in Air Transport

Air Madagascar and Air Austral sign their strategic partnership agreement

Posted 11 October 2017 · Add Comment

Air Madagascar and Air Austral signed a strategic partnership agreement in Ambohitsorohitra Palace, Antananarivo, on 9 October 2017.

The agreement was signed by Ralava Beboarimisa, Transport and Meteorology Minister, Paul Rabary, acting Finance and Budget Minister and Marie Joseph Malé, Air Austral CEO. Hery Rajaonarimampianina, His Excellency the President of the Malagasy Republic, and Didier Robert, Reunion Island Regional Council President, attended the event. Both parties are today endorsing the partnership which joins them and also formalising Air Austral's stake in Air Madagascar's capital. The signed agreement is the beginning of an interim phase in the strategic partnership implementation process. This phase will run until the planned signature of the shareholder closing agreement at the end of October.

A two-phase recovery plan for Air Madagascar

By entering into this strategic partnership, the Malagasy airline confirms its ambition to return to profitability and sustainability. The partnership's main development axes focus on offering competitive passenger and cargo transport services in domestic, regional and international long-haul markets and improving subsidiary performance, especially regarding MGH and Sofitrans.

Both parties carried out a lengthy due-diligence process which led to co-creating a business plan. The plan has been improved to include Air Madagascar's teams, it lays down 10-year transformation pillars and will be carried out in two phases: (1) a recovery phase rolled out over three years to restore a solid base, and (2) a growth phase including fleet expansion and the creation of new routes.

This equal partnership between Air Madagascar and Air Austral foreshadows a sharp increase in traffic and a return to a leading regional position. The joint development of both companies will also enhance and develop their areas of expertise.

"This agreement marks a new turning point for both our companies: it formalises our partnership and will enable us to develop the process right up to the planned closing in several week's time at the end of October. I wish to congratulate Air Austral and Air Madagascar teams for their work over the past six months in developing the initial business plan. We are now, more than ever before, determined to join forces in developing and strengthening our positions in the Indian Ocean. Air Austral is proud to support the implementation of such a process and we are fully committed to assisting the great company that is Air Madagascar, on its way to recovery. The next steps are complex and we have a lot of work ahead of us but we are ready to put our heart and souls into the task. We are doing everything in our power to make this a success," Marie Joseph Malé.

Joint and balanced development

The strategic partnership process was launched in 2016. It is the most fitting and most realistic option for Air Madagascar's effective and sustainable recovery. "The Malgashy state, in fact, has brought a "debt-free" company and a priority airport infrastructure development plan to the table. Air Austral, for its part, has invested $40m and its technical and operational expertise in Air Madagascar's development", stated Ralava Beboarimisa.

The Malagasy state will continue to be the main shareholder, with 51%, and will appoint a president of the Board of Directors. Air Austral will become the minority shareholder, with 49% of the Malgashy company, and will appoint a General Director. The new partner will manage Air Madagascar's administration and operations.

The project's key success factors include: improved services in line with leading international practices; system and technology development to support sales and operational processes; and expanded HR and management teams. New commercial partnerships with other companies are also being discussed with a view to targeting strategic markets.

The strategic partnership process also aims to consolidate the Malagasy tourism sector. The national company's successful recovery will undoubtedly have a positive effect on the entire Malagasy economy.

Strategic partnership: key figures 

Recovery: key figures
o 6.5% average yearly production growth
o 10% RPK traffic increase: 1,516,000 transported passengers
o $420m: long-term objective with gradual turnover increase 
o 4.6%: rate of return 
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