“The only option to save Air Mauritius is to privatise it immediately”

Interview – FerozeBundhun

* ‘In a liberal democracy, governments should govern and managers should manage’

* ‘MK is obviously a bankrupt enterprise: the only fate of a bankrupt company is to close it down or to sell it off to the highest bidder if there is one’


The future of Air Mauritius will be decided at the Watershed Meeting scheduled for next Tuesday, 28th Sept. Following the release of the report of the Voluntary Administrators Sattar H. Abdoula and A. Gokhool, we have sought the views of Feroze Bundhun on what would be the best option to ensure a future for our national airline.
F. Bundhun was a former Executive of the Abu Dhabi Investment Authority, the world’s largest financial institution, where he was responsible for overseeing an international real estate portfolio of US$4.0bn. He subsequently moved to CBRE, the world’s largest property consultants where for a period of twenty years he advised on some of the large investments in the hotel sector in Istanbul, London and Europe generally. He has travelled extensively around the world and has experience of the airline industry. He shares his insights on the local context below.


Mauritius Times: Voluntary Administrators MessrsAbdoula and Gokhool have submitted their report, under the Insolvency Act 2009, 16 months after they were appointed, on the progress of their administration. The focus of comments on social media since the report has become public has been on the Administrators’ remuneration (954, 867 euros, or Rs 48.5 million), and legal and other professional fees (2,218,765 euros, or Rs 112.7 million). Questions have been asked about ‘whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in similar cases in the industry’. As a shareholder of the company, what’s your take on that?

Feroze Bundhun: The level of compensation paid to the Administrators, if correctly reported, is plainly excessive and out of kilter with normal market practice. No self-respecting administration would appoint Administrators without first agreeing their fees based on rates obtained from a competitive bid in the open market.

Were bids obtained in the first place? There is reason to believe that this was not the case. The Administrators’ appointment seems to me to have been a political one like most other executive appointments at Air Mauritius since its inception more than 50 years ago. The level of abuse in the management of the Company is too long to list here, suffice it to say that governments of all colours have treated the company as a cash cow and for the benefit of their own political parties rather than for the benefit of the shareholders of the Company. 

There is evidence to suggest that the politicians in power have since decades been interfering directly with the running of the Company on matters such as who should be upgraded to a class of travel they have not paid for, on appointments to executive positions of people who have not the slightest clue about business in general never mind the airline business, not to mention the visits paid toheadquarters of the Company by ministers to collect funds at election time. 

* Even if these comments and questions that the Voluntary Administration raises, wouldn’t we be missing the forest for the trees with the focus on the Administrators’ remuneration? The larger issue is about saving the national airline, and the Administrators would have hopefully roped in the competent consultants for their inputs given the complexity of the task, isn’t it?

The national airline is obviously a bankrupt enterprise: the only fate of a bankrupt company is to close it down or to sell it off to the highest bidder if there is one.

But this will not happen because Air Mauritius is a useful platform for the placements of incompetent political supporters of the government of the day rather than to be put in the hands of skilled, qualified and professional managers. It reinforces the power of some in authority who continue to enjoy the privileges of their positions which itself is a form of corruption. Why is the airline in such a predicament today if not because of past mis-management?

* Air Mauritius has had a streak of poor performance over many years, with a peak coming on with the ‘hedging’ saga. Though it’s true that the aviation industry has been at times in a bad shape, as an activist shareholder, what exactly would you attribute the sustained declining performance of the national airline to?

Throughout its existence Air Mauritius has been a blithering basket case due to its mismanagement by incompetent political appointees. Those who have benefited most from the company are political parties and their agents rather than the travellingpublic or its shareholders.

One exception, however, was Nash Mallam-Hassam, appointed twenty-five years ago as CEO, who put an end to all sorts of abuses such as free travel by many people by virtue of their social status alone, the 10% commission paid to Rogers & Co on all tickets by the airline rather than those sold by the travel agent alone. Moreover, Air Mauritius in those early days often bailed out the overseas travel and accommodation costs of well-known public figures and the list goes on and on.

I have personal experience of staff attitudes towards senior managers being favoured over passengers. I have seen staff and their families occupying first class seats when full-fare paying passengers are downgraded to a lower class of travel. When the Chairman of Virgin Airlines, Sir Richard Branson, travels on business he does not expect to be looked after and be treated like a king: he would don his overall and serve his fellow passengers instead!

The quality of service you provide is paramount to the success of an operation. Air Mauritius does not have the reputation of providing the best service in the airline industry. During a five-hour flight to Cape Town for instance, there is no food available to passengers in Business Class other than the poor breakfast they are served with indifference on departure.

Given that their position is secure whilst their political masters remain in place, the Company’s managers are too narcissistic, preening themselves in front of the mirror with a strong sense of entitlement. It should rather invent a motto similar to BA for instance: “To Fly To Serve”. Serving is the last thing in their mind!

* The Administrators’ report to the company’s creditors came out ahead of the ‘Watershed Meeting’ scheduled for next Tuesday 28th September, which will vote of the three different options – corporate restructuring, end of voluntary administration or company liquidation. What is surprising is that ahead of that meeting, Government has also brought together Airports of Mauritius, Airports Terminal Operations Ltd and Mauritius Duty Free Paradise – all three-profit making -, as well as the loss-making Air Mauritius under the umbrella of a superstructure – Airport Holdings Ltd. How do you react to that?

The only option to save Air Mauritius is to privatise it immediately and end government interference in its management. The market will decide what valuation to put on it based on the value of its assets: goodwill, infrastructure and future trading prospects depending on the quality of its eventual management team.

In the past many airlines in the world have been privatised to save them from bankruptcies: British Airways is a good example; Turkish Airlines is another; in the latter case a strategic investor was identified in the first place and given a free hand to manage the company along profitable lines. It is now trading successfully.

Most state-owned airlines lose money: Gulf Air and Air India are good examples of these. Singapore Airlines and the TATA Group of India have recently launched Vistara to compete with Air India, and it will not take a long time before the new company eliminates the competition.

Airlines that trade profitably albeit still majority government-owned are those that are managed independently by experienced professionals. Singapore Airlines again comes to mind!

I am afraid that the merger of the three companies into one structure to be known eventually as Airport Holdings Ltd will precipitate the collapse of the entire edifice in no time. One bad apple in the basket can ruin the whole basket! Management consultants would agree that it is better to safeguard what is profitable and dispose of the rest.

* It’s said that government ownership of certain businesses can open the door to corruption and fraud instead of ensuring that citizens have access to important commodities and services at affordable prices. We seem unable to avoid this scenario time and again. Whys is that so?

In a liberal democracy, governments should govern and managers should manage. It is a fact of life that power corrupts and absolute power corrupts absolutely; the adage is truer in small economies in limited geography where favouritism jostles with ethnicity rushing for the gates.

In the case of Mauritius, government is busy protecting its own agents, the “colleursd’affiches” and other supporters, thus encouraging corruption at all levels.

Is there one politician in the country who can, with his hand on his heart, admit to not benefiting from corruption when the opportunity arose? Only privatisation can root out corruption practices that are too ingrainedin our country.

Do qualifications, experience and skills mean anything to the government of our country?

* Why haven’t we risen to the level of Singapore and its Temasek Holdings, the investment company owned by the Government of Singapore, often cited as an example to follow, when it comes to state-owned enterprises? Here state-owned banks and casinos lose money…

Singapore Airlines (SIA) is probably the best run state-owned airline in the world because it is precisely managed independently and professionally. It has earned its reputation through the quality of the service it provides both on the ground and in the air, in comfort and security and with punctuality. All these are reflected in the performance of its shares in the stock markets.

SIA was at the forefront of many innovations in the industry: treating its customers with dignity and respect, its staff all undergo thorough training and if any passenger has the smallest complaint about any aspect of service, staff is automatically stopped from flying for one month to enable them to undergo further training. SIA listens to its customers’ feedback and implements what the customer wants. Can we imagine or envisage such a regime in Air Mauritius?

How has such a small country like Singapore been transformed by one man from the third to the first world in one generation? Today the size of its economy is similar to those of most Middle Eastern economies: Temasek Holdings alone has become the world’s foremost financial investor. There is complete absence of corruption and Ministers are appointed on merit alone not through favouritism. Ministers are compensated like CEOs of large multinational companies – a situation that precludes corruption practices. What you need is a vision for the country, not necessarily an iron fist.

* To be fair, it’s not only state-owned companies that lose billions, there are also the banks and private companies that have incurred massive losses. You had raised pertinent questions at the annual general meetings of different hotel groups about the issue of corporate governance and non-payment of dividends in the past. Have things improved with the way these corporate bodies are being governed?

The current pandemic does not allow an objective analysis of the situation in the hotel sector, but it would be appropriate to ask why the government is bailing out the hotel sector with public money when they had plenty of time to create their own reserves during the golden days of tourism in the country. Again, a plain case of poor management.

When the CEO of an hotel company earned1500 times more than the lowest paid staff member in its heyday, then thereis something fundamentally wrong in the ways the company is managed.


* Published in print edition on 28 September 2021

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