PRESIDENTIAL INTERVENTION SAVED AIR SEYCHELLES
Information is beginning to filter into the public domain, of how the personal intervention by President James Michel brought Abu Dhabis Etihad into the frame, following discussions between the two governments in regard of part privatizing Air Seychelles. Upon agreement at the level of the two heads of state, Etihad then acquired a 40 percent stake in the airline with an agreed capital injection by both parties of 20 million US Dollars each, while Etihad then added a further 25 million US Dollars shareholder loan as working capital.
Also part of the deal was an initial 5 year management contract under which Etihad appointed Mr. Cramer Bell as the new Chief Executive Officer, which brought the shortlived term of office of Bram Stellar to an end.
Results of the new partnership are already visible with Air Seychelles starting code shared flights to Abu Dhabi from mid March onwards, while all former destinations from Europe, namely London, Paris, Milan and Rome are now being served by Etihad under a code share agreement with Air Seychelles, in addition to all the other European destinations now able to capture traffic to the islands, connecting via Abu Dhabi.
President Michel has earlier in the week given an interview to his party newspaper The People which is being reproduced here to further explain the circumstances of Etihads partnership with Air Seychelles:
Interview with President James Michel
President James Michel was asked several questions about the Air Seychelles partnership with Etihad, in which he says that today we have Etihads management running the company, but in five years, Seychellois staff are expected to take over to complete the running of the airline.
The People: Following the strategic partnership of Air Seychelles and Etihad Airways, what kind of benefits and opportunities can we expect to see for our national airline, as well as our country and given that in time Air Seychelles is expected to resume its international routes?
President: This strategic alliance has the clear competitive edge of the strength in numbers. Air Seychelles will no longer compete as the lonely worlds smallest airline, it is now part of one of the worlds best and fastest expanding brands. Now Etihads networks, offices, resources and training opportunities will double Air Seychelles chances to promote its name and attract new clients in the global market place. Air Seychelles now has the opportunity to grow at greater speed as it takes advantage of Etihads network, as well as opening up new markets for Seychelles, like China. Seychelles has seen a 422% increase in visitors from China, where some 705 Chinese visitors landed on our shores. Maldives had nearly 200,000 Chinese visitors last year and its now their number one market. We are just on the brink of tapping into this exciting new market, if all the tourism stakeholders take up this challenge and make this formidable window of opportunity turn into an economically-rewarding reality.
T.P: Will that create more work opportunities for our people, taking into consideration the staff that were made redundant?
P: Air Seychelles had to become more efficient, the losses it was making were no longer sustainable. Staff cuts were necessary in order to ensure the company becomes profitable once again. The entry of Etihads partnership does not mean that suddenly, over night, the companys finances are healthy again; the business still has to work at increasing its revenues, running efficiently, to ensure that the routes which are opened are sustainable. When the staff cuts were made, the company was in a very difficult situation, now with the strategic alliance, there is potential for growth but the challenge to improve remains the same. With time I believe Air Seychelles will grow stronger and more opportunities will be created for Seychellois staff and for further expansion of the company. Air Seychelles needs to focus on the development of a high quality service, and with the expertise of the Etihad Airways management team, I am confident that our national airline will pass through the turbulence of the last few months, and steer towards even greater heights than it had achieved on its international routes in the past.
T. P: Etihad has a five-year management contract. Does this mean there are no competent Seychellois staff to run the airline?
P: Giving a management contract to Etihad is not an indication that Air Seychelles does not have competent staff. In making business alliances choices need to be made in order for trust to be established. Etihad took a risk in investing in Air Seychelles as an airline that was making losses and downsizing, with a falling value by the day. It was important to establish a mechanism to build confidence in the business profitability of Air Seychelles. By asking Etihad to manage air Seychelles, the Government established the necessary trust that the investment made by Etihad would be overseen directly by the new shareholders, and while the key decisions concerning the company remain in the hands of the Government via the Board of Directors, the day to day implementation and accounting will be handled by Etihad staff, and therefore ensure the strategic partnership is feasible and transparent to both parties. In turn, Air Seychelles would get the benefit of the overseas training that Etihad offers and ensure that Seychellois managers are ready to take over their posts at the completion of the contract. Today we have Etihad management running the company, but in five years, Seychellois staff are expected to take over the complete running of the airline. There are many talented managers at Air Seychelles, and the Etihad team will groom them to take over the key management positions with the necessary experience for an increasingly competitive global airline environment.
T.P: What are the factors that have contributed to Air Seychelles financial problems and why was the decision for a partnership not taken sooner?
P: Weve seen all around the world the effects of the economic crisis of 2007/2008, and more recently the Euro crisis. Many airlines bigger and better established than ours have gone bankrupt and have had either to re-structure or to close down. To avoid closure altogether, many of them have had to forge strategic partnerships. It is the only way forward. Other airlines in the region are searching for similar strategic partnerships, for example Air Mauritius, in order to weather the economic crisis.
Air Seychelles was audited several times over the last two years and both international and local auditors have highlighted similar findings; primarily, financial losses due to the rise in fuel costs, high maintenance costs, rate of exchange fluctuations and lower revenue levels compared to previous years. Government has been helping out financially during the last two years but could no longer sustain the requirements of Air Seychelles, as the Government had to meet its own fiscal target under the IMF programme. We urgently needed to find a partner that would give Air Seychelles the economies of scale and synergies of a larger business entity. I was determined to keep the airline alive, although many had already pronounced it clinically dead in the financial ICU.
Our national airline, flying the Creole spirit, means more than just the business of flying, it is our national symbol and our pride as an independent nation, but in order to ensure its survival we need to find a strong partner to help it regain its profitability. We found one, and it is one with a strong track record of proven partnerships as well as an airline that belongs to a government, the United Arab Emirates, which has also proved itself a friend of Seychelles.
T.P: What are your hopes for Air Seychelles?
P: Air Seychelles will grow and expand. It will happen if the staff work hard and give their best service to the nation and to our foreign visitors. I hope that I will start to hear about the great flight that passengers experience on Air Seychelles, and the positive and welcoming attitude of the staff. I hope that staff will take every opportunity to grow and to learn and become strong airline professionals, that give Seychelles a good name wherever they go.
It is a tough market and the world economy is increasingly volatile, but we will continue to have visitors, as we have the most beautiful islands of the world, and visitors will still come and witness their beauty for themselves, even in hard economic times. It is up to us to ensure that the Creole service is world-class and that with this reputation, travelers will choose to fly with us, and that we will once again lead the market in tourism arrivals. This strategic partnership with Etihad has ensured that Air Seychelles will continue to fly the Creole Spirit. It is a major change, so let us embrace it and use it to our maximum. The sky is the limit!
