Mauritius Flag Carrier Hit by Rs 3.4 Billion Losses on London-Gatwick Route

Air Mauritius (MK) faces a crisis over its 2023-2025 strategy after incurring losses exceeding Rs 3.4 billion on its London-Gatwick route, just two years following the controversial decision to transfer operations from Heathrow Airport. The staggering financial setback, revealed by MK’s Chairman Kishore Beegoo in an email to company officials, has triggered a rapid internal inquiry.

Inquiry Launched as Strategy ‘Degrades’

The investigation aims to determine the causes of the losses and assign responsibility, as the figures show the route’s performance is significantly below the profitability threshold.

The chairman’s announcement also highlighted governance questions following his defiant attitude toward Vice-Prime Minister Paul Bérenger, suggesting a closer examination of the chairman’s decisions is imminent.

The data exposes severe issues since the switch:

• The average load factor remained below 68%, falling well short of the break-even point.
• Revenue per seat sharply declined, as did the number of premium customers.
• Operating costs soared, primarily due to an unfavourable slot allocation at Gatwick and increased marketing expenses needed to offset reduced visibility.

The current re-evaluation of the UK strategy now openly considers a potential partial return to Heathrow, pending the inquiry’s conclusions.

The daily flights between Gatwick and Mauritius were officially inaugurated on Monday, 30th October.

Key Figures Under Scrutiny

The internal investigation will scrutinise the decision-makers involved in approving the strategy. Attention is particularly focused on Krešimir Kučko, MK’s Chief Executive Officer (CEO) from December 2022 to September 2023, who was suspended over governance issues.

Other key figures from the time of the transfer include:

• Marday Venkatasamy, former Chairman, who approved the strategy based on the CEO’s suggestion without a full risk report.
• Ken Arian, CEO of Airports Holdings Ltd (AHL), responsible for harmonisation across MK, Airports of Mauritius Ltd, and Airport Terminal Operations Ltd.
• Premode Neerunjun, former Cabinet Secretary and AHL Chairman, and Renganaden Padayachy, former Finance Minister, who share political responsibility for the strategy’s approval.

Neerunjun was questioned this year by the Financial Crimes Commission in connection with another case, and recalls that under Padayachy’s administration, the Mauritius Investment Corporation (MIC) invested Rs 25 billion in AHL and MK.

However, audits later revealed a discrepancy of Rs 2.5 billion to Rs 4 billion between MIC payments and recorded investments.

Heathrow Slots Transaction Questioned

Another crucial element of the controversy is the leasing of three Heathrow slot times to Qatar Airways for the 2023-24 winter season.

The transaction details, which are not public, involve slots potentially worth millions of US dollars each. Internal sources indicate management justified the move as a short-term liquidity strategy, despite the risk of compromising a long-term strategic asset.

Earlier, a potential sale of MK’s three Heathrow slots was reported, though no further information has since emerged.

New CEO Returns to Lead Recovery

Amidst the turmoil, André Viljoen has been reappointed as MK’s CEO, marking his return to the airline after a decade with Fiji Airways.

Viljoen, who previously led MK from 2011 to 2015, is expected to leverage his extensive sector knowledge to stimulate recovery and growth.

His priorities will likely include revitalising the brand, improving financial performance, and enhancing the passenger experience.

The aviation sector and the political class will closely follow the new CEO’s efforts to adapt the company in a constantly evolving environment.

Source: l’Express