MAURITANIA AIRWAYS: IF IT CAN SUCCEED IN

C O N F I D E N T I A L NOUAKCHOTT 000693


E.O. 12958: DECL: 11/23/2018
TAGS: ECON EAIR EINV ELTN PGOV PREL MR
SUBJECT: MAURITANIA AIRWAYS: IF IT CAN SUCCEED IN
MAURITANIA, IT COULD SUCCEED ON THE MOON

REF: A. NOUAKCHOTT 688

B. 07 NOUAKCHOTT 827

Classified By: Charge d'Affaires Dennis Hankins for reasons 1.4 (b) and
(d).


1. (C) Summary: Mauritania Airways recently celebrated its
first anniversary, marking the end of a difficult year for
the company. Its first year of operations has been extremely
difficult and the company is struggling to stay afloat. It
continues to be hampered by the reputation of the now defunct
Air Mauritanie, and the current political crisis has only
exacerbated its difficulties in obtaining credit and
financing. High operating costs along with a lack of skilled
labor have made operations difficult. The company is now
looking for a major new investment in the company from Qatar,
which had initially planned to create a second airline in
Mauritania but has since cancelled those plans. Mauritania
Airways is currently flying to five international and two
domestic destinations. It will add four more international
destinations in the coming months with the arrival of a third
aircraft. The recent closure of the Mali-Mauritania border
has interrupted bus service between Bamako and Nouakchott.
The Malians assert that Mauritania Airways investor and Aziz
financier Mohamed Hmeye Ould Bouamatou was behind this
closure to try to create more business for his airline. End
summary.


2. (C) EconOff met with Mauritania Airways Director General
Moncef Badis and Commercial Director Anis Chebil November 19.
Mauritania Airways began operating in November 2007
following the collapse and bankruptcy of Air Mauritanie and
recently celebrated its first anniversary. Many small
airlines in Africa are struggling right now, and Mauritania
Airways is no exception. The new airline has had a difficult
first year and continues to lose money. When asked how the
company was doing, Badis replied "things could be better."
He said that Mauritania Airways was managing to hold on, but
even that was a struggle. Badis later conceded that
Mauritania Airways' goal for its first year of operations was
merely to get set up and become operational, which it had
succeeded in doing, but that was as big of a success as it
could report to date.


3. (U) Mauritania Airways currently operates international
flights to Paris, Las Palmas, Dakar, Bamako, and Abidjan, and
domestic flights to the northern cities of Zouerate and
Nouadhibou. Initially it had intended to fly to Casablanca
too, but has cancelled plans for the time being. According
to Chebil, Casablanca is only a transit point for most
passengers; it is rarely the final destination. Mauritania
Airways had hoped to form a partnership with Royal Air Maroc
(RAM) to allow its customers to fly onward, but was unable to
do so. In addition, the Government of Morocco, trying to
protect its airline from competition, made it difficult for
Mauritania Airways to secure landing rights in Casablanca.
Under these circumstances, Chebil said that it did not make
sense for Mauritania Airways to continue to try to fly to
Casablanca.


4. (U) Mauritania Airways also intended to fly to two
southern Mauritanian cities - Selibaby and Nema. Plans to
add those two routes have been delayed pending infrastructure
improvements. The runway in Selibaby is in poor condition
and must be refurbished before planes can land there. The
Government of Mauritania originally promised that the runway
would be ready by the end of 2007, but that did not happen.
Mauritania Airways is now hoping that it will be ready by the
end of 2009. Mauritania Airways cannot fly to Nema at this
time because there is no means to obtain jet fuel there to
refuel its plane.


5. (U) Mauritania Airways is currently leasing one Airbus
A320 and one ATR 42-300. Around the end of December or
beginning of January, it will give up its lease on the A320
and replace it with two Boeing 737s. It will continue to
operate the ATR 42-300. Once the two 737s have arrived,
Mauritania Airways will add flights to Tunis, Cotonou,
Libreville, and Brazzaville.


6. (U) Mauritania Airways' most popular and profitable
flights are to Las Palmas (Spain),followed by Nouadhibou and
Zouerate. Las Palmas is a popular vacation destination for
wealthy Mauritanians and many Mauritanians do business there.
Binter Canarias, a Spanish airline offering flights from
Nouakchott and Nouadhibou to Las Palmas, stopped operations
at the beginning of November. Chebil reported that the
company Binter Canarias was leasing its planes from had gone
into bankruptcy, forcing Binter Canarias to halt its
operations. Mauritania Airways no longer has any competition
to its most popular international destination, which should
benefit the company. The company will add a third weekly
flight to Las Palmas by mid-December.


7. (C) EmbOffs who have flown on Mauritania Airways have
observed that domestic flights are almost always near
capacity, while flights to Paris, Bamako, and Abidjan are
normally half-full at best. Mauritania Airways has faced
heavy competition on its route to Bamako by the popular
"Bamako Bus" which takes passengers from Nouakchott to Bamako
at a tenth of the price. While there was an official land
transportation agreement between Mauritania and Mali, the
land border has been closed for the past three weeks. The
Malians believe that Mohamed Hmeye Ould Bouamatou (Mauritania
Airways investor and Aziz financier) is behind the border
closure, in an effort to create more business for Mauritania
Airways (ref A).


8. (C) When Mauritania Airways began operations in November
2007, Chebil told EconOff that the company was struggling to
overcome the terrible reputation of Air Mauritanie. He said
that even after operating for a year, it is still struggling
to emerge from the shadows of the defunct airline. In
addition, Mauritania Airways is now associated with the
political crisis in Mauritania too, compounding its problems.
Even though Mauritania Airways is a professional well-run
company with no connection to Air Mauritanie and little
connection to the government, it has still had difficulty
differentiating itself from past problems. Badis reported
that as a result it has been almost impossible for the
company to obtain financing. Suppliers require the company
to pay them up front in cash.


9. (C) Badis said that there are numerous problems on the
ground impeding Mauritania Airways' operations. He said "if
Tunis Air (majority shareholder) is able to succeed in
Mauritania, then it could succeed on the moon," indicating
just how difficult the conditions really are. Badis said
that inputs are extremely expensive in Mauritania because
most must be imported and there is little available locally.
Taxes and airport fees are extremely high, especially
compared to neighboring countries. It is also difficult for
the company to find skilled technicians on the local labor
market. There is no means to obtain the necessary training
in Mauritania, so people must be sent abroad to obtain
training. Most Mauritanians who have gone abroad end up
staying abroad and find work with another airline. Bringing
foreigners into Mauritania is an extremely expensive
proposition because they demand huge bonuses (more than what
Mauritania Airways can afford to pay) to relocate to a poor
developing country. Furthermore, Mauritania is a difficult
market to operate in. As a poor developing country with a
small population, there is not a large demand for air travel.


10. (C) Several incidents and conditions have made Mauritania
Airways' first year of operations much more difficult than
anticipated. First, the December 24, 2007 terrorist attack
that killed four French tourists and three other small-scale
terrorist attacks since then have destroyed the nascent
tourist industry in Mauritania. Tourists in Mauritania are
primarily French. The steep drop off in tourists has left
the Nouakchott-Paris route struggling to find enough
passengers. Second, record oil prices for much of 2008 made
operating costs much higher than projected. While oil prices
have come down, Mauritania Airways must now deal with the
current economic crisis and a general downturn in economic
conditions. Finally, the August 6 coup has created
additional problems for the company. In addition to casting
a dark shadow on Mauritania Airways, Badis said the company
is not in a position to make any major management decisions
until there is a resolution to the political crisis.


11. (C) In early 2008 Qatar announced that it was going to
invest in a second airline to be created in Mauritania. When
asked where plans currently stood for a second airline, Badis
said that they had been cancelled. It is clear from
Mauritania Airways' struggles as the sole domestic company
that the market is not big enough to support a second
Mauritanian airline. He said that the Qataris are now in
negotiations with Mauritania Airways to become major
investors in the company rather than start a new one. If the
investment is finalized, Tunis Air will become a minority
shareholder in the company. Badis warned that the
negotiations had slowed down significantly since the coup
because the Qataris are concerned about the country's
political situation.


12. (U) Air Mauritanie Coda: Air Mauritanie went into
bankruptcy in September 2007 (ref B) and began liquidation in
January. In the High State Council's (HSC) ongoing attempt
to portray Abdallahi's government as corrupt, it has accused
10 people associated with the former Air Mauritanie of
embezzlement and corruption, including Prime Minister Waghef.
Waghef was the Director General of Air Mauritanie from
2004-2006. Five people, including Waghef, are currently
being held in jail while the cases of five others have been
dismissed. They have been charged with diverting public
goods, using costly means to reschedule debt payments,
camouflaging the company's financial situation, and malicious
use of the company's name and funds to achieve personal
gains. The FNDD has called the "selective arrests" a "witch
hunt" in the press and notes that the five people currently
being held in jail are all active members of the FNDD.
Others with closes ties to both the HSC and Air Mauritanie
have not been investigated or arrested.


HANKINS