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Chapter 3: Sector Overview
3.0 Sector Overview
Air travel is one of the largest and growing industries in the world. It is a critical section of global economy which supports 57 million jobs and $2.2 trillion in economic activity (IATA 72th press release, December 2013). Air transport provides important inputs into wider economic, political and social processes. It has many benefits such as it promotes economic growth, overseas investment, world trade and tourism as well. In other words, the airline industry allows globalisation to take place.
3.1 International Air Transport Association (IATA)
The International Air Transport Association (IATA) is responsible for the world’s airlines. It is the main vehicle for inter-airline collaboration and encourages secure, reliable, and economical air services to the world's consumers. It has supported many areas of aviation activity and has helped in formulating industry policy on critical aviation issues.
IATA was established in Havana, Cuba, in April 1945. At start, IATA had 57 members from 31 nations which were mostly from Europe and North America. Today it has some 240 members (representing 84% of total air traffic) from 118 nations in every part of the globe. The modern IATA took over the International Air Traffic Association which was founded in Hague in 1919 which was the year of the world's first international scheduled services.
3.1.1 Growth and Development
International air transport grew twice its capacity from its earliest post-1945 days until the first oil crisis in 1973 and this progress was due to technical innovation. The main innovations were the introduction of turbo-propeller aircraft in the early 1950s, transatlantic jets in 1958, wide-bodied aircraft and high by-pass engines in 1970 and later, advanced avionics (electronic systems). During the 1960s, automation took the lead in the airline opeations.
These brought higher speeds, greater size and better unit cost control and this resulted in lower real fares and rates. With a rise in real income and leisure time, demand for air travel grew significantly.
According to the 72th press release dated 31 December 2013 Of the IATA, on average, more than 8 million people travel by plane every day. In 2013, the total number of passengers exceeded 3 billion for the first time ever, reaching 3.1 billion. Coming to cargo, approximately 50 million tonnes of cargo is being carried by planes each year. This equals to 140, 000 tonnes daily. The annual worth of these goods is estimated to be $6.4 trillion or in other words, equals to 35% of the value of products traded internationally. Furthermore, the aviation sector employs more than 57 million people and supply $2.2 trillion for economic activities.
The forecasted number of passengers for 2014 is 3.3 billion which equals to 44% of the world’s population and the global turnover for the industry is estimated to be $743 billion, having an average industry net profit margin of 2.6%.
3.2 Air Mauritius Limited
The national airline of Mauritius is Air Mauritius Limited. It operates regional and international services to over 30 destinations with 80 flights per week. It also serves 20 destinations on four continents. The Sir Seewoosagur Ramgoolam (SSR) International Airport is the main base of Air Mauritius Ltd.
The main activities of Air Mauritius include operating domestic as well as international scheduled air services which carry passengers, freight and mail and the provision of ancillary services for aviation. Air Mauritius also controls a worldwide air cargo business, solely in association with its scheduled passenger services, using the belly hold capacity for cargo transshipment. Air Mauritius is one of the rare airlines proposing the services of combined airplane and helicopters.
Air Mauritius hires around 3,000 people and plays an important role for key sectors such as tourism for the Mauritian economy. It carried 1.3 million passengers in 2011 (AML Passenger Statistics Report) which equals to more than half of passengers at the Sir Seewoosagur Ramgoolam International Airport. For the nine months ended December 2013, Air Mauritius carried 991,934 compared to 969,488 during the nine months ended 31 December 2012. In addition the seat capacity was increased from 1,372,383 to 1,395,325.
3.2.1 Growth and Development
Air Mauritius was incorporated in June 1967 as a handling agent but it was in August 1972 that it began its operation with a Piper Navajo leased from Air Madagascar on a flight between Mauritius and Rodrigues Island. Then in 1973, the route to London via Nairobi became available and it was in the 1980s that the company launched nonstop flights to Europe. In November 1994, Air Mauritius took a leap forward by offering to trade its shares on the Stock Exchange of Mauritius. In July 1997, the Air Mauritius tried to create regional feeder airline called Air Ocean Indien (AOI) along with other airline companies for instance Air Seychelles, Air Madagascar and Air France. However, due to certain coordination problems among the airlines, this project could not take off. The company began supplying its cargo service to Johannesburg in October 2002 which accounted for 20 percent of revenues. It was during 2003-04 that the number of passengers exceeded one million for Air Mauritius. The new airport was recently build in September 2013 in order to deliver a better service to the passengers.
3.2.3 Air France and air Mauritius renew and extend their cooperation agreement
On 24th January 2014, Air Mauritius and Air France extended the existing collaboration between them. The CEO of both companies signed an agreement which allows the continuation of both companies’ activates between Paris-Charles de Gaulle Airport and Sir Seewoosagur Ramgoolam International Airport. The two airlines will be providing up to 16 flights per week for the 2013-14 winter season.
Air Mauritius will be provided with enhanced expertise by Air France in managing cost (especially in terms of fuel savings) and revenue, procurement, maintenance and commercial operations. Furthermore, the customers of Air Mauritius will be able to enjoy some European destinations provided by Air France from the Paris-Charles de Gaulle airport. Consequently, Air France passengers can travel to Reunion Island on flights operated by Air Mauritius.
Air France is also a shareholder of Air Mauritius since the company has began its operations in 1967. On 21st October 1998, a first agreement has been signed which was renewed two times, lately in 2008. Both airline companies have enjoyed a successful collaboration.
3.2.4 The best travel agencies being rewarded by Air Mauritius
On 30 November 2012, Air Mauritius organised its Travel Trade Awards Night at the Intercontinental Hotel found Balaclava in order to reward the best travel agencies or agents of the island. The best performing agent went to Atom Travel based on its overall revenue 2011/12. Air France won the best airline partner whereas the best upcoming agent (by market share) was Travel Spirit. There were around 450 guests who were present for this award ceremony and they were mostly from the travel trade community. The Chief Executive Officer (CEO) of Air Mauritius, Andre Viljoen thanked the travel agents for their continuous support to the company throughout the year and discussed about the latest progress done at Air Mauritius.