mechanism should be scrutinized and monitored. The bad perception about Procurement and Tendering is rampant elsewhere (though with lesser direct financial impact). The whole Governance, Accountability and Work Practices and Ethics need to be actively revisited and all be held accountable for their performances. This is the kind of change that the LCMSA’s limited voice keeps pressuring for. Knowing well that unless the majority shareholder (the government) actively supports our endeavour, the pledge for a new Air Mauritius with a greater Accountability and Efficiency will be an empty pledge.

* Do you have a feeling that those who run MK are giving an attentive ear to independent shareholders who point out the failings of the airline or do you think they are listening to the points raised only for the record, without taking the necessary decisions?

You are right in that assumption for this is what many concerned stakeholders and committed employees at MK often tell us. More, out of despondency, because they feel things are going from bad to worse in terms of Integrity, Transparency and Accountability. True, those at helm and the Board tend to just contend with playing PR & reassurances at General Meetings and hardly bother to investigate and take corrective actions on issues minority and independent shareholders raise. Even when doing so would be in the highest interests of Air Mauritius. Often, same issues relating to equivocal HR, Business & Procurement practices. That was systematically the Board culture in the past.

But we are not yet ready to give up our struggle to improve things. We hope the new Board and its Chairman (Dr A Suddoo) would show a new culture of collaboration and openness vis-à-vis independent and minority shareholders. Not only during question time at General Assemblies of Shareholders but through effective actions whenever an issue would be brought to their attention. Our commitment to insist on greater Governance and efficiency at MK is not merely that of independent or minority shareholders, but foremost that of responsible citizens who want MK, like for any other ‘state owned’ companies, to contribute effectively wealth creation for our nation. To act as responsible Corporate Citizen.

The truth of the matter is that despite our ‘limited’ voice, the current situation of MK has proved that all our concerns and queries since years were valid, and had MK’s Board and Management acted upon them in time, the situation would not have been that unmanageable or costly today.

* Why has the national airline failed to live up to the expectations we as a nation have about its role in being an important factor to help lift the economy and prestige of the country? Did you address issues like these at the AGMs and the SGMs? With what success ?

In the current difficult situation in which MK is finding itself, the obvious question that begs to be asked is whether Air Mauritius is at the service of the nation or is it the other way around? I believe it would be grossly unfair to ignore the pivotal role that Air Mauritius has played since its inception in the economy of the country, not only in terms of helping opening and connecting us to the outside world through tourism and other ancillary activities, but also in providing meaningful employment to numerous families of all strata. There are not many companies in this country that alone can provide decent employment for almost 3,000 people with worthy remunerations and working conditions. To that extent, MK as a national airline has been successful to lift the economy, the prestige of the country and fulfill its social obligations to some extent

However, it is clear that since the Fuel Hedging debacle of 2008, MK is reeling to recover its path and every new external challenge that emerges compounds the vulnerability of MK and makes it an undue burden on the nation. Everything said, this country needs to continue having a national airline for its growth and prestige. But for how long and at what cost to the nation?

If MK has failed to live up to national expectations, the government, as major shareholder, should be able investigate and inform us, why? We have reiterated our demand for a full-fledged enquiry into the Hedging fiasco of 2008 and its impact on the current state of MK. The Chairman has promised to look into the matter. There are contextual external reasons being given year in year out to justify adverse financial situations, but do these explain it all?

What about the level of impact of unhealthy interferences from lobby forces, vested interests in setting or influencing the strategic agenda and management of MK as a business entity and bringing it to the current disastrous level? When we learn about who used to have the final say about the choice of aircrafts to be purchased, the seat configuration in Business Class, the service of particular routes, etc., one wonders of what use are the Board and Executive Management in decision-making? And who foots the bill and is accountable, when things go wrong, either with ill-defined recruitments/appointments, loss-making routes or procurement matters, if not the airline?

These are questions that we keep asking, but which remain unattended. We rely on the new Board and the Minister of Good Governance to help change this arrogant mindset of the past.

* As things stand today for Air Mauritius, what should be the most important decisions it should implement in order not only to get out of the cloud but to fly into turbulence-free skies ?

Decisions have to be taken on two fronts simultaneously: Internally, first thing first, for the sanitization exercise to be effective, a few rotten cronies and opportunists who have kept playing cheap politics under successive leaderships at MK for years and have contributed to the downfall of MK need to be offloaded. It cannot be just André Viljoen. Despatching Viljoen alone would not send the right signal and trigger the much-needed trust in the workforce. This clan of cronies and sycophants can easily be identified through their track records and bluff style.

Then the Board needs to provide management with all the competent tools/resources to devise and implement the future strategies and action plans and also ensure smooth running of daily Operations for Service delivery. This means urgent recruitment of visionary leader for post of CEO, competent Heads for HR and Head of Sales & Distribution. Thereafter, get a new Organizational Structure in place with clear roles and accountability framework in line with needs and challenges of the company. With relevant internal stakeholders (management & unions/employees), review and eliminate all wastages and unproductive work practices/sinecures. Externally, reassess our business model and route networks in partnership with all internal parties in Planning, Marketing/Sales, Revenue Management, Cargo, etc.

Finally, establish clear protocol for productive and ethical partnership and collaboration/relationship with external stakeholders e.g. Travel partners/Alliances/Hotel Industry/ Government institutions, Media and Advertising entities, etc. All Board Good Governance Committees to be in place and manned by competent people and sitting regularly e.g. Board Finance Committee, Board Audit Committee, Board Risk Committee, Board Remuneration and Selection Committee & Board Good Corporate Governance Committee.

* State-owned companies somehow escape the scrutiny of Parliament, but one would have thought the revised Companies Act would have empowered minority shareholders to have a better say in the running of their companies with a view to setting right whichever matters need to be set right. Isn’t that of any help? Why is that so?

Well, there are various kinds of state-owned companies which, I believe, do not have the same legal status or are governed by the same provisions of the Companies Act. For example, SIC is State-owned but not Listed on the Stock Exchange whereas SBM and MK, which are state-controlled through majority shareholding on Board, are Listed Public Companies. They have different legal stakeholders’ accountability and scrutiny mechanisms. That is the reason why, when that suits politicians, they either accept or refuse to set/answer questions about listed companies like SBM or MK in Parliament. Obviously, this is not right and it makes the majority shareholder together with the minority shareholders sitting on the Board overbearingly powerful vis-à-vis minority shareholders who are not represented. And thus they have completely no say in any decision-making regarding the company which they ‘theoretically own’.

Had independent minority shareholders been represented on Board, what has been happening in terms of rubberstamping at MK over the years might have been ‘tempered’ to a large extent. This set up has to be reviewed in line with greater Board democracy and Good Governance, but then how to choose a representative among various minority/independent shareholders? A workable formula has to be found out with the guidance of the Ministry of Good Governance and the National Committee and Good Corporate Governance.

 

In the meantime, I believe the Public Accounts Committee and National Audit Office should be involved in scrutinizing the performance of state-owned/state-controlled entities. Most important is not merely having a seat on the Board but to have effective mechanisms that enhance Accountability and Good Governance.

* Would matters improve depending in the main of who is sitting in the CEO’s chair? Or, as in some parastatals, is there somebody at the executive or board level, who always has the first and last word on all matters because of political influences?

The unwarranted and unhealthy political/lobbyist interferences are at the root of the ills and inefficiencies of our state-owned/controlled entities. One or two independent/minority shareholders will not be able to change the voting agenda of the majority. That’s a given. But like elsewhere, their presence might keep the Board and Executive management shareholders on their toes and dissuade them from acting outright autocratically to meet the demands of vested interests or those of ‘sponsors’.

Certainly, the situation can become more complicated and disastrous for the organization where both the CEO’s and Chairman’s appointments are ‘anointed ‘ by the same person who holds power in the government. Thereafter, every single decision taken /not taken concerning appointment/promotions, or business at large, becomes an endless clannish power game, with real priority organizational and business issues taking the back seat.

In due course, this toxic clannish power game permeates the whole organization, with CEO’s or Chairman’s or so and so’s boys/girls promoted in the privileged positions/inner circle. For the sake of personal survival of the individuals and vested interests rather than the highest corporate or national interests. Air Mauritius stands testimony to this unhealthy situation almost nonstop from 2005 till December 2014. And the consequences are manifest today in key areas. Should the new Board and government be tempted to perpetuate the previous clannish power game for vested interests, then we better forget about any revived MK and the new Good Governance paradigm.

* We would like to believe that the parent Ministry – in the case of Air Mauritius, it’s presently the Prime Minister’s Office – would not intervene in the day-to-day running of the Company or with such matters as the procurement of tissues or wheelchairs, but it would certainly, as it has been the case since its setting up for being the major shareholder, wish to have the last word, in the recruitment – and firing — of MK’s CEO. Now, does that sort of exercise of political power defeat the practice of good governance in the airline?

There is often a stark paradox between the professed intention of leaders and the reality on the ground. Good Governance, Meritocracy, Accountability, etc., can become mere sound bites and rhetoric for the mass if they are not properly understood in its practicality and in the context of an organization’s setting and its specific requirements.

I always make a difference between the term ‘intervention’ and ‘interference’. In the present state of Air Mauritius, it is most reassuring and welcoming that the PMO oversees its ‘rescue operations’. Anything that will help the company recover and grow is positive intervention and should be sustained by the government until MK can start flying on its own strength. Where that intervention can be destructive and become sheer interference is when decisions about pertinent matters that require professional knowledge and experience in a specific field are dictated by self-proclaimed ‘Jack of all trades, master of none’ lobbyists or politicians.

SAJ is known to be a no-nonsense person and is said to be determined to have MK regain its glory. I trust him on that, and hope the politicians and representatives of the government on the Board will ensure that MK is no more a cash cow to be bled to death. Once the due process is followed and the best people are selected to deliver effectively in the key positions, the PMO should relax its hold and monitor the progress of MK through its representatives on the Board. The national airline should in due course exemplify what an efficient and wealth-generating government-controlled entity means to the rest of the country. And this is possible, if all adhere to the golden maxim “A chacun son métier, les vaches seront bien gardées.”

* There is more to the running of an airline than the procurement of tissues, cutlery, pens, children’s toys, passengers’ kits, etc. Issues like hedging, strategic partnerships, negotiations in relation to airline flight route negotiations, etc., call for specialised training and technical knowledge about the global environment for airlines. Would it therefore be too much asking to expect minority shareholders or their association to have a say in the more important success-or-failure matters for the airline?

I do not believe that it requires one to have such expert knowledge in the various fields you have mentioned to grasp what makes the success or failure of an airline, or for that matter, of any business. What one needs to understand is the impact of any decision and the process followed before taking that decision. Whether it is for buying an aircraft or a pen, there is a set of commonsense questioning that needs to be done in order to test the rationale behind an approval or non-approval.

In light of the different sagas that have shaken the reputation of MK (the Caisse Noire, Hedging 1 and Hedging 2), we are not convinced that many of those who have been on the Board for so many years have proved to be better experts (or better than us, laypersons) to advise or protect the interests of the national airline. At least, our persistent questionings have proved to be more meaningful and enlightening for stakeholders inside and outside MK than the complacent or complicit silence of some so-called ‘learned’ members sitting on the Board while the company was nose-diving.

* Should we concede even greater rights and facilities to foreign airlines in our air space for MK to take off or should we use our sovereignty to get from them reciprocal treatment for the future success of MK?

Without getting into the full merits and demerits of the traffic rights issue, I believe that before taking any decision in that direction there should be proper indepth assessments of the impact on all the stakeholders.

Air Mauritius is our national airline and has invested huge time and resources to develop certain routes and networks at a time when other bigger carriers were reluctant to service those destinations. Today, with the changing configuration of the aviation and tourism industries, coupled with new emerging markets and economies, bigger carriers find Mauritius as an attractive point of call for diverting passenger traffics and reaping benefits through the hub and multiple alliances strategies. Air Mauritius being in a weaker bargaining position with regards its route networks needs to adapt in order to maintain its market share and load factor. Often, on unfavourable terms as, here too, the rule of the jungle may apply.

Mauritius is dependent on the growth of its tourism industry for its economy, but in the process it cannot afford to expose its national airline to further vulnerability. The right balancing act should be found through proper consultation between the Tourism sector, the Government authorities and Air Mauritius so that our national interests are better served in the long run. Solid facts and figures should be brought to the table to substantiate the loss/benefits of any review of current air access rights or granting of new ones. If a piecemeal or ad hoc approach is adopted, this would adversely affect the tourism industry in the medium term but definitely hamper MK’s recovery in this critical stage.

In my view, it’s a good thing that the PMO is overseeing MK recovery. This can ensure proper synergy and better coordination with different parties, contrary to what seems to have been the case in the past. Ideally, the government should use its sovereignty to get reciprocal treatment. But ultimately, the experts in the various fields/sectors should come together and find the specific terms that reconcile their common interests. Both in the short and long runs.

* Good governance would also dictate that shareholders’ associations be manned by independent, non-partisan office bearers, not amenable to the dictates of and pressures from political quarters. How does the Listed Companies Minority Shareholder Association fare on that count?

I totally agree with that outlook. Good Governance is for me a set of working values based on personal integrity, accountability and commitment for the higher interests. Not just a set of edicts that are nicely packed in an academic compendium good for rhetorical discourses for the mass.

I would confess that in view of the size and informal structure of our association, there is not much room for testing how we fare or what we lack in terms of good governance within the association. It’s what we do in the name of the association for the higher interests that gives us a sense of purpose. One thing I am sure about is that in the discharge of our duties as office bearers we never let our personal interests outweigh the higher interests and objectives of the association.

We are more of a pressure group, which wants to make its voice heard on behalf of the independent minority shareholders, which is what we are. Not only during Shareholders’ General Meetings but whenever issues warrant us to do so. We have been doing this job for years, consistently and without fear or favour, irrespective of the regime in power. Shareholders are free to join in and free to exit. We do not keep any book of accounts and none of us is remunerated. We act as office bearers on a purely voluntary basis.

 

• Published in print edition on 14 August 2015

Tags:Air Mauritius, Caisse Noire, Dr A Suddoo, Listed Companies Minority Shareholder Association, Mc Kinsey, MK  Good Governance, National Audit Office, Public Accounts Committee, Raj Ramlugun, SBM   André Viljoen, Seabury    Fuel Hedging Debacle, SIC   Stock Exchange