Sunday, September 30, 2012

► MADAGASCAR: Air Madagascar to ask for USD9million bailout as part of 18-month plan to return to profitability.

Air MadagascarAfter the ordinary and extraordinary general meetings of shareholders in the Malagasy capital Antananarivo on Thursday last week, Malagasy national carrier Air Madagascar (MD), has announced plans to pull the airline back from the brink of bankruptcy, and return it to profitability within an 18 month time frame.

Whilst no actual details about the carrier's financial affairs were disclosed, it is understood that 2011 proved to be the company's most difficult with the company stating that a "loss in turnover, difficult market conditions, technical problems on the part of its fleet and the deterioration of its public image" were all factors which had badly affected the airline's viability.

However, despite its problems, the airline's management remained resolute and determined to make a go of things by outlining a two stage restructuring plan whose ultimate vision is seeing Air Madagascar become "the preferred company in Africa and the best in the Indian Ocean" with its mission "to be a lever for the economic development in Madagascar." 
Air Madagascar tail
Moreover,  it was noted during the meetings that despite its financial distress, the dissolution of Air Madagascar would have extremely serious social consequences on its 1'300 employees, suppliers, and all of its partners. Being that Air Madagascar is 89.5% Government owned, it was therefore decided that in the interests of the preservation of jobs as well as the safeguarding of  the national heritage, a future recapitalization of the airline would be needed, in tandem with a revitalization plan.
But before deploying to new routes and new destinations, we must stabilize the company. To do this, we will rely on five levers:
  1. The revival of the company-customer relationship and its re-evaluation in terms of sustainable development;
  2. The consolidation of the existing network;
  3. Technical restructuring;
  4. Financial restructuring;
  5. A performance-oriented organization.
Source [La Gazette]

Phase One will consist of a USD9million Government bailout of Air Madagascar which would allow the carrier to renew and strengthen its fleet now consists of four ATR42s/72, two Boeing 737-300s and two Airbus A340-300, leased from Air France. This would then allow for the consolidation of its existing network (four long-haul routes to Paris, Marseille, Bangkok and Guangzhou, 6 regional routes to Moroni, Mayotte, Nairobi, Johannesburg, Mauritius, Réunion and 18 domestic routes). By 2015, this should, theoretically, have put in place a mechanism to better handle aircraft downtime as well as delays, thereby helping to improve the carrier's on-time performance.

Phase Two will be launched in 2016 with the extension of its long-haul network to country's principal trading partners: India, China and/or Europe. The carrier ambiguously stated that it also wishes to integrate into an "alliance" to benefit "from opportunities in more distant markets such as the United States, Brazil and Australia" though which alliance (OneWorld, SkyTeam or Star Alliance) they are talking about, is uncertain.

Given that no redundancies will be made, and that no mention was made about any possible salary cuts, it remains to be seen how Air Madagascar's ambitious plan to return to viability will be implemented and whether or not it will actually achieve anything.